Spending returned in 2011 as most major payment providers
reported single-digit, if not double-digit, increases in travel volumes.
Spending growth is expected to continue in 2012 with "North American
travel card spending reaching $170 billion by 2012 and $186 billion by 2015,"
according to the 2011 Corporate Travel Card Benchmark Survey Results by
Mahendra Gupta and Richard Palmer, based on responses from 1,234 travel card
program administrators in late 2010.
[Please click here to view the digital edition of the 2012 Business Travel Survey, featuring all
charted data, downloadable as a pdf.]
The spending uptick was due to both increased travel and
higher costs, according to AirPlus International managing director and
executive board chairman Patrick Diemer.
Some commercial card volumes also were enhanced by adoption
of procurement, meeting, single-use and emerging payment products, all further
evidence of the movement away from cash and checks.
Demand for global card programs prompted issuers to expand
to more countries or partner with other companies to ensure global reach.
Growth in international travel, along with the adoption in Canada and Mexico of
chip-based security—joining Europe and elsewhere—prompted U.S.-based providers
to deploy cards with both chip-and-pin and signature security protocols.
The payments landscape in 2011 also saw a flurry of
announcements and trials in mobile payment as card networks attempt to
determine standards and the players that will emerge as leaders in this rapidly
evolving space. Isis, a mobile-commerce joint venture of AT&T Mobility,
T-Mobile USA and Verizon Wireless, announced that Visa, MasterCard, Discover
and American Express would join the venture.
Single-use card options also emerged as one of the fastest
growth areas in commercial payment. While few organizations have looked to
single-use cards to replace all plastic, many have found that an increased
level control allows them to plug gaping holes to pay for hotels, meetings and
travel for new recruits, consultants and other non-employees.
Another major development in the payments sector last year
was new leadership at the top of MasterCard and in commercial payments
divisions at American Express, Citi, JPMorgan Chase and U.S. Bank Corporate
Payment Systems, as well as MasterCard.
AirPlus International
"Positively caught by surprise" by sound business
growth, AirPlus International reported a record year as it settled more than
€10.4 billion in travel volume, 17 percent more than a year ago, Diemer said.
AirPlus reported more than 3,000 new customers in 2011 for a
total of 38,000 in 60 countries served. "The average customer spent 10
percent more on business flights in the previous year," due to higher
costs and an increased number of flights, according to Diemer.
"The recession of 2008 and 2009 was fully compensated
in 2011," as AirPlus reported 6 percent more business flights charged
globally than in 2010. In the United States, the AirPlus subsidiary reported a
15 percent boost in card volume in 2011.
Part of the reason costs rose so much last year, Diemer
said, was a 2 percentage point boost in the use of business-class fares, to a 9
percent share of all fares, and a 2 percentage point decline in the use of
economy fares, to 90 percent. First-class fare use remained at 1 percent of
volume.
Major product enhancements last year included ancillary fee
reporting, a new debit account in Europe and continued work on its green
reports. In the United States, the ancillary fee reporting mechanism was
developed from data streams from MasterCard and UATP, according to Diemer. "Our
customers have started to negotiate based on the ancillary fee data," he
said. Sometimes it is "still difficult to determine exactly what was
purchased or associate a charge with a specific ticket," he acknowledged. "We
are in intense discussions with a number of airlines and ARC to ensure that we
will receive the data," through electronic miscellaneous documents or
other means.
As for its own growth, Diemer said AirPlus gained new
customers in the Asia/Pacific region and opened a service hub in Singapore.
According to AirPlus global sales executive vice president Volker Huber, new
focus is on three parts of the world: Latin America, Asia/Pac and Australia. In
Asia/Pac, AirPlus volume rose from €8 million in 2006 to €320 million in 2011,
with an expected jump to €492 million in 2012, he added.
In early 2012, AirPlus and JPMorgan Chase announced a
strategic partnership to introduce a new global payment solution to North
American multinationals this year, in addition to their respective individual
offerings.
American Express
American Express Global Commercial Services reported record
2011 cardmember spending of $154 billion, 16 percent more than 2010, with
average basic cardmember spending of $21,898. Last year, GCS reported 7 million
cardholders, about 100,000 fewer than in December 2010.
Across all business units, Amex reported record cardholder
spending of $822 billion, 15 percent more than in 2010.
