Mobile payment solutions have reached a tipping point, but the story deserves more than just a passing wave
With the much-hyped launch of Apple Pay late last year, mobile payments have continued to creep closer into the mainstream. According to a report from Business Insider Intelligence, payments made through Apple Pay accounted for between 0.1 and 1.6 percent of transactions at five top retailers in the month following the launch of the feature.
“Considering that the feature can only be used on the new iPhones we think that’s indicative of exceptional momentum,” the report reads.
Overall, the Business Insider research predicts that US mobile payment volume will grow at a five-year compound annual growth rate of 172 percent. Volume will rise to $818 billion by 2019, or just under 15 percent of total U.S. payment volume, the report predicts.
But while consumers may be more inclined to wave their phones in front of a point-of-sale terminal to buy a venti latte at Starbucks, it still remains to be seen whether mobile technology will be incorporated by-and-large into corporate card programs. Indeed, in much the same way that online booking revolutionized consumer travel but was not as easily integrated into business travel, so too do mobile payments still have some hurdles to clear before they become a standard part of corporate T&E programs. But the tide may slowly be turning.
According to Mary Miklethun, senior vice president of travel payment solutions at U.S. Bank, many of the bank’s corporate clients are beginning to ask about mobile payments, albeit as a supplement rather than a replacement for traditional corporate cards.
“They believe it will be more convenient for their employee card holders in certain circumstances; it seems likely that it could incrementally increase spend capture as well,” she says. “If you find yourself without your card but you do have your phone, you can still make a purchase. You are bound to capture more transactions that way. Can mobile payments ever completely replace commercial cards? Maybe, but we are a long way from that when you see all that has to happen first.”
Miklethun says one reason for the long horizon is the “many moving parts” associated with mobile payments, from merchant acceptance to accommodation of the different mobile devices people use, as well as sorting out which emerging players in the space will rise above others.
While issues such as these may slow adoption of mobile corporate payments, ultimately travel managers will realize that this payment method has advantages that can’t be replicated with a plastic corporate card, says Mario Zorn, director of virtual and mobile payment for Airplus.
“Better tracking of expenses and data visibility is just one example of the benefits it will bring,” he notes. “Others include more convenience and smarter purchasing choices for travelers, and better process efficiencies and program control for travel managers. Think of mobile payment as a credit card with a keyboard, screen and GPS attached and you start to get some idea of the potential. Here’s just one example: you’re in a Starbucks around the corner from your office and you go to pay for a coffee with your phone. However, company travel policy says you can’t claim for food and beverage bought within three miles of your workplace, so the phone blocks you from using your mobile corporate card.”
Zorn also believes that single-use virtual payment numbers, such as AirPlus’s A.I.D.A., are taking off fast – and virtual cards and mobile are perfect bedfellows. This is yet another reason mobile payments at the corporate level are poised to soon become more commonplace, he says.
Wendy Ward, VP marketing and communications for UATP, a global payment solution owned and operated by the world’s airlines, notes that the concept of virtual account numbers is one that is really gaining steam across the industry.
“UATP has historically been a virtual payments with the majority of our ‘cards’ being lodged,” she says. “This is how we started out in 1936. We are of course though, looking at the importance and demand on the corporate side for both types of payments; we want to make sure to provide our client base what they need and want to conduct business.“
UATP, in fact, recently announced a partnership with Bitnet, a Bitcoin payments processing platform, to allow UATP’s 260-plus airlines to accept Bitcoin payments, which further illustrates a continuing acceptance of innovative types of payments in the corporate world.
Waving Goodbye to Security?
As with any new technology, there are still security concerns around mobile payments in general. But some say these fears are overblown, and that perception is not reality when it comes to safeguarding the security of mobile payments.
“With the tokenization of the physical card account number into the mobile device and secure transmission of this information to the merchant, mobile payments based on the MasterCard platform will bring added security to the management of account details and transaction information,” says Richard Crum, senior vice president, T&E, Global Commercial Payments and Solutions, MasterCard.
Airplus’ Zorn agrees, noting that for payments made by waving a mobile device over a Near Field Communication reader, intercepting that NFC signal is exceptionally difficult.
