On demand | Elevate 2021

KEYNOTE  •  THOUGHT LEADERSHIP

How can airlines drive more leisure demand, conversions, and revenue? Easy customer financing can be part of the answer.

In this session, Alex and Brian talked about what’s happening in the area of customer financing and payments, specifically buy now, pay later (BNPL).

BNPL is one of the fastest-growing areas of payments, serving suppliers and travelers alike. With BNPL, consumers can pay for a trip over time using small monthly or weekly amounts without interest or late fees. Approval is handled instantly, making it possible to offer flexible payments without going through traditional credit bureau approvals.

More than 60 percent of people in the United States have tried BNPL, representing all age groups and demographics.

BNPL offers a powerful new way to appeal to and increase demand in the leisure market for airlines and other travel suppliers. Travelers who may have been putting off a trip can adopt a different mindset, opting to book now and pay over time.

Creative marketers recognize that incorporating BNPL as part of the offer can lead to double-digit increases in conversion earlier in the funnel.

“When you start thinking of it more as a marketing thing than a payment thing, you realize you need to get that messaging out because if they only see it at the last part hidden in checkout, it didn’t influence their behavior, didn’t influence what they chose to do and buy. And so, as you bring it upstream and up funnel, that’s where the real power of this is.”
—Brian Barth, Uplift

For suppliers offering BNPL, the results are compelling. According to Brian Barth, Uplift partners experience a 20 percent increase in checkout size. In addition, the appeal of paying later motivates shoppers to book earlier, which increases the booking window, making it easier for airlines to fill flights and manage load factors. BNPL also has a positive impact for revenue managers in that it serves as a segmentation tool to know someone is a leisure traveler.

"What’s really curious about this is that it starts off as payments but you end up in marketing. All the metrics, all the KPIs around buy now, pay later, are marketing metrics."
—Brian Barth, Uplift

Narrator

Financing and paying for flights has changed dramatically over the last decade. People want more payment options, they want simplicity, and they want the ability to buy now and pay later with no surprises.

Joining ATPCO Elevate for the first time is Brian Barth, CEO of Uplift, who will chat with Alex Zoghlin, President and CEO of ATPCO about the future of customer financing in the travel space, its unique challenges, and how different it will be ten years from now.

Alex

Hi, I’m Alex Zoghlin, president and CEO of ATPCO, and I’m thrilled to welcome Brian Barth, CEO of Uplift, to Elevate for the first time to chat about the future of buy now, pay later in the travel space.

Brian, I know you're no stranger to the travel space as the founder and CEO of Sidestep, which literally invented travel metasearch back in 1999. So my first question for you, is you've been running this incredible company Uplift now, and it really does seem like finance payments or buy now, pay later is exploding. Last week the Wall Street Journal ran an article that predicted U.S. merchants will see 8.2 billion dollars increase in sales in 2021 due to the availability of these plans. It's amazing. But before we dive in, and for those in our audience new to buy now, pay later, can you review the basics for us? How does buy now, pay later work?

Brian

Yeah, sure, and thank you for having me, Alex. It's a pleasure to be at Elevate and I was there two years ago in person, thought it was a wonderful conference, and it's just a real pleasure, even to do it virtually.

So I think we're very fortunate that buy now, pay later is turning out to be a force which is just absolutely taking off I think beyond any of our expectations. And really in its simplest form, it's just a way of instantly approving flexible payments for consumers. It's a way of splitting up payments into small monthly or weekly amounts instead of paying it all in one lump sum, and it is just taking off like crazy.

And it's kind of funny because if you look at what happened with it, you know the idea of installment payments have been popular in other parts of the world for a long time. Then it started taking off in a few developed countries. And everyone, even a few years ago once we got started on this, kept saying, oh, this won't be a big thing in the United States, it won't be a big thing for North America. And it's just unbelievable how it is just, it's taking off like nothing we've ever seen before.

And there's also stories about how it's only for young people. We're seeing it in our data across all age groups. We're seeing across all our credit qualities, pretty much everybody's doing it. And one of the really interesting data points is that more than 60 percent of people in the United States have now tried buy now, pay later. And so it's just great.

And so there's a lot of different reasons. We've done surveying. Some people say that it's because they want budgeting. Some people say it's to reduce the stress of a large purchase. But really if you just kind of step back and look at it, the idea if you offer someone the ability to pay you later, it works. So it's as simple as that.

And I’ll give you, just so just make sure it sinks in for travel because there's different flavors of buying later, a really typical thing we'd see in the travel industry is, call it a thousand dollar purchase, we would split that up and just say 12 monthly payments of about ninety dollars.