"Cardmembers spent a record amount on their American
Express cards, continuing a trend that has translated into overall share gains
during the last two years," according to chairman and CEO Kenneth
Chenault.
In its Global Commercial Payments space, Amex in 2011 said
it launched a "European enhanced business travel accounts product"
for its global and multinational accounts and introduced international
dollar/euro corporate cards in an additional 12 countries. Amex issues local
currency corporate cards in 44 countries, and international dollar/euro cards
in a total of 120 countries. It also offers corporate cards issued through
partner relationships in an additional 30 countries.
Amex Global Corporate Payments also announced an expansion
of its partnership with Concur in Japan, where the two companies now promote
each other's products.
In addition to its own private-label cards, Amex said it
offered co-branded cards with 14 partners in 2011, primarily for midsize
companies, with revenues of $10 million to $1 billion. In this market segment,
Amex noted "increased competition from both regional banks and national
banks, such as Citibank and JPMorgan. Payment providers have increasingly
acquired technology offerings to enhance data-capture capabilities and
reporting functionality. In addition, many providers attempt to leverage their
banking relationships and capabilities to secure and retain card business."
In 2011, Amex received the final quarterly $70 million
litigation settlement payment from Visa. Those payments began in March 2008
after an initial payment of $1.13 billion. MasterCard paid Amex 12 quarterly
payments of $150 million from September 2008 to June 2011 as part of the
antitrust settlement. Amex executives have noted in recent years the partial
use of the settlement funds to reinvest in core products and services.
Last year, Amex announced a $100 million, multi-year
investment in digital commerce initiatives that now operate under the
Enterprise Growth Business unit and include Serve, LoyaltyEdge and Foreign
Exchange Services, mobile and online payment services, fee-based services and
global payment options (formerly prepaid). In early 2012, Amex announced plans
to make its U.S. Consumer, Open small-business and Serve cards available in the
Isis Mobile Wallet, the aforementioned AT&T, T-Mobile and Verizon venture.
Social media trials with Foursquare and other platforms thus far have been
aimed at consumer cardholders.
BMO Financial Group
BMO Financial Group reported a slight decline in charge
volume last year to $6 billion, down from $6.3 billion in 2010, across its
travel and entertainment, procurement, one-card, lodge, fleet, meetings and
prepaid offerings. As the owner of the Diners Club franchise for North America,
BMO issues both Diners Club and MasterCard cards.
BMO at year-end 2009 bought the Diners North American
franchise from Citigroup and within months opened a new account management
center in the Chicago suburbs. By year-end 2011, it had migrated all Diners
customers off the Citibank customer service platform.
In early 2010, BMO executives said the acquisitions of
Diners in North American would provide almost $1 billion in net receivables,
$7.8 billion in card transactions and 6,000 North American corporate clients
with nearly 250,000 cardholders in Canada and the United States. But it was up
to BMO to sell clients on the new vision. Discover in 2008 acquired the Diners
International brand from Citigroup, and various entities own Diners franchises
around the globe.
Citi
Citi in the last three years double-charged itself, doubling
its geographic footprint and adding new product lines and client segments,
according to Manish Kohli, who in late 2011 took over as managing director and
global head of commercial cards within its global transaction services unit.
Citi in 2008 and 2009, respectively, divested both the Diners Club
International franchise network (sold to Discover Financial Services) and the
Diners Club North American franchise (sold to BMO), but retained some of the 80
franchises that are operated in a different business unit.
The expansion, according to Kohli, was driven by a strategy "where
we realized how core to the treasury function that a client's working capital
and efficiency agenda is, and how reliant commercial cards are to the direction
in which the payments industry was moving. Our largest clients are investing
more in emerging markets, and they are insistent in looking for consistency.
What they see and get in the United States and Western Europe is what they want
in Bulgaria, Romania and Nigeria. Sometimes in response, and sometimes
anticipating that trend, we have expanded our business into those markets."
As of early 2012, Citi was in 64 markets to self-issue local currency products
and awaited approval to issue in China.
As part of the investment, Citi built its own data
repository and this year announced new auditing tools for managers. Citi last
year announced plans to roll out chip-and-pin cards to global travelers. Kohli
said he was surprised by the demand, but honored all requests for the
chip-enabled cards. Citi last year also began to implement the first phases of
its mobile strategy in the corporate space, beginning with mobile alerts to
cardholders and the ability to release payments and check balances via mobile
phones.
