Corporate payment charge volumes in 2009 painted a clear
picture of travel spending cuts, though issuers expect those volumes to rebound
this year. In the meantime, corporate card vendors are enhancing data offerings
and global performance capabilities in response to increased demand from travel
buyers.
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Most major corporate card issuers saw year-over-year volume
decreases in 2009. American Express reported overall commercial card volume
worldwide was down almost 9 percent from 2009 levels, while U.S. Bank reported
its volumes fell almost 16 percent. Jeff Rankin, senior vice president and
senior sales and marketing officer for U.S. Bank's corporate payment systems
unit, said the bank was able to mitigate some of that by growing its client
base.
"U.S. Bank was the leader of the pack in terms of being
a good, strong, solid financial institution," Rankin said. "We
continue to see a flight to quality, whereas customers in the past might have
accepted a commercial card service based solely on the pricing."
AirPlus International, the leading issuer of the Universal
Air Travel Plan, reported its global charge volume dropped by €17.1 billion,
about 6 percent.
"2009 was a year where travel managers reacted severely
to the recession," said AirPlus CEO Patrick Diemer. "Volume from
existing customers was down 20 percent, half of that because of lower ticket
prices and half of that because of less travel."
Payment issuers and networks are optimistic about volumes
this year. All issuers who responded as to their expectations for 2010 said
volumes would rise from 2009 levels. Diemer said he expects to see two-thirds
of the volume lost in 2009 return this year. "With a little bit of luck,
this year will come back to a 2008 situation," he said.
U.S. Bank's Rankin expects double-digit percentage volume
growth this year. "Customers are still being very judicious about their
airline contracts and preferred hotels, and we're seeing better management
today than we've ever seen in the past," he said. "Even with that,
our customers are working on growing their business, and we expect to see that
continue through the remainder of the year, depending on the economic
situation."
A 2010 CFO Research/American Express Global Business and
Spending Monitor, fielded in February, indicated that 26 percent of 479
financial executives surveyed said they plan to increase travel spending this
year, part of 57 percent overall who either will maintain or increase such
spending. In a similar survey in 2009, only 2 percent of respondents expected
an increase in travel spending.
"Overall, we're seeing some positive signs of
stabilization and growing optimism about recovery," according to Wendy
Prewitt, vice president of American Express' global commercial card sector. "Companies
are really balancing that with some of the policies, controls and disciplines
they put into place over the prior year."
Despite the deep recession, a few issuers still saw volumes
increase in 2009. Bank of America Merrill Lynch reported its corporate travel
and entertainment expense volumes were up by 5 percent compared with 2008. The
biggest volume jump, however, appeared in BMO Financial Group's volume, thanks
to its late-year acquisition of the North American franchise of Diners Club
from Citigroup.
The Toronto-based bank, a growing presence in the U.S.
T&E card market in recent years, added about $7.8 billion in card
transactions to its portfolio, while breathing new life into what had become a
fading brand. Citi, which has its own corporate card program, had largely
relegated it to midmarket accounts.
"The brand was weak and almost dying on the vine with
Citi," said Terry Wellesley, BMO's managing director of spend and payment
solutions. "Clients were happy to see a solid bank take over this brand,
put energy behind it and show a commitment to continue its growth going
forward."
Diners Club customers in North America will migrate off the
Citibank platform in about a year, and Diners and BMO sales forces will be
fully integrated by November, Wellesley said. "The integration has gone
well beyond what we thought it would be," he said. "Sometimes
cultures collide, but collectively, these teams have worked well together for
their mutual benefit."
Looking just within the United States, AirPlus also saw its
volumes increase year over year, said president Richard Crum. While its clients
faced the same cutbacks as everyone else, AirPlus reported 12.6 percent growth
in customers compared with 2008, leading to a 1.4 percent increase in total
account volume, he said.
The UATP network earlier this year also broadened its
acceptance to include its first hotel vendor, La Quinta Inns & Suites. The
deal came from a trial run in 2009 with La Quinta and UATP client Wal-Mart,
which uses the network with American Airlines as its issuer, and UATP now hopes
to generate more partnerships with other hotel and car rental suppliers.
One of the drivers of AirPlus and UATP's growth has been an
industrywide shift by corporations from individual bill and payment options to
centrally billed and paid programs. AirPlus and the Association of Corporate
Travel Executives partnered earlier this year to create a white paper on
centrally billed programs as a best practice, surveying 186 ACTE members
worldwide. Of those surveyed, more than half said they viewed ghost or lodge
cards more favorably than other payment tools.