And the other really thing that's important, and maybe I’ll try to touch on this a few more times as we talk, but for this audience, buy now, pay later has a very important impact to revenue managers in that it is a segmentation tool. There is no business traveler that is going to want to do 12 expense reports because they use buy and help pay later. This is, in a sense if you think way back to when you would book round-trip tickets and you had the Saturday night stay requirement as a segmentation tool, this I think is the new replacement, but a more powerful replacement with a much bigger future for that same idea, which is to try to find a strong way to know whether it's a business or a leisure traveler.

Alex

Wow, really interesting.

Brian

Yeah.

Alex

So clearly travel is one of the big industries benefiting from buy now, pay later. What do you think is driving the accelerated consumer adoption, and the travel space specifically, why is it so hot?

Brian

Well, and that's the perfect question for this audience because it won't require a lot of explanation with people who deal with pricing all day long.

When you show people a lower price, it turns out you get more demand, right? And it's, you know, and really what this is an opportunity to do, like in the example to take something that's a thousand dollars and start showing ninety dollars all over the place. It changes people's mindset. They start thinking about how, wow, I really can take that trip that I've been wanting to take. But if you step back, what's really curious about this is that it starts off as payments but you end up in marketing. All the metrics, all the KPIs around buy now, pay later are marketing metrics.

And so if you think about it, when we're working with a partner on this, we're trying to focus on all of the points where we can improve conversion. We're looking at numbers like, how are we increasing the size of the checkout? And we're seeing on most of our partners more than a 20 percent increase in the checkout size.

We're, and actually another point that's really particular for people in revenue management, when people see that low price and they're shopping, they tend to book a lot earlier. So across our dataset, we see a 40 percent increase in the booking window.

So if you think about how much that could help you as you're trying to manage filling up flights and fares, it's just super, super valuable how this whole buy now, pay later thing is going to help.

And I’ll just comment that the thing that's really interesting about it, when you start thinking of it more as a marketing thing than a payment thing, you realize you need to get that messaging out because if they only see it at the last part hidden in checkout, it didn't influence their behavior, didn't influence what they chose to do and buy. And so as you bring it upstream and up funnel, that's where the real power of this is. So you have to, from pricing, you have to come up funnel, and sometimes it's even before you even get to the website.

So I’ll talk more about this, but just to give you a sense of how powerful this is becoming inside of travel now, a lot of our partners where we've been working with them for a little while, and consumers know that it's there, and they're starting to sort of see it, it's in some of their marketing communications, we're seeing double-digit percentages of checkouts with this. That's how popular this is.

So it's huge, and again I think for me, what my sort of takeaway from all of that, is that if you, at least I only know the stories of the earliest days of revenue management where there was actually debate whether or not, we've come from regulated tariffs, and should we or should we not do revenue management?

Well, that's like so long ago, but I think in some ways we're having that same argument, which is that of course you should do this. The benefits are so obvious and so powerful and the road ahead is actually so much greater because of the unique characteristics of travel. This is not optional, it's just a question of when.

Alex

So Uplift has doubled the number of travel supplier partners during the pandemic. What are the key benefits of buy now, pay later for airlines and revenue managers in particular?

Brian

Yeah, well, and by the way, that was a huge surprise for us too. We did not realize that people would get on it and it's really wonderful how much progress we've made during this really tough time, and how much we've been able to help our partners. But first and foremost, we want to keep it simple. This is a super complicated, messy thing under the hood and we want to keep it really, really simple for our airline partners. So first and foremost, to them it's going to look like a regular payment, and it's not, quite frankly, it's better than a regular payment because they never see any fraud charges, they never see any chargebacks. We collect all the money, we handle all the servicing. There's really nothing for them to do and we've tried to make it incredibly simple.

But it's sort of, just because it's simple from a business perspective, all of those who know how an airline really works, how about getting in that IT queue, for example, right? It's a really, really difficult challenge. So we've gone out of our way to make it easy.

So we have integrated with a number of platforms across the travel industry. We've built special toolkits that are actually designed for airlines so they don't need to touch any of the back ends. We actually can integrate purely with your front-end system. So it's a really cool set of tricks and we just have tried in every possible way.

So for example, one of the relationships we're very, very proud of is that we have been working very deeply with UATP and we can generate unique virtual UATP numbers to pay the airline with. And so first of all, it's lovely everyone's getting UATP transactions, but the other thing is of course they just work. They settle through the Airlines Clearing House and the whole thing just operationally is really, really simple. So we just always keep it sort of one unique virtual UATP card number per transaction, so it's easy to see the BINs, it's really easy to manage.

So that's the kind of stuff we've done to try to make it not just a dream but reality.

Alex

Super easy, yeah.

So what's the financial kind of fraud credit payment risk to the airline partners, and how hard is this to implement beyond just the front end?

Brian

Well, basically it's just simple, simple, simple, and simple.

