Multinational Corporate Card Consolidation Accelerates

The trend toward multinational consolidation with a single travel and entertainment payment card appears to be intensifying, according to card providers, as evidenced by improved multinational service from card companies, an increased drive for transparency of expenditure fueled by Sarbanes-Oxley reporting requirements, globalization of suppliers and multinational centralization within corporate clients. Manifestations of this latter trend range from stronger use of mandates to increasing multinational rollouts of enterprise resource planning and automated expense management systems.

Multinational programs also may be expanding beyond their traditional customer profile of large U.S.-based corporations. Visa claims rising interest from midmarket companies, while American Express is seeing more consolidation among multinational organizations based in Europe.

Despite these advances, obstacles to card globalization remain. These include problems with acceptance, objections to changing card suppliers, lower card company incentives outside the United States and a continuing inability or relative reluctance within many organizations to mandate.

According to Visa, the amount of revenue channeled worldwide through corporate cards is growing 12 percent to 15 percent annually. The challenge of using those cards to capture a comprehensive proportion of spend is illustrated by figures from Citigroup.

Ten to 15 countries typically accounted for 90 percent of an average Citigroup corporate client's spend, while 95 percent of spend is covered by 20 countries and 98 percent by 30 countries. Five years ago, said Citigroup Commercial Cards head of business development Vincent Eavis, 20 countries would have been sufficient to cover 98 percent of spend, demonstrating how businesses are globalizing their operations. That said, the word "global" is used less to describe absolute worldwide consolidation than it is to indicate an integrated multinational travel program. The companies in what American Express calls its "global client portfolio" average 15 to 18 countries per program.

However, some consolidations are considerably larger than that. Shell started a program last year to consolidate $1 billion in travel and purchasing expenditure through the Citibank One card in 48 countries. Previously, it had 46 separate card programs in those territories. "Some of those programs were well-thought-out with good controls, but not all of them," said Shell Oil Products vice president of contracting and procurement Allen Kirkley.

Consolidation of data from the different programs, Kirkley added, "has been a problem." That was one of the three main reasons for moving to a single card provider. The others were improved policy compliance and enhanced incentives from the card provider. Kirkley said that switching simultaneously to a single expense management system also made sense, so Shell is introducing the SAP travel expense reporting tool.

Kirkley traced the motivation for such a formidable project to a concerted drive by Shell's most senior management to centralize the company's operations and processes. It is a similar story at ICI, which is six years into a card consolidation with Amex in more than 30 countries. Travel services global procurement manager Tony Archer said the use of a single card has produced much richer data, especially for hotel spend. "It is the most certain data source we have," he said.

Furthermore, the quality of data has improved over the past six years, Archer said, producing greater detail about hotel suppliers down to property level and better analysis of expenditure by ICI business units. "The slicing and dicing has improved," he said. Like Shell, ICI also is making better use of the card by flowing the data into a consolidated automated expense management product provided by IBM. It already has been introduced in the United States and will be rolled out in Europe later this year.

Citigroup's Eavis said both enterprise resource providers and expense management systems are playing a major role in the spread of multinational card programs. "Consolidated ERP systems are providing a place to capture payment information," he said. "At the same time, Concur and other expense providers are building their operations outside Europe. Companies are also moving towards a shared-service environment."

Another important factor, Eavis said, is the pressure Sarbanes-Oxley has created for greater visibility of accounting. He made the point that although air and hotel bookings account for 65 percent of T&E spend, they only account for 9 percent of transactions. Reporting requirements are driving up use of the card to shed some light on the remaining 91 percent, even though they are a less significant cost.

As alluded to by Archer, improved product from card providers also plays a part in encouraging globalization. For example, GE Corporate Payment Services marketing manager Michael O'Malley said that investment in improving global capabilities will form a major part of his organization's strategy for 2006. This will take the form of raising data reporting features to the same standard as in the United States, striving for greater consistency in account management and spreading coverage beyond the three dozen countries where GE currently has a presence.

Customer support coverage and card acceptance remain two of numerous key challenges deterring growth of global programs. American Express and Diners Club in particular enjoy less acceptance in many markets outside the United States. "It depends on where your employees travel for business," said Citigroup's Eavis. "In France, for instance, acceptance in the centers of the big cities is about the same, but elsewhere it isn't. It is not usually an issue for airline or hotel bookings but it is for the other 91 percent of transactions."

This issue can have a direct effect on travel costs, said Ian Flint, head U.K.-based travel management consulting firm Ian Flint & Associates. "We did a competitive study for a client and found certain cards tended to be accepted in costlier establishments," he said. "Therefore, the price of travel was increasing."

Flint said that using Visa and MasterCard, which have higher levels of acceptance, can bring problems too. While the lead bank issuer chosen in the client's home country may be a good fit, the partner banks in other parts of the world could be less attractive.

The difficulty of finding a card that is ideal in every country leads Flint to suggest the option of taking consolidation only as far as a regional basis: perhaps one each for North America, Europe and Asia/Pacific. Not surprisingly, Eavis rejected this idea. "There could be advantages in having a local provider," he said. "However, having one global provider means you only have to deal with one party for contractual arrangements and to specify issues like quality and frequency of data. Different card providers also mean different implementations, payment terms and standards of service."

Another disadvantage to a regional solution would be that the combined incentives paid by the different card providers would almost certainly amount to less than what a single global provider would pay. That said, a different challenge to globalization for U.S.-based companies is getting used to lower incentives in the rest of the world. Incentives are based on a complex range of variables including income from merchant fees, interest rates from banks and payment terms, the upshot of which, according to Eavis, is that card companies pay out less in Europe, especially France and Denmark. "The more you are buying globally, the more you are blending your incentives," he said.

On top of these issues, any card globalization may have to deal with resistance from business units or individual employees for a wide range of reasons. Some travelers will resent switching from a card that awards their frequent-flyer mileage; others might be nervous about settling their card bills individually. Sometimes, it can be a question of contrariness, said Aliza Knox, senior vice president for Visa Commercial Solutions. "We do see the politics of autonomy: 'If the guy in New York wants Visa, I want MasterCard,' " she said.

There can be specific market issues, such as the need to gain approval from worker councils in Germany or to overcome a liking in Spain for lengthy settlement periods. The United States is not immune from being difficult about contributing to the good of the business. "If a company has invested a lot in its booking and card systems in the United States, there can be resistance to undoing it and using a clean sheet of paper," said Spencer Hanlon, director of global sales for AirPlus.

The biggest obstacle of all is the inability of companies to mandate their program across all business units and markets. All parties seem to agree that good communications led by senior management are essential for achieving buy-in. However, even these will not suffice unless there is a centralized command and control structure that all businesses are obliged to follow.

At ICI, said Archer, compliance is within the company culture. "Once we got the strategy agreed, it was cascaded through the businesses, which enabled us to avoid too much local debate." Knox was even more blunt: "It has to be a serious mandate, not just a memo," she said. "It has to be, 'We don't pay you, if you don't use your card.' "