The Airline Industry, thanks to First Data may now consider HomeATM's PIN Based Platform as their primary payment choice
HomeATM recently signed a deal with Universal Air Travel Plan (UATP) and if anyone was wondering why the Airline Industry is interested in HomeATM's platform, you need to look no further than this mornings announcement that Frontier filed for Chapter 11. Many will blame the high cost of gasoline, but in fact, the majority of the blame (according to Frontier themselves) is their credit card processor, First Data.
Follow this link to read the letter sent by Frontier's CEO, Sean Menke to it's employees in it's entirety. Otherwise, here's a pertinent excerpt of that letter:
This week, I was notified by our credit card processor that, as of Friday, April 11, due to "current economic conditions, the rise in fuel costs and the other bankruptcies around the industry," they intended to start withholding 50 percent of the credit card funds received from the sale of Frontier tickets.If they went ahead and did this, tens of millions of dollars owed to us by our customers would have been withheld by the credit card processor, First Data. This would have drained our available cash almost immediately and would have made it impossible for us to continue normal operations.
Therefore, we decided to file Chapter 11 in an effort to fight this unwarranted step by the credit card processor so that we can continue to position the Company for long term success.I want to emphasize to each of you that this was very sudden and unexpected. We are the victims of a credit market that is very fragile and the tolerance for risk is extremely low. As I have stated many times recently, our executive management team has been working diligently and tirelessly to extend our runway by securing additional cash to bolster our balance sheet. We were successfully making progress on a number of fronts that would position us well for the future and with the protection of the bankruptcy court, we plan to continue to pursue those opportunities.
It's simply amazing to me that a card processor, in order to mitigate "their" risk, instills immediate danger into a company's "very existence" by having control over funds that were not theirs to begin with. The time has apparently come for airlines to position PIN Debit, (not as an alternative payment), but as their primary payment mechanism. Here's more from Bloomberg...
Frontier took the step after its credit-card processor, First Data Corp., began withholding proceeds from ticket sales, the Denver-based carrier said in a statement today. First Data told Frontier April 8 it would retain half the proceeds of bankcard sales and increase collateral to $130 million from $54.5 million, according to a statement by Frontier Vice President Edward Christie filed with the U.S. Bankruptcy Court in Manhattan. If First Data's hold on proceeds went unchecked, ``it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations.'' Menke said. First Data is based in Greenwood Village, Colorado.
I'll include more detail in next week's blog posting(s) but suffice it to say that PIN Based Transactions not only "eliminate the reserve" instituted by credit card processors, but also "lowers the transaction rate" (Interchange Fees) significantly.
Airlines are on the very brink and the issue of credit card reserves is going to explode in this space (if not in their face, as it has for Frontier) if the airlines industry doesn't start taking the necessary steps required to switch their payment choice over to the lower cost, more secure PIN Based transactional methodology that "their partner" HomeATM offers.
First Data actions today could not have driven this point home (or should I say HomeATM) any more clearly.
Frontier took the step after its credit-card processor, First Data Corp., began withholding proceeds from ticket sales, the Denver-based carrier said in a statement today. First Data told Frontier April 8 it would retain half the proceeds of bankcard sales and increase collateral to $130 million from $54.5 million, according to a statement by Frontier Vice President Edward Christie filed with the U.S. Bankruptcy Court in Manhattan. If First Data's hold on proceeds went unchecked, ``it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations.'' Menke said. First Data is based in Greenwood Village, Colorado.
I'll include more detail in next week's blog posting(s) but suffice it to say that PIN Based Transactions not only "eliminate the reserve" instituted by credit card processors, but also "lowers the transaction rate" (Interchange Fees) significantly.
Airlines are on the very brink and the issue of credit card reserves is going to explode in this space (if not in their face, as it has for Frontier) if the airlines industry doesn't start taking the necessary steps required to switch their payment choice over to the lower cost, more secure PIN Based transactional methodology that "their partner" HomeATM offers.
First Data actions today could not have driven this point home (or should I say HomeATM) any more clearly.
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