The way we like to explain it to our travel partners is you do the travel, we'll do the financing, right? It's as simple as that. Like even if you, If they call us, we'll take care of the financing. If they want to change their itinerary, yeah, call the airline and vice versa. And we actually run a 24-hour seven in the U.S. call center. We take care of customers super, super well.

And you know we just want to make sure that it's just an amazing experience for the consumer. But the key thing, and this comes up a lot, which is, so we approve somebody, and by the way, we can talk more about this, but we have an unbelievable high approval rate and it scares a lot of people in the traditional credit business. And we take that risk, and we do get it wrong. We do take charge offs, we do get hit with fraud sometimes, and we're getting very, very good at this, and, but we never pass it back to our online partner. We take it.

Alex

Wow, that's great.

So as the leading travel buy now, pay leader specialist, what have you learned about how to make buy now, pay later work best for airlines?

Brian

Yeah, well, I would probably, well, there's several things. Maybe I’ll pick three.

And so the simple one is that you just have to have a very straightforward, easily understandable, no tricks, kind of consumer proposition. The trouble is anytime you've got a bunch of fine print and it's confusing, or you worry people, you're going to have no conversion. And so we do things to go out of our way. So for example some buy now, pay later companies, they'll have late fees and various kinds of retroactive somethings. We never do that, ever, and part of it is because then you get repeat usage. You earn the consumer's trust. It converts and it just works.

And it turns out when you give people a really good deal, they tend to be very loyal. And even south of the pandemic into really hard times, it's unbelievable when people believe and trust and appreciate your brand, how much they'll come through to keep making their payments. So we were super happy about that, so that's probably number one. It's just, it has to be super clean and simple.

The second thing is that travel's kind of messy. It's busy and it's complicated. We sell big things, we sell small things, we do, it's all the stuff. And so we really need an incredibly flexible buy now, pay later platform. And so for Uplift what that means is that we have the widest range of transaction sizes that you can imagine. So we'll actually split up a 50 dollar payment, believe it or not. Some people do that and we'll go all the way up to 25,000 dollars in seconds, on the fly, with someone we've never seen before. And that's sort of the power of what our machine learning platform has been able to achieve, that we can actually get that, and we can get it right. So that's really big for us. That's one piece of flexibility.

The second piece I would say is that we can do things like either do zero down or we can take the first payment along with the transaction. We can do things where the transaction is completely funded by the consumer or is funded by the merchant or the airline, or we can actually do any combination of those. And so it's really a powerful tool. We should talk more about how that can be used with revenue management. But then we can even extend the time period, everything from things like all the way down to people paying back in three months or we can give them two years.

And a question that we often get is, how long is typical for travel? And really the sweet spot for most things is about 11 months. And the thing that we love about that, that sort of occurs naturally, but the reason why that's actually lucky is it sort of coincides with people wanting to take one really big, nice vacation per year. And so the whole thing sort of fits together really, really nicely.

Oh, actually I forgot I was going to make one third point, but I’ll keep it brief, which was that really, I would say that one of the keys to our success, is that seven years ago when we really started digging into this, we got, we have a lot of travel people at the company. We wanted to really make a platform that worked well for travel, and so we have essentially an entirely travel-specific data science platform. And so a lot of the performance and our approvals and our fraud and a lot of things we can do actually come from that data science platform we've built for travel.

Alex

Oh, interesting.

So mentioning that travel-specific data science and machine learning, why is that important now and in the future?

Brian

Well, I’ll tell you.

So that we think that that's really the foundational element of what we can do today and a lot of where the industry is going, and the big problems that we all need to solve together. But I’ll give you one really specific example right now.

So one of the key issues in buy now, pay later is if you pepper your site with all of these wonderful messages, you can take that trip, it's an affordable price, you should do it, there's going to be no bigger disappointment than if you say no to them after they planned it, they believed in it, and they can't get it there. So you have to have a really high approval rate. And, look, the traditional credit industry has some pretty hard and fast rules about how to look at that. For someone has too low of a FICO, that's usually called a knockout rule. If you don't have a FICO that's often a huge red flag.

So what we've done in our platform is we've captured a huge number of new and alternate data sources that are more than what you just get from the credit bureaus, and believe it or not, we actually even have RBDs in our platform.

So we just have kind of tried to collect and look for features and signals and everything we can find, and over the last seven years we've been doing data science again. So let me tell you one of the really cool results that we've got from that platform that has made it special, which is that you take these cohort of people who everyone categorically will say no to, and they'll say tough luck, we're not going to let you have your vacation, and what we have managed to do, well, there's a super important fact, is that when you look at the loss rates, most of these people will actually pay you despite the kind of bad bucket of data, and they'll pay you in full and they'll pay you on time.

But the traditional methods cannot segment that cohort or those cohorts, and what we've really managed to do is use a lot more data, look at the transaction much more specifically, and pull this all together and really split those cohorts back apart, and finding the good people, that good majority, in those lower and hard to score buckets. So super, super happy with that.

