In a future that’s totally connected, it looks like corporate cards may pull a disappearing act
By Bryan Yurcan
Looking back to their earliest days, 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.
Just as in the consumer payments space – with innovations such as mobile wallets and digital, person-to-person payments – commercial cards and payments are also changing to meet evolving customer demands.
One such aspect is virtual cards, wherein a one-time number is generated for employees to make purchases. These can be especially convenient for those who don’t have frequent purchasing needs, so travel managers don’t have to issue extra plastic cards to those who won’t use them much or are contract employees.
“It’s beneficial for employees that don’t need a full-time corporate card, but also can be combined with traditional corporate cards to create an enhanced travel product,” says Ralph Kaiser, CEO of UATP. “Virtual cards offer another layer of security since the number can only be used once. Virtual cards won’t replace plastic cards anytime soon, but are becoming more and more popular.”
Virtual Connections However that’s only the beginning; many in the payments business are bullish on how virtual cards and virtual payments can be even more integrated into the travel management process.
“At some point sooner than many think, virtual payments will be the norm,” says Bradley Matthews, middle market bankcard product and marketing manager at U.S. Bank. “Three trends are now converging to transform the payments space: mobile adoption, connectedness and artificial intelligence. Global adoption of mobile payments is now picking up steam, with some industry observers predicting mobile payments will overtake plastic by 2020. Connectedness is advancing nearly as fast. Your phone, your e-mail, your calendar and your other online work tools are almost all in the cloud; the next step is to connect them all.”
According to Matthews, that “next step” could look something like this: A business traveler makes a note in a CRM tool to arrange a meeting with a customer; the CRM tool connects to a calendar, which then automatically corresponds with the customer’s calendar, which finds a date. An app “virtual assistant” then purchases an airline ticket using a virtual account number, and reserves a hotel with a separate virtual number. When the business traveler lands in town, an Uber is already booked and waiting with the address of the restaurant where the meeting will take place, along with the driver’s payment, in the form of another virtual account number.
“After an enjoyable lunch, there is no awkwardness or battle for the bill as it has already been paid for by yet another virtual account number,” adds Matthews. “Best of all, when you get back to the office, there is no tedious and time consuming expense report to create. Since each transaction was pre-approved and had all appropriate details, the report is complete without any additional input. This is not, in my view, a far-fetched scenario.”
And it’s something the industry is buzzing about. Virtual cards are “the hot payment topic right now,” according to Diane Laschet, head of the Americas for Airplus International.
“While still in growth stage, virtual cards offer the most secure form of payment,” Laschet says. “Additionally, virtual cards increase traveler satisfaction, simplify expense reconciliation and improve transparency. It could be entirely possible that plastic will eventually disappear from people’s wallets. Virtual cards tied to virtual central bill accounts could become the ideal way to pay for business travel with no need for walking plastic.”
Andy Nicholas, vice president of sales, global accounts and global commercial payments at American Express, agrees. “Virtual payments are certainly growing in popularity,” Nicholas says. “Businesses may benefit from using virtual accounts for employees’ and contractors’ travel expenses to more seamlessly manage their travel. In addition, virtual cards can help travel managers and accounts payable departments simplify and automate the stressful and often manual reconciliation processes that can come from matching purchase order and invoice data, associated with both travel related and business-to-business purchases.”
Some card issuers report that their corporate clients are already seeing greater flexibility with the use of virtual cards, since it allows them to expand their payments programs to capture new segments of commercial spend.
“This expansion includes the B-to-B side through efficient supplier payment solutions as well as on the business travel side through effective centralized travel programs, allowing a client to cover key spend categories such as hotel, airline and car rental for travelers that otherwise do not have a corporate card,” says Jennifer Petty, head of global card and comprehensive payables, Global Transaction Services, Bank of America Merrill Lynch. “We definitely see a path where virtual cards replace physical cards as the primary payment method in a number of scenarios. However, right now we see a complimentary relationship to the traditional physical T&E card, allowing clients greater flexibility to implement a range of payment solutions to best fit their organization and its travel patterns.”
The likely scenario for the time being, Petty adds, is frequent business travelers will continue to have a need for a physical card to ensure their travel experience is smooth, while additionally seeing virtual cards as a means to manage travel for infrequent travelers, employee relocation programs and candidate or non-employee travel programs.
