Means of payment: virtuality in good order

Virtuality, efficiency, peace of mind. These, in a nutshell, are the major virtues of the payment methods available to companies. The virtual payment solutions that are now making business travel payments more fluid are making travel budget reporting more efficient, while at the same time, the traditional credit card allows business travellers to leave with peace of mind, certain that they will be able to meet their occasional expenses once they are on the ground.

As the first dematerialised solution to appear on the market, the log-in card has been an integral part of the business travel booking process for more than a decade. However, even today, outside a circle of insiders, the log-in card is often a real mystery. "There's still education to be done, says Michel Dieleman, Chairman of the French Association of Travel Managers (AFTM). For example, I recently met the financial director of a CAC 40 company who had no idea what a hosted card was for.". He hastened to add: "However, when you explain how it works, they quickly see its usefulness."

Although the term 'embedded card' is part of the everyday language used by players in the sector, it is admittedly a little disturbing when describing a solution whose main characteristic is precisely that it has no tangible reality. "It's better to talk about a lodged account"As John Baird Smith, Director of France at Air Plus, points out. While the Anglo-Saxons also speak of a "lodge card", the term "business travel account", used in particular by American Express to designate this virtual payment offer, is probably more descriptive of the functions of the lodge card.

So, to explain this solution to a corporate payment novice, what should we say? That this means of payment is registered in the travel agency's reservation system. Rather than sending an invoice to the company, the travel agency pays for the tickets from this account. That the cost of all these bookings is borne by the card issuers. And that these issuers - American Express, AirPlus and Citi, to name just the three biggest players - are then reimbursed for these expenses by the company on the basis of a single invoice sent to the customer, either weekly or monthly.

But what's in it for the company? Thanks to the secure card, they benefit from an automated and secure solution for paying most of their travel expenses, instead of having to pay by invoice and by supplier, thus limiting the time-consuming processing involved. What's more, for greater efficiency and flexibility, the card can be integrated directly into accounting management software. In addition, companies benefit from detailed monitoring of travel costs, giving them better visibility of their travel budget. As a result, the company is able to negotiate more effectively with its key suppliers.

Centralising and rationalising

"Some companies still charge their travel agency for ticketing.says Michel Roncka, travel manager at RTE (Réseau de transport d'électricité). And yet, for companies where centralising payments is the lifeblood of the business, the embedded card is essential.". At a time when travel budgets are being rationalised, this solution seems to be increasingly popular. The German specialist in corporate payment solutions, AirPlus, added 1,900 new accounts last year to its 41,900 worldwide. Growth is being driven by emerging markets such as China, as well as mature markets such as Italy and the United States, where AirPlus has a partnership with JP Morgan Bank.

In France, its second largest market after Germany, Airplus is also winning new customers. From September onwards, the general public procurement agency UGAP will be offering a turnkey business travel package, operated by Avexia on the travel side and by BNP Paribas AirPlus on the corporate card side. "This will streamline procedures and cut red tape, while providing visibility on public spending on travel."says John Baird Smith.

All in the same boat

This year, AirPlus and BNP Paribas renewed their strategic partnership to offer a joint or co-branded solution to key accounts. However, at the end of 2014, the French bank will be launching its own packaged card offering aimed at the mid-market. This solution, based on the Visa network, will initially be distributed in travel agencies in France before moving on to other European countries, including Spain, Italy, Germany and the UK. "We continue to work hand in hand with AirPlus on major accounts. But this new offering will meet the needs of medium-sized businesses, to whom we will now be able to offer the full range of payment methods.It's not just a question of centralising expenses," explains Laurent Sautré, Head of Corporate Card Sales at BNP Paribas. Because centralising spending is not just a matter for the rich. "Many travel and finance managers in small and medium-sized businesses still don't understand the benefits of payment methods, explains Michel Dieleman. In the white paper we will be publishing on these small businesses, we will be recommending the deployment of both corporate and corporate cards in SMEs and SMIs.".

