A managed payment strategy is one of the three technology pillars of a traditional corporate travel program. Along with a booking tool and expense technology, the payment mechanism clearly enables transactions but also delivers critical data to the travel manager. Feeding credit card data directly into expense systems, for example, has become a clear best practice over the past decade, reducing human error—and human effort—in expense reporting. So-called Level 3 card data also has improved payment detail for travel managers looking to double down on business travel intelligence.
Even so, the industry has not always considered payment products in terms of technology and, until quite recently, they have not been an area of intense innovation. The U.S., in particular, and other markets have relied intensely on plastic cards for travel payment. How such programs are set up—in terms of how they are billed, who pays and who is ultimately liable—can vary. Risk-averse companies often lean toward individual bill/individual pay programs, whereas other companies may set up an individual bill/corporate pay program or the company may fully take on the payment and reconciliation responsibility with a corporate bill/corporate pay program. Along with decisions about setting up a corporate card program, many companies also consider lodge cards, particularly for airfare payments but also for prepaid hotel reservations, where the corporate authorizes its travel management company partners to charge central accounts for travel expenses. This can also be referred to as a business travel account, and some version of it is offered by all the major travel card brands and issuing banks.
All these payment mechanisms operate on traditional banking rails, with merchant fees, interchange fees and card networks and schemes like Mastercard, Visa and American Express in play. Immediate innovations in travel payment do so, as well. There is some movement to disintermediate traditional players and the payment fees that go along with them. In terms of corporate travel payment, however, truly disruptive efforts are still nascent.
What's Driving Innovation
Three major trends are driving innovation in the payment space. Perhaps the most pervasive at this moment is payment security. Widespread data security breaches at major retailers and hotel chains—and even hitting home at travel distribution and technology provider Sabre in 2017—have shined a harsh light on the problems of recording and storing active payment card details.
Related to that but broader is the desire to reduce payment fraud, which for corporate card administrators can extend from smaller-scale card theft to employee misuse of corporate payment vehicles. For many corporates, reducing fraud may be partially synonymous with reducing the number of corporate cards in force. Lodge cards and business travel accounts have been the traditional answer to this issue, but those accounts not only remain vulnerable to security hacks but also present reconciliation complexities for finance and accounting teams—and for many travel managers who administer travel payment programs.
The third trend is quite different. It pivots on the payment experience and the idea of "frictionless" payment that we also see on the consumer side with tap-and-go functionality at the point of sale and mobile wallets that make it unnecessary for users ever to present a plastic card or fob at all. While initially this trend may seem to run counter to the others—increasing payment security and reducing fraud, while at the same time making it easier to pay—it may not be as conflicted as it seems.
Virtual Cards: Old Technology on the Rise
Virtual card, which is really not a card at all but often a single-use payment number that is tied to a master account, isn't new technology. It has moved to the mainstream for corporate payments, however, as more vendors are now paid online. That's long been the case for travel, thanks to online booking systems and web-based agency desktop tech, but travel payments and processes have only recently caught up with the technology capability.
Virtual card specialists like Conferma, Corporate Spending Innovations and Wex have variously integrated with major global distribution systems and TMC mid-office provider Concur Compleat, enabling agencies to generate virtual cards and transact payments on behalf of their clients. Australian middleware provider Troovo recently launched modular robotics process automation tools that allow TMCs to digest what can be complex corporate policy and configuration rules around virtual card generation and automatically traffic bookings to the appropriate payment solution, including virtual card. GraspPay, which partners with both Wex and Corporate Spending Innovations, has integrated with major booking tools Concur and GetThere by tunneling through traveler profile systems. Regardless of their entry points, advancements in virtual card automation are significant for a host of reasons.
First, there is broad belief that virtual card tokenization, the process of generating the "disposable" card number, is the next-generation solution to lodge cards and business travel accounts. Major suppliers from Mastercard and Visa to Airplus and UATP are looking to virtual cards to grow their businesses. From a security standpoint, virtual card numbers expire quickly. They are configured either for a single use or for multiple uses over the duration of, perhaps, a week or a month. After that time, the virtual card number becomes inactive and any stored record of the transaction becomes useless to would-be bad actors who might access it.
Virtual card configurability also protects against employee misuse. Multi-use cards are set to a specific dollar amount and can include limitations on the merchant codes—down to a single merchant code, if needed—restricting the virtual card funds to the intended use case only. At the end of the day, each virtual card number is associated with an individual user and likely a single travel event, which minimizes the intensive reconciliation effort often associated with lodge cards and business travel accounts.
These benefits are compelling, but for all their potential, virtual cards do present some practical challenges. Airfare payments on virtual cards are less common but more straightforward in that the transaction happens at the time of booking. The major use case for virtual cards, right now, is hotel booking and payment, which is not as simple. The reservation is made online and the card number is authorized, but the payment happens at the time of travel. As a result, the agency is required to fax an authorization to the front desk. Yes, you read that right: The TMC must fax the authorization because a fax is Payment Card Industry compliant, whereas an email generally is not. If the hotel participates in Conferma Connect, authorization may be transmitted in a secure email. At this point, faxes remain a mainstay for this process.