Diners Club
International
Discover Financial Services reported a second year of
spending growth on its Diners Club International network to $29 billion, after
it acquired in 2008 the global franchisee network from Citi. In its annual
report, Discover said it is "investing in our Diners Club International
business by developing new products, seeking new franchises and providing
incentives to existing franchises for expansion and development." It added
one new license in 2011 for a total of 80, operating in 185 countries.
Discover executive vice president and Payment Services
president Diane Offereins said the company would continue to "improve
domestic and international acceptance," establish network-to-network
alliances with regional players and invest in mobile. One of the latest network
alliances was announced with the National Payments Corporation of India. The
relationship by the third quarter of 2012 would allow Diners, Discover and
Pulse cardholders to use RuPay automated teller machines inside India with
reciprocal access to RuPay customers expected later. Discover also licensed its
chip-and-pin specifications to RuPay, with a requirement that RuPay be able to
issue such cards by 2013, she added.
"Less than 5 percent of transactions are electronic in
India," she added, so there's "huge opportunity for growth."
JPMorgan Chase
While continuing to market its own commercial card products,
JPMorgan Chase in 2012 also plans to market a new global offering with partner
AirPlus International.
JPMorgan Chase global commercial card president Andrew
Pilkington said the company in 2011 "embarked on a thorough strategic
review" of its commercial card portfolio. "We decided we were at a
crossroads. Do we continue to build product sets and invest in many more
markets per client wishes or partner with someone who already has a very strong
footprint in those markets? We choose the latter."
Executives evaluated several potential partners before
honing in on AirPlus, he said. Key was a "strong brand, real global
presence, first-class product set, genuine commitment to clients and a culture
that would work well with JPMorgan Chase."
J.P. Morgan Global Commercial Card claims "more than
6,000 public and private sector clients and more than 6 million cardholders."
The company's treasury services business serves more than 135,000 corporations,
financial institutions, governments and municipalities in more than 180
countries and territories.
The bank has global reach, but "didn't have a global
footprint in all business lines. We found a fantastic fit with AirPlus,"
said JPMorgan Chase corporate card executive and managing director Lionel Le
Meur, who in 2010 joined the company after more than a decade with American
Express. "We thought we could really leap ahead of many of our competitors
in providing that solution to many of our clients," he said. "It's a
strongly founded partnership based on where we want to take the product."
MasterCard
MasterCard said its commercial credit and charge programs
generated approximately $251 billion of billing volume globally, about 8
percent of the company's total billing volume. At year-end, the MasterCard
brand appeared on about 33 million commercial credit and charge cards
worldwide, nearly 11 percent more than a year earlier.
With partner Brighter Planet, MasterCard last year announced
a program to help corporate cardholders track carbon emissions of travel
expenditures.
MasterCard in 2011 added both Hyatt Hotels and Starwood
Hotels & Resorts Worldwide properties to the MasterCard enhanced folio data
program. In all, MasterCard said 13,000 properties participated in the e-folio
program.
In May 2012, MasterCard proposed the formation of a "cross-industry
group designed to foster collaboration" of all parties in the
implementation of chip-and-pin, instead of swipe security, in the United
States. Earlier MasterCard outlined its roadmap to EMV standards.
As part of its mobile initiatives, MasterCard this spring
announced its own suite of mobile software products called PayPass Wallet
Services. American Airlines and Barnes & Noble were among the first
merchants to announce plans to use the service with a "PayPass checkout"
button on their sites. AA also plans to integrate the technology into its
mobile application. MasterCard also partnered with Google, First Data and
Citibank in the United States to launch a digital wallet with an integrated,
pre-paid MasterCard. The company also licenses its Mobile PayPass technology to
the Isis joint venture.
MasterCard this year released a mobile readiness index for
34 countries to estimate when three types of mobile payments would be likely.
It also announced mobile standards for the small-business and micropayment
markets. MasterCard estimates that by the end 2011, there were approximately
1.2 million MPOS solutions shipped to MasterCard merchants globally.
Approximately 75 percent of those merchants previously had not accepted payment
card transactions. With the amount of innovation and growth expected in this
area, MasterCard will continue to expand the MPOS Program over the coming
months.
