MasterCard International has added "in-flight commerce" to its list of credit card acceptance categories.
By the year 2000, the New York-based card association estimates, consumers will use in-seat video monitors on about 600 long-haul, wide-body airplanes to spend $1 billion a year.
MasterCard announced rules this month for the transaction category it has created to handle the business. The rules were distributed to member institutions in August.
Visa International has not created an in-flight category but is expected to do so soon.
Airplane commerce is not expected to be as big as some other new markets MasterCard and Visa have entered, such as movie theaters, taxicabs, parking, and fast food. But on in-flight transactions, only card payments will be accepted - a distinction not shared by those other locations.
"The credit card companies have been searching diligently for any new venues for electronic commerce," said Anne Moore, president of Synergistics Research Corp. in Atlanta.
"It's certainly the wave of the future," she said. "Consumers, since they're busy ... want to maximize their time.
And "it's not only convenience," Ms. Moore added. "It's a form of entertainment."
So far, in-seat monitors have been installed in only a few planes, for testing.
Passengers using most of the systems would be asked at first to swipe their cards into the machines. A menu would then prompt them to chose an option on the touch screen.
The options would include video rentals and video games; duty-free and mail-order shopping; access to entertainment and travel services, such as hotel and car rental reservations; local news and weather; and gaming.
Airlines have been looking at such systems for a year or so, said Mark Brady, director of global interaction for MasterCard International, but now their interest is starting to take off.
British Airways will be beginning a three-month test on one of its long- haul planes next year. Each seat will have its own interactive video screen, control panel, telephone, and card swipe. (See article at right.)
In two weeks Alitalia will be testing in-flight entertainment on a long- haul aircraft, according to Lance Fieldman, vice president of sales for Interactive Flight Technologies Inc., the New York company supplying the system. The Italian airline has ordered systems for 10 more planes, he said.
Alitalia business and first-class passengers in 33 seats will be able to play video games, shop, and order movies, initially for free. The airline may add gaming later, Mr. Fieldman said, which would require a passenger to use a card to credit winnings and debit losses.
Mark Wheeler, chief operating officer of InterGame, Irving, Calif., which is working with British Airways, said many international carriers have expressed interest in, or have started to install, in-flight equipment on their aircraft.
These include Singapore Airlines, KLM of Amsterdam, Quantas in Australia, Cathay Pacific in Hong Kong, EVA in Taiwan, Air France, SwissAir, Lufthansa of Germany, and Japan Airlines.
In 1993, Virgin Atlantic Airways of Britain installed on an Airbus A340 an interactive entertainment system featuring eight movie channels, five television channels, a map that tracks the flight, and 16 audio channels. Last year, Virgin Atlantic added a gaming feature on trans-Atlantic flights. Passengers play games for points only.
However, service providers such as InterGame and hardware and software providers such as Interactive Flight Technologies are marketing systems that allow players to win and lose money.
MasterCard has set a $350 limit on gaming losses and a $3,500 limit on winnings.
"This eliminates fraud," said Mr. Wheeler of InterGame, because there would a limited incentive to gamble with someone else's card.
Establishing the in-flight card acceptance category "made the business possible," he added. The card companies "obviously did not want somebody to fly from Tokyo to Singapore and lose the family fortune, so we put loss limits on that."
Most airlines will go lower than the $350 limit, he predicted, because their objective is to get someone to play for three hours and on average lose $20. The gaming aspect is what drives the profitability of these in- flight systems, Mr. Wheeler said.
Domestic airlines have shied away from gaming, mainly because laws prohibit or complicate it. International laws are more permissive.
The cashless approach appeals to airlines that "from a security point of view, don't want any more cash in the cabin than they have to have," Mr. Wheeler said. "When you add the element of gaming, flight crews felt it was above and beyond the call of duty to have to handle that much cash."
Not only that, Mr. Brady said, for the airlines "any supplemental revenue like this is a good thing for them. They have the cardholders captive more or less for six or eight or 10 hours."
Indeed, trying to keep passengers happy for that long is one reason airlines are turning to interactive entertainment even though it will cost as much as $3 million to install a 400-seat system. Citing industry figures, Mr. Brady said each airplane equipped with in-flight systems will gross $1 million each year.
Issuers can expect to capture incremental income from this new acceptance category.
MasterCard said the transactions will fall under a new category of cardholder-activated terminal transactions called CAT 4. Card-issuers will thus be able to identify authorization requests for in-flight commerce.
Issuers can authorize transactions while the cardholder is in the air, using air-to-ground telecommunications, or more commonly, MasterCard said, through a delayed batch process after the flight has landed.
Interchange fees for these transactions will be the same as other non- face-to-face transactions.
"We're committed to all new global points of interaction for consumers," Mr. Brady of MasterCard said.
"We want to be sure when we develop these new point-of-interaction categories that the transactions are secure and the cardholders will have confidence that they are secure."
