The role of BigPay in AirAsia’s digital strategy remains questionable

The strategy of the aspiring digital airline includes a digital wallet provider – BigPay. However, launching a fintech platform will not guarantee AirAsia’s success.

By Joelyn Chan

The AirAsia group has gone a long way from its loss-making days.  Under group chief executive officer Tan Sri Tony Fernandes’ leadership, AirAsia has grown. It is voted the World’s Best Low-Cost Airline at Skytrax 2017 World Airline Awards. It has held the position for the ninth consecutive year. That alone lays testament to its commitment to being the largest low-cost airline in Asia.

AirAsia’s mission can be summed up with the tagline “Everyone can fly”. It now has a new motto – “Everyone can pay”.  An app called BigPay makes this possible. After downloading the app and signing up, users will receive a Mastercard. The card connects them to over 35 million online and offline merchants. Users can also use BigPay to top-up from all their existing cards and to manage their spending. This fintech app is a licensed e-money issuer, regulated by Bank Negara Malaysia. It is available for mobile download. Its commercial launch is set to happen in the second half of 2018.

On 14 Jan 2018, Tony Fernandes posted on Twitter, “The launch of a great company BIGPAY. Part of AIRASIA Digital strategy. One day this product will be worth more than @AirAsia. Many features being rolled out. Soon no more cash on AIRASIA. Analysts don’t even know about our digital strategy.” Despite the lack of enthusiasm from market analysts, the CEO has high expectation. A cashless airline will impress the world.

AirAsia’s evolution into a digital airline

AirAsia sees the value and competitive advantage of being a digital airline. It will be consolidating its digital businesses under RedBeat Ventures. The consolidation will set a strong foundation for growth and data centralisation. AirAsia can then leverage on the data. It can gather key customer insights and optimise efficiencies. It aims to grow bigger and monetise further. The end goal is to list on New York Stock Exchange. Malaysian Prime Minister Najib Razak lauded AirAsia’s decision as a smart move.

Source: AirAsia

AirAsia has also started restructuring its priorities to transform into a digital corporation. Senior leadership movement accompanied the consolidation of non-airline companies into Redbeat. If all goes well, its digital businesses could become major tech players in their own fields.  The group will also be able to enjoy a growth in ancillary income, from RM49 (US$13) to RM55 (US$14) per person. In 2018, AirAsia targets to carry 89 million passengers, up 25% from 71 million last year.

Source: AirAsia (1, 2)

Chief Data & Digital Officer Nikunj Shanti tries to set the direction

Since he took the role in 2016, AirAsia has made baby steps. Nikunj Shanti started off as a consultant, followed by roles in Expedia and Tigerair. He was Tigerair’s director of e-commerce and ancillary revenue for one year and two months. Before taking up his role in AirAsia, he was working for Emirates. He was in Emirates’ digital data science and architecture for six months. Including his time at Tigerair, his relevant experience adds up to less than two years.

The lack of experience does not translate to doom and failure. CEO Tony Fernandes was from the music industry and had no airline experience. His entrepreneurial mindset and passion helped him transform the Asian aviation industry. However, if AirAsia jumps onto the fintech bandwagon to test its luck, it may be in for trouble. Its current offering of e-angbao service is unlikely to sway users onboard. China’s Wechat and Alipay have already successfully executed the idea. BigPay needs novel ideas of its own.

Miscalculations will set AirAsia backwards

AirAsia has fared well. In the financial year 2017, AirAsia’s pre-tax profits rose 40% to RM2.1 billion (US$0.5 billion). The launch of a fintech app adds another accomplishment to AirAsia’s list of firsts. However, any wrong move would weaken investors’ confidence and set AirAsia backwards. All initiatives come with a price tag and opportunity cost. The group still needs capital to double AirAsia India’s fleet to 20 aircraft by the end of 2018.

AirAsia has recently divested its aircraft leasing operations and Expedia is up next. AirAsia’s profits come from air ticket sale and ancillary income. Their focus should be on activities with high cash generation and lowest cost of operation. Aircraft leasing, travel booking site and non-core assets did not make the cut. But, BigPay did.

AirAsia’s rich database of 63 million passengers could skyrocket BigPay’s popularity. Big Loyalty’s membership base would help too. However, AirAsia only has 15% of all bookings done via mobiles. At that low percentage, it may take a longer time for their customers to download BigPay. As of 7 March 2018, BigPay’s facebook page only has 700 likes. Some customers struggle to differentiate between AirAsia BIG Prepaid MasterCard and BigPay. The latter offers additional benefits on top of what is offered by the former. Perhaps, there will be greater distinction during its commercial launch. Otherwise, there may be some cannibalisation or duplication of marketing efforts.

A fintech app does not make AirAsia’s digital strategy infallible

Digitalisation’s promise of cost savings appeals to AirAsia’s management. They view it as the way to low-cost operations and hearts of cashless passengers. Not all firms are suited for fintech. AirAsia needs the know-how to make BigPay work. With luck, BigPay’s offerings will attract many users. For instance, there is zero foreign exchange rate mark up on international spending. Otherwise, BigPay will be a stumbling stone in AirAsia’s digital strategy.

About the Author

Joelyn Chan
Joelyn is a freelance writer based in Singapore. She graduated from Nanyang Technological University with a Double Bachelor in Accountancy and Business. During her free time, she explores the latest developments in fintech and business.