For travelers, the painful issues may arise at the front desk where hotel check-in and payment protocols don't yet jibe with the reality of virtual card. The traveler may be asked for authorization details if the front desk has misplaced the paper fax. The front desk may charge a nominal amount to a virtual card number as a confirmation that the account is live, thus, expiring a single-use card and leaving the traveler without a payment solution. The traveler may be asked to present the card, but the card does not exist.
Mobile Wallet Enablers
Numerous virtual card providers, from major players like Conferma and Corporate Spending Innovations to emerging providers like Divvy and Bento for Business, have mitigated such issues with proprietary mobile apps that can refax a booking authorization from the traveler's phone, present a digital image of a card and, in the case of an accidental charge, send an SOS to the program administrator to either reopen the card number or issue another. With the right authorizations, some mobile tools enable the traveler to self-serve this function. Without that, remote manual intervention may be a bridge too far for a company with hundreds or thousands of travelers. It might not be an issue for a smaller organization.
But solutions need to be scalable, and corporate-oriented virtual card providers may have a workable solution. Conferma and Visa are working to tap into consumer mobile wallets as a landing place for virtual cards that will reduce payment friction and increase customer satisfaction.
Mobile wallets have become more widely accepted, both by consumers and by retailers. More than 20 percent of American consumers used a mobile wallet for payment in 2018, and more than half of retailers have point-of-sale systems that support them, according to eMarketer. The latter number may matter more for corporate payment managers and virtual card technology providers than the former if virtual card providers ultimately shift their focus to mobile wallets as a path forward, rather than stumbling through hotel protocols and efforts to train constantly churning staff at the hotel front desk to recognize a virtual card booking. Corporate travelers will likely be glad to adopt a tech-forward solution, like they embraced mobile travel booking prior to the general consumer, as long as it is supported in the marketplace.
One concern with such technology, which for North and South America, as well as Europe, relies in near field communication at the point of sale, is that Asia uses a "quick response" or QR code system. Creating a global solution will be critical for travel and payment managers.
What About Alipay & WeChat Pay?
The Chinese market is the bedrock for QR code-based Alipay and WeChat Pay. While these players aren't on the radar for most corporate travel managers at the moment, the travel industry at large—likely including the agencies that corporates work with most—are considering these payment platforms very seriously.
That's because the outbound Chinese tourism market is booming and the mobile pay user base is enormous. Ant Financial CEO Eric Jing claimed Alipay had more than 700 million active users as of September, while Tencent's WeChat Pay active users were estimated at 900 million as of October.
UATP struck a deal with Alipay in 2013. Marriott International launched a joint venture with the company in 2017 and expanded it in 2018. The hotel company already accepts Alipay at more than a quarter of its hotels globally. ARC inked a deal with Alipay in July, thus enabling its accredited agency partners to settle Alipay transactions through the platform. Air Canada began accepting Alipay and WeChat Pay in August. Also last year, Bank of America enabled WeChat Pay for corporate cards, but it limited use to users with mobile phone numbers and bank accounts from China, Hong Kong, Macau or Taiwan.
Alipay and WeChat Pay users can link credit and debit cards to their accounts, but because credit cards aren't popular in the region, users tend to transfer money from their Chinese bank accounts into the platforms, where the money is held in escrow. By charging a percentage fee for transferring the funds back into users' bank accounts, the apps encourage users to keep the money within the platforms. Used in more traditional banking markets, the platforms have the potential to disrupt established revenue streams from interchange and merchant fees.
Blockchain & Bitcoin
Some corporates and travel suppliers are looking to do exactly that. In short, they are looking to reduce the cost of payment by removing the middleman. Gant Travel and U.K.-based Corporate Traveller have both announced that they will accept bitcoin for payment. That's a bold move that likely will not be widespread anytime soon. More interesting, however, is the blockchain distributed ledger technology that underscores bitcoin. Large corporate programs and a few payment innovators are experimenting with suppliers on nascent solutions.
The above-mentioned ARC, which has enabled Alipay, partnered with United Airlines and an unnamed corporate account to perform feasibility testing with blockchain-based inventory booking and transaction management supplier Blockskye. In the test, United tickets were reported, tracked and settled through an ARC private blockchain, allowing the group to demonstrate how such technology could simplify the payment and booking process for corporate travelers and their employers, and remove payment costs from the equation. Travel suppliers, particularly airlines, are keenly interested in reducing payment costs. Corporates willing to explore those possibilities could be rewarded with more flexible negotiations. For its own part, ARC made its first-ever venture capital investment this month. It took an abiding financial interest in blockchain technology developer Blockskye, so this will be a space worth watching.