Initially designed to simplify the booking process between airlines and major business travel agencies, the lodged card is now opening up to other horizons and is tending to cover all areas of business travel, further supporting its growth. "Our solution extends to other sectors such as car hire and, above all, the hotel industry."says Stéphanie Laroque, Corporate Solutions Sales Director at American Express. Last March, this player strengthened its partnership with the CDS hotel reservation platform, which is now "business travel account compliant", meaning that the Amex escrow account can be integrated into CDS systems. This development is in addition to the links developed by this historic player in payment methods with other hotel reservation platforms such as HCorpo and iAlbatros.

At a time when companies are determined to control a hotel budget that leaves a great deal to optimisation, these players, also known as hotel booking agencies (HBAs) or hotel booking tools (HBTs), are gaining in importance. The emergence of a new dematerialised payment solution, the virtual card, is no coincidence. This means of payment is well suited to online travel purchases, including room reservations via an HBT or on the websites of budget hotel chains, as well as seat reservations on low-cost airlines. "Linked to the AirPlus account, our AIDA (Air Plus Intergrated Data & Acceptance) virtual payment solution was launched nine years ago to capture travel spend that companies previously had no control over."says John Baird Smith.

The reality of the virtual

But before we go any further, let's take a look at how the virtual card works. It works in the same way as a personal credit card... but without a credit card! To make an online payment, a card number with a unique 16-digit code is issued on request. On the reporting side, this number automatically links the booking to the transaction, making it easier to reconcile travel expenses. But the virtual card also provides companies with a guarantee of security. "Compared with a traditional corporate card, our vPayment solution allows you to control spending upstream. For example, you can set a ceiling for each reservation."explains Stéphanie Laroque.

On the strength of these advantages, virtual cards are now offered by a large number of players - not just those mentioned above, but also BNP Paribas, Citi, Société Générale, CIC and LCL. While American Express' vPayment solution benefits from Amex's acceptance by travel suppliers, other virtual cards rely on the coverage of the Visa or Mastercard networks. Developed in partnership with the latter network, the AIDA virtual card has seen a growth in transaction volume of 238 % per year in the countries where it is already available. The next newcomer to this list is the French market, where the solution was launched in June. At BNP, the virtual card was launched in 2011 and is developing at a good pace. "We are in line with the objective we set ourselves three years ago, explains Laurent Sautré. However, while the major groups are showing great interest and are thinking about it, not all of them have yet made the move.".

Conversion via hotels

So there's still a long way to go. And it's by trying to achieve greater control over the hotel side of the business that new fans could start using the virtual card. "As soon as a hotel reservation platform is set up within the company, the existence of a virtual card becomes an issue, as it enables reservations to be guaranteed with the hotelier."explains Michel Roncka. So it's hardly surprising that the two parties - payment solutions providers and hotel platforms - are working together to strengthen their ties. While Amex's vPayment solution is integrated into the CDS, BSI and hotel.info reservation tools, BNP is in the process of deploying its virtual card with CDS, as well as with HCorpo. For its part, AirPlus became the 'official' partner of HRS at the end of 2013. "Payment was the missing brick of HRS"says John Baird Smith. Until now, the hotel reservation centre did not have a prepayment solution. Through AIDA, travellers will be able to pay for or guarantee bookings made via HRS. Another important development is the agreement signed with Amadeus, with AirPlus payment solutions now integrated directly into the GDS.

Alongside these two contemporary virtual solutions, the good old plastic card is still an essential tool for business travellers, enabling them to pay for taxi fares and restaurant bills, or to withdraw cash for small expenses. For companies, in addition to the flexibility offered to their employees, the Corporate card ensures that all these expenses are recorded in the management tools. There are many cards available on the market, whether they are affiliated to the Visa network, such as those issued by HSBC and LCL, to the two Visa or Mastercard networks, such as the business cards distributed by CIC-Crédit Mutuel, Société Générale, Citi and BNP Paribas, or whether they bear the historic acronyms of American Express and Diners Club.

