BSP vs. NDC: Survival

The Evolving Landscape: Will BSP Survive the NDC Revolution?

As travel industry professionals, we’re keenly aware of the seismic shifts occurring in airline distribution. IATA’s New Distribution Capability (NDC) is transforming how air content is sold, directly challenging the long-standing dominance of the Billing and Settlement Plan (BSP). Understanding this evolution is critical for every travel agency, airline, and technology provider navigating the future.

BSP: The Backbone of Traditional Airline Sales

For decades, the BSP has been the financial backbone of the airline industry, offering a simplified, centralized, and efficient system for managing transactions between airlines and travel agents. It drastically reduced complexity, credit risk, and operational costs for both parties, enabling smooth global air ticket sales. This standardized approach has been instrumental in the industry’s growth, allowing agents to book inventory from hundreds of airlines with a single, universally accepted process.

NDC’s Disruptive Force: Direct Connections and Dynamic Offers

NDC, however, represents a paradigm shift. Designed to empower airlines with greater control over their inventory, pricing, and merchandising, it facilitates direct connections with travel sellers, bypassing traditional Global Distribution Systems (GDSs) and, by extension, the conventional BSP settlement model. NDC allows for dynamic, personalized offers, unbundling services, and delivering richer content directly to the consumer through agents. While this promises greater flexibility and revenue opportunities for airlines, it introduces significant questions about how these direct transactions will be financially settled.

The Challenge to Unified Settlement: Fragmentation and Risk

The primary challenge lies in the potential for fragmentation. If NDC transactions bypass BSP, travel agents could face a complex web of multiple settlement systems, varying payment methods, and increased credit risk with individual airlines. This directly contradicts the efficiency BSP was designed to provide. Agencies would need to manage diverse payment agreements, reconciliation processes, and potentially higher collateral requirements, leading to increased operational costs and administrative burden. For airlines, while NDC offers direct benefits, managing numerous individual settlement relationships could negate some of the cost savings.

IATA’s Response: Evolving Settlement for a New Era

IATA is not ignoring these challenges. Recognizing the need for an industry-standard settlement solution for the NDC era, they are actively exploring options. The concept of "Billing as a Service" (BaaS) is emerging as a potential evolution, aiming to provide a flexible, standardized settlement layer that can accommodate diverse NDC transaction types while retaining the core benefits of BSP’s efficiency and risk management. This approach seeks to provide a unified financial framework without stifling the innovation and direct connections NDC offers. The goal is to avoid a fragmented, high-risk environment for agents while maintaining a robust financial ecosystem for airlines.

Implications for Travel Professionals

For travel agencies, the future of settlement in an NDC world means adapting to new processes while advocating for streamlined solutions that minimize operational complexity and financial risk. Partnering with technology providers that offer integrated NDC booking and settlement capabilities will be crucial. For airlines, the focus remains on leveraging NDC’s revenue potential while ensuring efficient, secure, and cost-effective financial settlement mechanisms are in place for their distribution partners. The survival of a unified, efficient settlement system, whether an evolved BSP or a new BaaS, is paramount for the continued growth and stability of the entire travel ecosystem.

Key Points

Over US$236 billion in transactions are processed annually through BSP. In 2023, IATA managed 24 million NDC transactions, a substantial increase from just 3 million in 2021. The average transaction value for NDC bookings is higher at US$1,000, compared to US$400 for traditional channels. NDC channels accounted for 20% of indirect sales for airlines at the end of 2023. IATA hopes to achieve 80% NDC adoption by 2030. BSP is active in 140 countries and territories, processing 300 million transactions involving 60,000 travel agents and 400 airlines annually.

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