“NFC-enabled payments can also be confirmed with a PIN number,” he adds. “And, we believe mobile payments will often be made with virtual card numbers, which are immune to fraud because they are used once only and can be controlled in many other ways. Finally, if there are any problems, travelers can act quicker. One call blocks all card numbers stored in their mobile wallet, and travelers’ ability to track spend on their phones means they can detect anything untoward much sooner.”
U.S. Bank’s Miklethun says mobile can be more secure because of tokenization, in which actual card data is never transmitted in the course of a mobile transaction. Instead, a unique single-use number is assigned, encrypted and used in place of the cardholder’s actual credit number. The merchant never gets the real credit card number, they get something that operates as a regular credit card number, but can’t be reused if it gets into the wrong hands, she notes.
Kevin Phalen, head of global card and comprehensive payables at Bank of America Merrill Lynch, adds that it will be imperative for corporations to make sure their overarching mobile policies provide the flexibility that’s required to support corporate mobile devices for payments and other mobile services.
Streamlined Benefits
In fact, many in the card industry say the benefits this new form of payments will bring to corporate travel far outweigh any possible security issues that may be raised. According to Phalen, mobile technology can greatly improve the efficiency of corporate travelers.
“Mobile devices are an increasingly important extension of how people do business every day, and a payments capability would be the next evolution” he adds. “However, a corporate mobile strategy should include much more than just a payments capability; it should also address data exchange, expense management and document management, such as receipts.”
Along those lines, MasterCard’s Crum believes that corporations will benefit from an increased ability to capture transaction data that can be used to streamline the expense claim process. “When more of the business travel spend is captured on card and this data is automatically fed into the travelers expense reporting solution, the time required to complete the claim process can be reduced significantly,” he adds.
Mobile technology will also allow an organization to capture more spend than before, according to Miklethun. “It may, for example, become easier to support people who wouldn’t normally be issued a card, such as consultants and job recruits, if you could save the expense of issuing a card by allowing that person to run charges on a mobile device.”
However, she cautions, “A lot would have to happen before that becomes commonplace. Hotels need to have equipment that can read information from a device, to name just one of many back office alignments that need to happen before mobile commercial payments begin happening on a large scale.”
Phelan does not believe the back office alignments needed to be made to accommodate mobile payments will pose a very significant problem, especially considering that “a corporate card is the ultimate payment method through the mobile device.”
While there may be some hiccups currently with back office compatibility, Miklethun expects this to be resolved in the near term as mobile payment methods become more commonplace among corporate travelers. “It’s happening faster on the retail side right now, but we believe the commercial side will catch up rapidly,” she says.
”Our expectation is that at least some of the technology around tokenization and mobile payments will become more available on commercial platforms within the next 12 months. It’s already starting to rev up. At the White House Cybersecurity Summit [held in February], for example, it was announced that Apple, Visa, MasterCard, Comerica Bank and U.S. Bank have committed to working together to make Apple Pay available for users of federal payment cards, including DirectExpress and GSA SmartPay cards. Expect this effort to pick up steam in the year ahead.”
In fact, Crum says MasterCard is actively working with partners and has built a digital enablement platform that card issuers and merchants can leverage to move towards mobile payments while continuing to enable card-based payments as they do today.
In terms of interoperability with travel and finance systems, there’s almost no difference from using a plastic card, Airplus’ Zorn believes. “The only point we would make is that you are only really going to reap the benefits of mobile payment if you operate an automated expense management system too,” he says. “Mobile fuses payment and expense together so closely that they become almost one and the same. That’s why travel managers will enjoy better visibility, control and efficiency in a way they can barely conceive today.”
Ultimately, Zorn says it is probably inevitable that mobile payments come to corporate travel in a widespread way, in large part thanks to the overwhelming influence of Apple. “There’s the Apple Pay factor,” he says. “To date, mobile payments have only partially taken hold in the consumer market, mainly because Apple wasn’t playing. Now that Apple has come to the table, it will push mobile payments along like never before, and once consumers are using the technology in their private lives they’ll want it in their business lives too.”