Risk-free travel

According to a survey of a large number of private companies and public institutions carried out by research firm RPMG in the United States, these companies distribute payment cards to an average of 21 % of their employees. 78 % of these cards are "active" each month, with almost 4.5 uses for an average spend of 171 $. "In any journey, there is and always will be an element of imponderability, Michel Roncka also points out. We provide cards free of charge to our employees so that they can use them when they travel, even if they are limited in number.". However, it seems that in France there is still a certain reluctance to equip employees with payment solutions. "You could call it cold feet, says Stéphanie Laroque. Some companies see this almost as a blank cheque." "However, there is no real risk, stresses Michel Roncka. The traveller is given a sense of responsibility, as the expenses are debited from his or her personal account. And the company has time to validate the expenses incurred before they are reimbursed.". However, not all employees are eligible for the Corporate card, even in companies that are least reluctant to roll out this means of payment. And for all these employees - temporary workers, technicians, executives on short-term assignments or fixed-term contracts - BNP Paribas will be launching a prepaid card at the end of the year, probably affiliated to the Visa network. This card can be pre-loaded - with 500 or 1,000 euros, for example - depending on the estimated volume of expenditure for all mission expenses. "The big advantage is that these costs are included in the travel policy, explains Laurent Sautré. What's more, the risk of use is low. Of course, compared to a cardholder whose debit is made from his personal account, a prepaid cardholder does not necessarily have an interest in justifying all his spending... But conversely, the company knows that he will not spend any more...". What's more, if there's any money left on the card, the company can reclaim it or reallocate it to another mission. The card, which can be loaded and recharged online, does not necessarily have to be named, and is valid for three years.

Solutions for very small businesses

Lodged and virtual cards on the one hand, business cards on the other: CAC 40 multinationals and large SMEs have a whole range of solutions at their disposal to optimise the payment of business trips and the reporting of expenses. In comparison, VSEs - small companies with fewer than 10 employees - do not have the same resources because they are too small. The manager's business card is often the only solution for paying business expenses, whether for travel, office supplies or the purchase of equipment. However, according to American Express, there is still room to develop these expense management tools in these companies. In fact, the number of business bankcards used by SMEs and SMIs is 52%, and 44% for the self-employed in the healthcare sector.

With its Business cards, American Express offers a more practical way of paying for purchases than by cheque or bank transfer. What's more, it gives you visibility of all your expenditure. "One of its advantages is that you can download a report that can be integrated into your company's accounting tools and tax returns."explains Christophe Brouttier, Director of the Professional and Very Small Businesses market. Amex also distributes Pro cards, co-branded with Air France-KLM, designed for very small businesses whose executives frequently travel abroad, with the cardholder earning miles.

American Express is obviously not alone in this market, and almost all banks offer their business customers payment methods affiliated to the Visa or Mastercard networks. Alongside the classic Business cards, their range of statutory cards offers more guarantees in terms of insurance, as well as VIP services. In addition to its Gold card, last year Visa launched a Visa Platinum Business card, distributed as a preview by Banque Populaire, offering the services of a personal assistant to deal with all professional requests, from the organisation of business trips and events to day-to-day secretarial work. Similarly, the American Express Platinum card comes with an extensive concierge service, enabling you to book a prestigious table, even at the last minute. "It also has very high spending limits, stresses Christophe Brouttier. Imagine a company director who is refused a menu at a three-star restaurant where he is dealing with prestigious guests to negotiate a major contract..."