And so for us, we think that really this platform, not only has it helped us right now, but as we look forward to the problems of ancillary sales and bundling and things like that, really it's about predicting anything. It's not just about predicting fraud, credit repayment, you can predict anything with. As a matter of fact, one of the models that we use a lot is that we actually can predict very accurately the acceptance rate of a consumer on any given offer, so that's just a hint.

Alex

Sounds like you learned a little something from your Nor1 days.

[laughing]

Brian

Yeah, and by the way, and the other thing I will say is, these days every time you turn around there's just so much more power and so much more stuff. It's really about having that body of data and the capability of keeping it clean and handling well. How do we share it in a responsible way with our partners, and then we can apply so much of this latest data science.

And I’ll just throw one more little tidbit in there, which is that a lot of the most cutting-edge techniques we probably can't use for credit because of the rules, and we have to do things that are much more auditable, but when it comes to things that are much more cutting edge, like how do you build a bundle, we can use the latest and greatest capabilities of the platform that we can't necessarily allow because of laws.

Alex

Very interesting.

Brian

Yeah.

Alex

So we're starting to see zero percent, interest-free promotions from airlines. Can you tell us more about that? What does that mean?

Brian

Yeah, by the way, I think this may be one of the most exciting things, and I’ll just, I’ll come back to it. But I think I would almost think of this as perhaps the new third dimension of revenue management. Just to be a little bit flippant, but what, if you look around, you've seen zero percent promotions all over the place. For example you look at a car ad in a paper and they've got zero percent, you know, the Toyotathon, come on down, zero percent financing. And what's really going on is the question, right?

Toyota didn't find free money somewhere, they are doing, technically it's actually called subvention, and you buy that interest rate down to the consumer to whatever rate you want, but zero of course is a very powerful one to get to, and what it really is, is it's a non-price based promotional or discounting mechanism. Think about that. Think about what that means in the context of revenue management.

You now have another lever, you have an orthogonal dimension to play with. And if we go back to what we talked about the beginning, it is a leisure-only discount because no business traveler will take the trouble to get that discount. That's actually really, really cool. And so there's all of these questions, like how do you use that? How do you test with it? And I’ll just give you, we've been doing a lot of tests.

I think a lot of people may have seen something. We ran a zero percent test recently on certain O&Ds with Southwest, and we're trying to collect data, we're trying to learn, but I’ll give you, this is not that test but a different test we've been running, people are finding these and you know emailing these screenshots of what they found of course.

But we did a particular test, which was based on a zero percent offer with zero down, and we saw almost a doubling of bookings on those tests. I mean this is, and, look, I wouldn't even say we're good at this yet, we are the cusp of something super, super interesting as we continue to follow this, learn how to control it, but it is powerful. And so we're really, really excited about where this will take us.

Alex

Fantastic. So you've been mentioning this buy now, pay later testing and learning with airlines. What sort of targeting should we be thinking about, and where are the biggest opportunities for improvement?

Brian

Well, that's a great question, Alex, and we get asked that all the time by our airline partners. And if you think about who's at our company, we have a lot of airline nerds, and so of course we've built in probably every imaginable type of airline-relevant targeting. So of course I already mentioned to use O&Ds for targeting, easy things like whether it's a round trip or a one-way, what the date range is, the length of stay, the fare class, the transaction amount, what sort of ancillary bundle it is. Anything we have we create our own consumer segments. There's other consumer segments and stores we sometimes get from our partners, and it's basically any available data attribute works with our built-in A/B testing platform.

So I talked a little bit about how we want to test for things like how we use zero percent, but another really important part of testing is that we need to be able to influence consumers and have them know that zero percent is available further up funnel. If they only find it once they're done on the payment page, we don't get nearly as much benefit as all the way back up stream.

Alex

Right. Very interesting. Okay, so what's next for Uplift?

Brian

Well, of course we're really looking forward to expanding geographically. I think we a lot of people know we had plans for that before the pandemic and so we're live in the United States and Canada. You'll see us live across North America soon, and we're of course looking to serve the consumers in all of the places that our airline partners have with their customers. And so that pretty much answers itself.

And the other thing that we're really wanting to do is to invest a lot more in our data science platform and be able to support ancillaries, bundling, and any kind of cross-sell, even all the way out to how we help airlines finally perhaps crack that nut, how they're going to sell a hotel.

Alex

Very good. So, Brian, thank you so much for joining us and we look forward to tracking the evolution of buy now, pay later in the travel space.

I hope everyone stays tuned for the next session, The quest for the ultimate retailing experience, with a fantastic lineup of panelists. And thank you all for leveling up with us at Elevate 2021. Take care.

Brian

Thank you so much.