Rafael de la Vega, head of large and middle market for Visa
Commercial Solutions, said he sees a slight shift toward central bill and pay,
particularly in the United States. Central bill and pay in general always has
been the predominant practice outside of the United States, while U.S.
corporations traditionally have favored individual bill and pay.
"There's a little more shift," de la Vega said. "We
are not actively tracking that shift, but based on questions we've seen from
banks and the requests for proposals that we've seen, it's clearly a trend."
Companies are attracted to central bill and pay because of a
combination of efficiency and better risk management, without having to worry
about employees missing payments, de la Vega said. Midmarket and small
companies also have better access to automated expense reporting systems, which
give them the data-monitoring capabilities necessary to maintain central bill
and pay programs, BMO's Wellesley said.
The decision also is tied to whether companies want to offer
reward programs on corporate cards to their travelers, which isn't possible in
the central bill and pay setup, he said. "The big guys, like the IBMs of
the world, don't do that because they want the rebate," he said, "but
midsized companies that can't offer the bigger salaries can do that as a perk."
Data enhancement also remained a focus for the corporate
card vendors in 2009. Visa in September launched a new reporting and expense
management tool, Visa IntelliLink Spend Management, particularly for large and
midmarket companies.
While getting more data always has been a priority for
expense managers, the economic downturn pushed many of them to be able to
better manage that data, de la Vega said.
"Companies, in the past, always asked for as much data
as they could get, but they never used it in proportion to the amount that they
got," he said. "Recently, we've seen them use the data to make very
good sourcing decisions to a very good outcome."
American Express in recent months has expanded its
partnership with expense management tool supplier Concur to offer an expense
management system for small and midmarket companies, Concur Breeze, sold
through the new Google Apps Marketplace. It also gained a new partner,
Ritz-Carlton, in providing electronic folio data that itemizes hotel spending
across all its North America properties.
These data needs increasingly are taking a global scope. BMO's
Wellesley, whose ability to handle global programs increased considerably with
the Diners Club acquisition, said global payment needs no longer are the
province of large companies.
"Midsize is moving much faster to large size, with the
ability to transfer and move goods and services electronically," Wellesley
said. "We're seeing a lot more RFPs talking to global capabilities."
Visa's de la Vega also reported an increase in demand for
global programs and said Visa has created a special service to target midsized
companies with global needs. "These are not Fortune 100 companies, but
small companies in NAFTA, or with three countries in the European Union or five
in Asia/Pacific," he said. "There's a lot of demand from that
segment."
Networks are increasing their global footprint as well.
Earlier this year, for example, American Express launched its first business
travel account in Russia, a ruble product issued by American Express Bank in
Russia. The account, a cardless, centrally billed account, gave Russian
companies new opportunities to control travel bookings and expenses, according
to American Express.
Meeting cards continue to be an area of growth for issuers
and networks. Visa launched a new meeting card in 2008, and while de la Vega
said growth was slow when meeting demand was still low, interest in the card
has picked up considerably as meetings make a comeback.
U.S. Bank's Rankin said interest in the issuer's meeting
card has grown steadily over the past few years, as clients see them as good
negotiating tools with hotels.
"If I've got a meeting card, I can go to Marriott or
Hilton and remind them that I did 12 meetings with them last year and spent
$180,000," he said. "That way, I can be treated like a $180,000
customer rather than a $10,000 customer 12 or 13 times.
Issuers and networks in the past year also have enhanced
prepaid card offerings, as they begin to have more T&E applications.
MasterCard, for example, last year lent its processing capabilities and brand
name to a prepaid card supplied by foreign exchange and international payments
supplier Travelex. The cards allow corporations to set spending or per diem
levels for contractors or one-time travelers who do not have corporate cards.
More recently, JPMorgan Chase announced single-use accounts
for midmarket customers, which it defines as those with under $500 million in
corporate revenues. The cards could have T&E uses, such as booking flights
for contractors or paying the master folio bill following a meeting, said Chase
commercial card product executive director Lisa Steury.
Visa's de la Vega said such cards stand to play an even
bigger role for travel and expense managers in the years ahead. "There's a
lot of interest from the corporate world, for now mostly with incentive cards,
relocation expenses and some payroll, but not T&E," he said. "As
companies get more efficient in managing their expenses, it'll be much easier to
give prepaid cards to nonfrequent travelers rather than giving cash advances."