THE PAYMENTS PUZZLE

At Business Travel Show Europe earlier this year, a masterclass of multinational travel managers was asked to identify its biggest cross-border challenge. The unhesitating response from the group was managing payments.

Ben Park, senior director for procurement and travel at Parexel, sees payments climbing the travel management agenda for all travel managers. “It’s a category receiving much more attention for a variety of reasons,” Park says. “These include PSD2 [the Revised Payment Services Directive], requiring many buyers within Europe to review their corporate payment programmes; virtual payments becoming more sophisticated; and a focus on consolidating volumes to a single supplier during the pandemic to maximise rebate potential.”

Business travel payments are no exception to the rule that Covid was transformational. At the most fundamental level, says Grasp Technologies president and CEO Erik Mueller, the pandemic was “a period of time when we got to stop and think about how we do things. That drove a lot of change, including embracing virtual payment technology.”

Concerns about hygiene also gave an almighty push to the transition from cash to card payments, and more specifically to contactless payments, either with plastic cards or through card numbers stored virtually on mobile devices.

“Adoption at points of sale was previously a huge struggle but Corona has been a breakthrough point for the industry to accelerate digitialisation of payments and extend central payment systems to the mobile devices of users,” says AirPlus International chief marketing officer Michael Heillmann.

A breakthrough in principle, perhaps. Interviewees for this report are consistently reluctant to share figures but concede that corporate adoption of mobile remains low for now. While every spotty teenager is already typically pulling out a mobile phone to pay for their fizzy drink in their local shop, anecdotally it remains unusual for business travellers to have their plastic corporate card digitised in their phone; far rarer still a virtual card.

That gap will start to close, insist travel and card professionals – and indeed has to close, not just to take corporate payments mobile but to make all aspects of corporate payments more user-friendly.

“We saw companies wake up and realise that manual processes had to go,” says Pascal Burg, a director of multinational payments consultancy Edgar, Dunn & Co. “Some corporate clients still had issuers that would only let you collect new cards from the bank or would only post it to the office. When you have people working from home that’s not going to be very convenient. When a consumer can set up an Apple Pay account within seconds, they get used to it.”

The message has been received, according to Ajay Singh, vice president with responsibility for payment and expense at BCD Travel. “The technology is improving a lot,” he says. “Many banks are looking at building new platforms. Start-ups have come in like Stripe and Marqeta which are more card-as-a-service platforms, such as for generating virtual cards in real time and putting policy and a budget on top of it. Not only can you create those cards but you can integrate them into the virtual eco-system which removes the need for physical plastic from the equation.”

Regulatory challenges
Yet in spite of all these changes triggered by the pandemic, the biggest issue affecting payments over the past couple of years has no connection with the virus, according to Institute of Travel Management  head of programme Kerry Douglas.

“The most significant change is around regulation,” she says, referring to the requirement within PSD2 for Strong Customer Authentication, a secondary verification of e-commerce payments now in force across Europe. “It’s having a major impact on buyers with established corporate card programmes. It has driven a review of payment options within their programme and for some it’s meant they have had to bring in multiple payment solutions.

“Regulation has made payment more complicated on both the buyer and supplier side. If your organisation doesn’t have support from the finance department or the background knowledge and experience in payments, it could be a little overwhelming looking at the regulation and understanding what you need to do to put the best-in-class solution in place for your business.”

Strong Customer Authentication is also identified as the most profound development by Clive Cornelius, head of travel segment for Visa Europe. “Over time the changes required will be one of the most impactful elements for a travel buyer,” he says. “Some of the processes you may have had in place for years just don’t work now – shared cards for example or the way in which you book low-cost carriers.”

Challenging as this turmoil may sound, Douglas believes it is potentially good news for travel managers. “This changing world in the payment industry presents a great opportunity for the buyer to raise their voice within their organisation and work on solutions with their finance team,” she says. “Travel managers can own that programme and be an advisor back to their business.”

All talk and no action?
Yet there is also a danger of overstating how much the payments marketplace is changing. Much-vaunted non-card alternatives, such as cryptocurrency or payment by bank transfer, for example, have yet to make any meaningful appearance.

What has been new specifically within corporate travel has been the introduction of payment products by travel service providers to compete with those offered directly by financial institutions. But Heilmann says travel managers should not feel unable to keep up.

“Over the past 24 months it may have become overwhelming to some people on the buyer side because there are so many buzzwords popping up and stories about how to take payments to the next level,” he says. “There has been a certain amount of hype involved. The reality is that the landscape hasn’t changed too much.”

Paradoxically, more of a challenge could prove to be shrinking options. Arthur D. Little senior advisor Patrick Diemer says the volatility of the travel market has frightened away some banks from corporate travel payments in recent months. Added to that, Burg is finding increasing numbers of issuers focusing on only one size of corporate customer.  

“Some only want to work with large corporates and have a minimum spend threshold which they are increasing because costs of Know Your Customer verification and auditing are high,” Burg says. “At the other end, some issuers are avoiding large companies who want to customise and are tough negotiators, and are therefore focusing on SMEs. There is a blind spot if you are in the middle, especially if you are a mid-market multinational.”

Automating expenses
Assuming they can find a reliable issuer, Diemer says the payments status quo works well for companies, the great majority of which have “little incentive to change established processes.” However, where he does identify a major opportunity is in the improvement of expense management.

A study released by Amadeus in September 2022 supports this assertion. It claims that digitalising the expense process saves companies an average 147 minutes per claim when the combined time of travellers, managers and finance teams is taken into account. Total efficiencies, including reduction of fraud and error, amount to 8.2 per cent of direct travel spend, Amadeus says.

“The degree of expense automation is still relatively low,” says Diemer. “Large companies have automated but there is room for many medium and small businesses to make that improvement. They are still using paper, or Excel files, which is almost as cumbersome.

“Expense management companies are making a lot of noise and receiving a lot of funding from the venture capital sector. There is M&A activity as well and a lot of interest generally because there is still room for growth.”

Whether payment or expense, or both, it is certainly a good time for travel managers to review all options with finance colleagues.

See below to find out how two travel managers are rethinking their corporate card strategies.

CASE STUDIES
How travel managers are rethinking their corporate card strategies

“When I arrived at the company in 2018, the travel agency was taking care of payment for air tickets and hotels and then invoicing us, and we paid the agency by bank transfer. Other expenses were mainly paid via personal credit card and reclaimed through our expense system. Now we are using plastic corporate cards and also virtual credit cards, although those are mainly for procurement. The idea is to have all T&E charged on individual credit cards, giving us almost real-time data. We realised the best source of data is the credit card feed, so it was important to make sure we had flights, hotels, car rental, meals, incidentals – everything related to business travel – charged to an individual’s company credit card so that we can better report at the individual level as well.”

“The servicing and selection of corporate credit card and travel payments historically sat with our treasury team but is now the responsibility of the business travel management team, with continuing input of requirements from treasury. We are looking to consolidate our currently fragmented payments programme, where a lot of countries are using non-contracted providers, into global contracts. Our new business travel policy now mandates the use of BASF’s two globally contracted corporate credit card and travel payment providers. Entities can still select a local provider, but these must meet our minimum requirements and the local entity would have to manage the relationship itself. If they do choose one of our globally contracted providers instead, we’ll set up everything for them and they just have to sign the agreement. We are getting a lot of quick wins that way. We can do all the administrative work for them and they’re quite happy about that.”