The face of the corporate card is changing and so are the ways travel gets paid for in a post-plastic world
From their early days as embossed pieces of plastic good for credit at your local tire shop or department store, purchase cards have come a long way. The technology, the systems and the processes have all matured and diversified, so that now business travelers and the companies they represent have lots of choices in how to pay, who to pay and even when and how much to pay when managing their credit lines.
With solutions in the corporate card ecosystem proliferating almost daily, and more on the way, travel managers must make the strategic decision in choosing a tool set that best fits their program objectives and business traveler goals.
According to Yael Klein, CEO and president of AirPlus International Inc, the optimal solutions combine central payment capability as well as “walking cards” with complete data integration and reporting tools. This enables the highest cost travel expenses to be managed with greater control and ease as they can be booked before the trip begins in one central location without the need to be disaggregated over multiple accounts, she notes.
“During the actual business trip a corporate card is used when transactions need payment to occur at the time of service,” Klein continues. “Finally the solution should have all the transaction data fully integrated into ERP and T&E systems after the trip. You also want to make sure that you are getting the highest level of data quality with the most detailed level of data available. This after the trip analysis can provide strong data for negotiation with travel providers and it also can ensure travel policy compliance.”
In order to get the most value from a commercial payment solution, companies should focus on three key elements: acceptance, data and technology, says MasterCard’s senior vice president, T&E, global commercial products and solutions Richard Crum.
“Broad acceptance of the card will ensure that your business travelers can use it wherever they do business and that all travel spend will be captured electronically on the card maximizing rebate potential and ensuring that the data you need to manage travel expense will be easily available and integrated,” Crum explains. “Detailed and customer specific data will provide the company with a rich set of information to be used for managing and optimizing the travel program. Lastly, evaluate the technology provided for managing the program. Commercial card issuers today have a wide variety of online tools, virtual card capability and reporting solutions that will ensure you can take maximum advantage of the card program according to your needs.”
The rapid evolution of mobile technology adds even another layer, according to Kevin Phalen, head of global card and comprehensive payables at Bank of America Merrill Lynch. He adds that as companies need to consider digital capabilities in addition to the traditional physical, plastic card. “When we talk with our clients, we always ask them, ‘what is your
mobile device strategy?’”
From Plastic to DigitalIndeed, it may not be too far into the future that managing corporate payments via digital channels will surpass the use of physical cards. But that’s par for the course for an industry that’s seen constant change and innovation, from the “charge cards” of the first part of the 20th Century to mobile payments today.
In the 1800s “credit tokens” created from fiber, paper, metal or coins are on record as the earliest forms of charge cards. The history of credit cards versus charge cards later took a momentous turn during a dinner conversation between an executive and a customer who was in a precarious financial predicament with department store and gas charge cards. At the end of the evening, the embarrassed executive found himself without the cash to pay for the meal and had to wait for his wife to bring money.
Frank McNamara, the executive in question, got the idea to make himself the middleman, offering one card with a line of credit available across many business types and locations. Diners Club, as it would become known, replaced the numerous loyalty and charge cards typically found in the late 1940s. At the same time, travel for both business and leisure took off, leading to a boom in travel related purchases, further fueling the credit card expansion.
Now, the latest evolution in the card industry may soon involve the elimination of the physical card, in much the same way its credit token forebears disappeared.
Phalen notes that physical cards for corporate use will still be dominant for at least the next 3 to 5 years, but more and more companies are exploring digital avenues, and that includes not just mobile payments. “Mobile payments are becoming more and more popular, with the rise of things like Apple Pay,” says Phalan. “I would say our tech clients are early adopters in that regard, but it’s not just about payments. Even among consumers, Apple Pay hasn’t caught on like wildfire, and so it’s not widespread when it comes to commercial use. But there’s so many other uses for mobile technology in a corporate payment perspective than just payments capability.”
For example, companies can set up fraud alerts, so a business traveler can be immediately notified if a card has been compromised. Also imaging technology related to mobile devices can be used to take pictures of receipts. This not only saves the time and hassle of keeping track of assorted paper records of spending, but also this technology can be integrated with back-end expense management tools so the information can be directly entered into a company system.