Contactless: the future awaits

Technology first and foremost. Yes, but... What is true for the average consumer is not necessarily true for the business traveller. While contactless payment by card or from smartphones equipped with NFC technology is beginning to make inroads - Visa counted 4.5 million transactions in France in 2013 - corporate payment methods are still lagging behind. "In our calls for tender, we haven't yet had any demand", stresses Laurent Sautré of BNP Paribas. Why not? It's not a question of infrastructure. According to MasterCard, more than two million merchants in 63 countries are equipped with contactless technology. But the interoperability of all the systems around the world is still lacking. Unlike consumer cards, which are used on the domestic market in 90% of cases, business cards are used worldwide. Furthermore, the ceiling of 20 euros above which a code is systematically requested for a contactless payment is another argument that does not support the mass development of contactless corporate cards, when the average transaction for a business card is between 60 and 70 euros. That's not to say that the players in the corporate payment sector aren't taking initiatives. The mobile version of the AIDA virtual card, issued by AirPlus, is currently being tested by 2,500 travellers worldwide.

Finance: beyond business travel

Traditionally used for travel expenses, corporate payment methods are now being extended to other areas. In this context, the purchase card seems to be coming back into fashion after a period of decline. "Its use is exploding for non-strategic operating expenses other than travel, such as office supplies. But it is also used to pay for small meetings"says Laurent Sautré of BNP Paribas. With a spending limit set in advance, as with the prepaid card, the purchasing card can be both a physical means of payment, with a supplier, and a virtual one, for purchases on the Internet. "It provides good traceability of expenditure and does not require the creation of a new supplier in management software, a cumbersome process for episodic or even one-off transactions."he continues. But it is also strategic purchases, those on which companies base their added value, that are the focus of payment methods. American Express is leveraging the acceptance of its card by a large number of suppliers, including textile wholesalers and dental prosthetists, to position itself as a "one-stop shop".no longer as a simple supplier of payment instruments, but as a financial partner"explains Stéphanie Laroque. Hence the name of the new product launched by Amex, Buyer Initiated Payment, which offers the same reporting advantages as the payment methods used for business travel. An SME can therefore better estimate the volume of expenditure with a given supplier in order to negotiate more effectively, while at the same time seeing these costs integrated directly into the company's accounting systems. Last but not least for small and medium-sized businesses: optimised cash flow through deferred payment.

Regulation: banking commissions in question

A sword of Damocles hangs over the world of corporate payments. The European Union intends to drastically reduce interchange fees for both consumer and commercial cards. The rate of these fees could soon fall from 1.51% to 0.3% for corporate payment cards operating under a "four-point" system. This is the model used by the Visa and MasterCard networks, which act as a link between the cardholder's bank, the cardholder, the merchant and the merchant's bank during a payment transaction (see illustration below). On the other hand, three-party systems such as American Express or Diners Club, which organise a three-way relationship with the merchant and the cardholder, are not subject to these new regulations, since they operate on the basis of merchant fees rather than interchange fees.

A double standard that does not satisfy John Baird Smith, Director of AirPlus France: "While the consumer market is highly fragmented, with a market share of 98%, the business market is almost equally divided between four-point and three-point systems.." "It is legitimate to have a competitive framework that respects all players"admits Stéphanie Laroque, who points out that "American Express is not affected by interchange fees".

However, in its initial draft of July 2013, the European Commission had excluded commercial cards from this regulation. But the text was amended in April. For the Committee on Economic and Monetary Affairs, it is important "to include corporate cards, otherwise consumers would be indirectly subsidising corporate cards".

However, banks and major networks tried to plead their case. "This fee of 1.51% is used to pay for services such as data restitution and security.explains John Baird Smith. In addition, financial backing is much more important for business cards." According to Andrew Buckley, MasterCard Europe Commercial Product Manager, "treating commercial cards in the same way as private cards is akin to treating a family car like a commercial truck".

The die has not yet been cast, as the newly-elected Parliament still has to adopt the text. But assuming that nothing changes, what could be the impact of these regulations? "There will be consequences for innovation and geographic supplysays Laurent Sautré of BNP Paribas. Part of the revenue from these fees is used to add new functions such as contactless payment, to support longer payment deferrals and to expand into other countries."

But above all, it will be up to consumers, i.e. businesses, to make the difference through
higher annual subscriptions. According to Andrew Buckley, "copying and pasting the proposals made for personal cards would significantly increase the cost of commercial cards and make them too expensive for many small businesses."