Universal Air Travel
Plan
Buoyed by "the resurgence of corporate travel,"
Universal Air Travel Plan announced record transactions and charge volume
during 2011. It processed about $13 billion during the year, up 23 percent from
2010, and signed five new airline issuers: Aeromexico, Malaysia Airlines, Qatar
Airways, Shandong Airlines and Turkish Airlines. The company also cited "significant"
growth for its DataStream product line, which allows airline issuers to provide
corporate clients with a "data-rich, multilingual and multi-currency
travel management system." CEO Ralph Kaiser indicated UATP expects to set
new records this year.
"2011 was a record year and the main driver was the
comeback of the corporate traveler," said Kaiser. After the "big
recession in 2009, in 2010 we started to see improvement, but 2011 is when it
came back. The other reason we grew so rapidly is because of new issuers. We
offered them a free invoicing system. We've cut down the costs to almost zero.
They only pay transaction fees when the network is used. It not only helps airlines
lower their cost of sale, but on interline sales—when one airline's card is
used on another—they earn a merchant fee."
Kaiser said he expected another record year in 2012 as the
new issuers begin to generate volume. He added, "$13 billion is material,
but it's not enough. We want to be a bigger issuer: $30 billion to $40 billion."
U.S. Bank Corporate
Payment Systems
For the first time in more than a decade, U.S. Bank
Corporate Payment Systems last year gained a new business head with the
appointment of Kurt Adams to succeed Rob Abele, who retired. The bank also
announced plans to expand to Europe and this year to emerging markets, as well
as deeper within treasury management functions at some of its corporate clients
and prospects.
The bank in July began issuing cards in seven European
countries. By year-end, it had added resources in Europe to help support
multinational sales, but continued to focus on U.S.-based multinationals. Early
this year, U.S. Bank announced plans to expand to emerging markets to support
client needs.
With the demise of the Global Commercial Payment Solutions
network that it helped to form more than a decade ago to support global card
deployments, U.S. Bank this year also began to explore other bank partnerships.
U.S. Bank last year began to issue chip-and-pin cards to
globetrotting U.S. cardholders and armed more than 100 clients in the first 12
weeks of deployment of its new Payment Analytics product, which allows
organizations to audit 100 percent of its commercial card transactions for
misuse. The bank also saw more than 50 percent growth from 2010 with its Access
Online Payment Plus offering, which allows organizations to automate their
payables process. It also gained several dozen midsize and large corporate
customers on an expense reporting platform introduced earlier with SpendVision
and Visa.
U.S. Bank Corporate Payment Systems said card billings for
U.S.-based travel and entertainment cardholders last year rose more than 5
percent.
Visa Inc.
Visa Inc. said commercial card and prepaid billing in the
United States grew 16 percent in 2011 to $282 billion.
In May 2012, Visa CEO Joseph Saunders said his company was
intensifying competition with MasterCard and signed nine of the 10 largest card
issuers to deals that lasted through 2015. "From a volume perspective,
that equates to more than three-quarters of our U.S. credit volume secured into
2015 and beyond," he said.
Visa last year announced plans to accelerate the migration
to chip-based cards—both contact and contactless—in the United States through a
variety of merchant programs in 2012 and 2013.
"By encouraging investments in EMV contact and
contactless chip technology, we will speed up the adoption of mobile payments
as well as improve international interoperability and security," said Visa
global product head Jim McCarthy. "As near-field communications mobile
payments and other chip-based emerging technologies are poised to take off in
the coming years, we are taking steps to create a commercial framework that
will support growth opportunities and create value for all participants in the
payment chain."
Visa also announced a variety of mobile developments. "We
really do see mobile payments as a global growth strategy," Visa global
mobile product head Bill Gajda said. In developed countries, mobile represents
the next generation payment initiatives, while in other markets, mobile represents
a means to provide electronic payment services to people who don't have bank
accounts or access to banking technologies, he explained.
In addition to joining Isis, Visa licenses its payWave
technology to Isis and others. Visa bought Fundamo, a wallet provider in Asia,
and put the technology inside its VisaNet to offer a no-cost mobile money
solution, Gajda said. "You have a 16-digit pin. You may not ever have a
physical card," he added.
Visa also launched its V.me Wallet for consumers and signed
a five-year commercial agreement with Monitise, which operates payments and
mobile banking services for financial institutions.
This report
originally appeared in the June 4, 2012, edition of Business Travel News.