Virtual cards are becoming more popular and another avenue where mobile technology can be used to make the procurement process easier to manage, notes Mary Miklethun, SVP of travel payment solutions at U.S. Bank. Virtual cards store payment information in a digital format for one-time use, and can be ideal when the need arises for a separate unique payment, or to give to contractors, consultants or other non-employees on a limited basis.
“We offer virtual cards to our corporate customers for certain types of travel situations,” says Miklethun. “These could be for things like job recruits, for contractors, or other situations where they need to pay for travel on an irregular basis,” she explains.
And as mobile payments become the norm in everyday society, Miklethun believes so too will the technology make its way to corporate travel spending. “I think we will continue to see innovation around this area in the future and an increase in mobile payments on a corporate level, just because that’s what employees want,” she adds.
“There are lots of things that you see starting out in the consumer world and then get built out for adoption on the B2B side. The same consumers that use this technology in their personal lives are corporate card holders, too. There’s a few challengers to overcome; the networks have to agree on specifications on commercial use, issuers on how to authenticate, but at the end of the day if it becomes commonplace in the consumer world it will make its way into a B2B use in some capacity.”
MasterCard’s Crum also says the near future of commercial card programs will include a variety of solutions to ensure security, data capture, integration and user experience.
“Plastic cards will continue to feature in the wallet of business travelers but are becoming smarter with the inclusion of contactless, chip and PIN, and dynamic card controls,” he notes. “In addition, travelers will be able to access and use their corporate card via mobile devices bringing added security and intelligence to each payment. Even the lodge card used by travel management companies for centralized purchases are evolving more into single-use virtual account numbers that simplify reconciliation and improve data capture.“
The Rise of GlobalizationWhereas a mere 20 years ago only a handful of companies had the need for their employees to travel internationally, globalization and changing trends in how business is done internationally mean even medium-sized and small enterprises are doing business overseas.
Bank of America’s Phalan says that in the past only large, multinational companies were asking for a global card solution, but an increasing number of corporate clients now require it.
AirPlus’ Klein says in choosing a global card solution, a company first must understand the networks of its most frequently traveled-to locations. “For example, if you know that Colombia has become a focus travel country, you should make sure that any travel payment solution is fully functional there,” she says.
“Different countries will have different levels of acceptance for the various credit networks. Additionally make sure that you have an easy way of integrating payment data into your ERP and T&E tools. This will save your traveling employees as well as your accounting staff significant amounts of time submitting expense reports and reconciling invoices while optimizing travel payment processes,” she adds.
“Not all travel payment solutions can offer fully integrated solutions contrary to what they might say. Another thing to consider is how global travel payments will be consolidated. For example, say you have a subsidiary in China of a US based company – your travel payment solution should have the ability to provide strong data consolidation with detailed reporting data that will come in handy when you are negotiating with travel providers.”
Companies also need to determine whether they will manage international expenses in a centralized manner, or on a local or regional level, Miklethun of U.S. Bank advises. This will likely be determined by how often and where the company’s employees travel.
“Are you looking to simply get the benefit of seeing all your global spending data in one place, or are you seeking more control to manage data across different markets?” she asks. “On the next layer down, you will have to figure out issues around how you want to manage contracts in different markets, how to provide implementation, and getting the necessary buy-in from key stakeholders in the different markets.”
Business travel represents one of the largest expense items for most companies and is often the most distributed, with hundreds or thousands of employees out on the road to conduct company business and spend corporate money, notes MasterCard’s Crum. A smart commercial travel payment solution that takes advantage of the variety of payments devices, wide global acceptance, rich data and advanced technology gives a company incredible control over this spend which they could never achieve when travelers use their own personal credit cards or pay with cash.
Ultimately, says Crum, “each company is unique and requires a commercial payment solution for both business travel and general procurement that fits their needs. There is a wide variety of providers that can offer solutions to meet these needs,” he says, “and companies need to spend the time to get to know what makes them different.”