A BIP on the Radar Another trend disrupting the traditional purchasing card is buyer-initiated payments – commonly known as BIP. Buyer-initiated payments, also referred to as straight through processing, can create efficiencies for both the buyer and supplier in terms of how the payment is processed. Essentially, a buyer pushes a payment through the card rails to a known supplier, who in turn receives the payment directly into their deposit account. The buyer controls when the payment occurs and for how much.
According to Petty, BIP provide some benefits, but still aren’t seeing widespread use due to a few factors.
“For the supplier, the payment is received into their deposit account and, typically, an e-mail remittance notifying them of payment and amount is also received,” she explains. “While buyers appreciate the control over timing and payment amount and suppliers may appreciate the hands-off approach to taking a card payment, BIP still poses issues for a supplier in that they still have to match deposits into their deposit account with e-mail remittances received.”
In addition, Petty notes the potential for a cost differential for suppliers who accept BIP. “There is an interesting twist in that depending on which network a payment is processed, the supplier’s cost to accept a BIP transaction will vary greatly. While BIP typically boasts a lower price point than traditional card not present, we have not seen wide adoption of this payment process by the supplier community. If merchant acquirers would proactively enable and educate suppliers on the value of BIP in the marketplace, we might see forward momentum.”
But buyer-initiated payments have helped overcome a major supplier objection around accepting virtual card payments – namely, the time it takes to manually process the payment, says Jennifer Swenson, virtual payments product and marketing manager for U.S. Bank.
The typical steps a supplier takes to accept a virtual card involves receiving a remittance e-mail, retrieving the card number from a secure portal, and then typing the number into their point of sale or online system to process the payment, Swenson notes. As more and more buyers elect to pay this way, suppliers spend an increasing amount of time and resources manually processing these payments, she says. With BIP, payments are automatically processed and deposited into the supplier’s account.
“The supplier receives an e-mail notifying them that the traveler’s payment has been made,” she adds. “No work whatsoever is required on their part to process the payment. I do see virtual card payments – whether buyer-initiated or supplier-initiated – as more effective than the traditional purchasing card. They both offer more controls and necessary security, as well as important reconciliation benefits. BIP solutions will help overall supplier adoption of virtual cards grow.”
Having a Voice Regardless of what new or innovative ways business purchases are made, most agree that travel managers need to have a voice in helping their finance and procurement departments decide what card issuers will work best for their business in the travel space.
“Travel managers need to have a role in choosing their payment solutions so that they can address risks and concerns associated with traditional payments in the travel industry, such as fraud, card misuse or limited credit card penetration in certain international locations,” cautions UATP’s Kaiser. “It’s also important to be included in this conversation to make sure they receive the appropriate amount of data for easier reconciliation.”
And while a recent trend has seen finance and procurement have a bigger influence in T&E decisions and vendor relationships, their role can have a positive impact on the business. Including these disciplines can maximize financial benefit to the organization and create more defined performance metrics to help measure their travel programs, says Petty of Bank of America Merrill Lynch.
“With that said, the travel managers will continue to run their programs on a day-to-day basis,” she maintains. “They see the impact a specific program and partner have on their business travelers. Additionally, they need to build and maintain a positive working relationship with their issuer in order to efficiently manage the program and resolve any issues or challenges as they come up. Those components – the relationship with the issuer, the impact to travelers and the servicing efficiency – are often more difficult to quantify, but they are just as critical to long-term success and need to be a key component within the decision process.”
Indeed, travel managers are the “front line” with the employees who are the ones making purchases; so it’s travel who can provide finance and procurement with the tangible requirements the card issuer must meet in order to realize their goals and objectives, says U.S. Bank’s Swenson.
“Travel managers also enforce the policies, so they need to make sure whatever tools they get from the issuer fit with how they want to enforce their policies,” she adds. “Travel managers who stay informed of industry trends can also assist finance and procurement by sharing knowledge and education of new innovations in the travel space to ensure the needs of their travelers are met. Lastly, travel managers play a crucial role in providing feedback on the technology being considered to manage their program.”
Considering the rapid pace of innovation and change, it is perhaps that last point that will become the most important for travel managers.
For travel, it’s an increasingly important role that is being driven by a combination of today’s technology environment coupled with client expectations, says Petty. “The challenge is not only do we have to deliver the necessary enhanced functionality, such as virtual cards, but they have to be fully integrated into the overall client experience, delivering end-to-end efficiency and value.”