Interview: U.S. Bank Corporate Payment Systems Head Kurt Adams

U.S. Bank last month named Kurt Adams to head its Corporate Payment Systems business, succeeding Rob Abele, who retired after 20 years at the bank, the last 12 as CPS head. Also an executive vice president at U.S. Bank, Adams runs a segment that includes commercial and government travel, transportation and payables and processed more than $44 billion in sales last year. He started at the bank in 2005 and has directed CPS strategy and worked in Europe at the company's Elavon unit. Adams spoke this month with BTN's Mary Ann McNulty.

What is on your agenda?

We've been an extremely successful business within U.S. Bank and within the commercial payments markets. Historically and even today, commercial payments or corporate payments, while a broad term, is still very defined by the card. How do we leverage that expertise and scale we've developed over the years—our position in the marketplace—to expand, both within the card market geographically as well as [within] the broader travel value chain?

Looking at the role of e-payments or even accounts payable automation, it primarily resides within the AP organization, but even within larger corporates, the migration is toward more centralized procurement. What role does travel play in that? As we look at the functionality of AP automation, there are aspects that can be defined within the travel segment and aspects that are much broader.

What sort of specific controls or tools do you need with regard to travel, freight, utilities, general procurement or whatever? That's really our focus going forward: looking at that card as the engine or foundation, but what can be wrapped around that in terms of general treasury management solutions, new ways of looking at control and reporting tools and consolidation from a regional view of the world to centralized decision making?

Isn't Syncada (a joint venture of Visa and U.S. Bank, launched in 2009) your e-payables platform?

Syncada is a platform that we're looking to provide for business-to-business payments. What Visa, MasterCard and American Express have all introduced separately came out of banking networks, taking a platform owned by a bank—U.S. Bank for Syncada—and have it offer more ubiquitous functionality for multiple banks. You create a standard for b-to-b payments for buyers and suppliers.

When you talk about desire to grow, is it through Syncada or other functionality?

[We will] use Syncada functionality, as well as Payment Plus for virtual cards, single use and ghost cards, as a way to utilize the card network, but running through with a very different economic proposal that can capture non-cardable spend. But a company can still get the Level 3 reporting and all the controls they have with the card. That's the logical progression looking into e-payments, a card, Payment Plus, electronic invoice presentment and payment and e-payables.

Today, is volume in this area small?

From the Syncada piece, volume today isn't small—it's about $20 billion annually—but 90 percent plus is through freight payments. It's not general payables or T&E; it's specific to freight spend. On our Payment Plus capability with virtual cards, that's a business that will probably do in excess of $1.5 billion in volume this year, and that's up $500 million from two years ago.

Are any companies finding uses for Payment Plus in travel?

Not yet, but I think there's an opportunity as we think about the idea like lodge accounts in Europe. Payment Plus could have a functionality, whether it be meetings spend or centralized travel, in which you could provide a virtual account number that can be associated with this travel. In the U.S. market, that card works really well. If we could extend into event planning or any sort of centralized travel, that's a one-to-many solution that could work really well.

In Europe, Lufthansa announced new fees for credit card use. Are you talking to Lufthansa about any solutions to mitigate costs for your clients?

We're not in any discussions with Lufthansa at this time. We're still evolving into the European market. As we service our North American base multinationals and demands there, still a supermajority of cards and usage happen here or in Canada, and the smaller percentage is in Europe. The economic scenario would be different if we were issuing cards to large European organizations, but our philosophy is driving centralization of decision-making with the travel manager and being able to provide a single contract and reporting to companies based in North America. Right now, we're active observers.

The bank was to deploy multinational cards in seven countries in July. How many clients have signed up for your new multinational cards?

We implement our first external client in July and have five in the pipeline for implementation. It's been a tremendous success for us. We rolled out a pilot for [U.S. Bank subsidiary] Elavon in Europe. In addition to the euro and pound, we added Swiss franc capability. We still have the ability through a consortium to backfill other countries, so our solution is not limited to those seven countries and currencies.

What are your plans for chip-and-pin cards for U.S. cardholders who travel overseas?

What's on our roadmap is a Q1 launch for chip-and-pin. We're not viewing it as replacing all cards. Chip-and-pin would be for our power users who are doing a lot of multinational travel. The capability will be there and our target is Q1 of 2012.

What are you hearing from customers?

As we get feedback from customers traveling overseas, the only time have issues is with unmanned kiosks. It's not something they've been outspoken about; it's more, "Boy, this would really be nice to have." As Europe continues to evolve, this probably will be more prevalent. It just isn't today.

A year ago, CPS along with partners Visa and SpendVision introduced an expense reporting solution for clients. How many clients are using that?

In the short time it's been in marketplace, we already have several dozen midsize and [large] corporate customers either implemented or in the final stages of contract execution, and we expect to double those numbers in the next 12 months.

Takeup from the commercial market has been going to plan. It's been a real differentiator for us in the market. Demand coming from the large corporate market is more prevalent than we originally anticipated. We rolled this out anticipating it would be a midmarket product, but we're seeing demand from the [large] corporate market. Where we're really focused now is ensuring that the product has the horsepower to meet the demand of the corporate market.

Are clients moving off spreadsheets, paper or other online deployments?

Most of them today really don't have anything, and are using Excel or lots of manual processes. Deconversions off of existing capabilities are probably where we'll see the opportunity in the corporate market. But most of this is replacing something that really isn't automated today—that's the opportunity we're going after.

Are you still issuing commercial cards only on the Visa platform?

Ninety percent are Visa, but we do have MasterCards in force in the market. Visa has been our vendor and likely to be so too, but as functionality, technology and demand unfolds in the market, we will continue to look for the best-of-breed providers. However we deliver that—whether Visa, MasterCard, a proprietary solution, Syncada—we are open to exploring all the alternatives that best meet the demands of our customers and allow us to deliver against our strategy.

Competition in the premium space with executive cards has heated up in past couple of years. What are you hearing from clients on their needs, and what are you doing?

That's a market we are addressing by adding functionality that the C-suite is looking for. We haven't lost any business with what we have today. We view it as one of those nice-to-haves. We launched a platinum card last year, but we will be enhancing it in the fourth quarter of this year to provide more flexibility and broader coverage. Details of our Executive Platinum Card are still being worked out, but in general the aim is to tailor it more to the needs of each cardholder for such benefits as airport lounge access and other perks.

What size companies do you expect to court to help your growth strategy?

Our launch into the European market was really driven by our corporate channel. That's a market that continues to be the primary driver for our T&E solution. While we've gone into the [midsize] commercial market, it takes pieces from the corporate market that we can evolve and repurpose for the commercial market, but the changes in technology and the demand for functionality, whether geographic or on the product side, still is driven by the corporate market. That hasn't changed.

Within the commercial market, one of the differentiators is with our one card, which is a combination of p-card and T&E. That provides the commercial market with the procurement capability of a p-card that can also be used for T&E.

When initially launched, we thought it would be more focused on general maintenance, repair and operations, but we're looking at 20 percent on T&E. It's been one of those areas that we're continuing to adapt, but the way we adapt to it is driven by the corporate market.

Strategically, where we're headed is centralization of that procurement function, taking it from a regional to a centralized approach with other capabilities beyond the card and EMV chip. As we look at the corporate travel segment, those are the main drivers.

Also on our radar is delivering that full value chain from booking solutions to card spend to settlement/reconciliation and reporting, and being able to more elegantly provide a solution within that chain.

Are you looking at developing your own booking tool or partnering?

We're exploring all options. Strategically, what's on our road map? It's the ability to deliver that capability: booking and all the different ways to book travel, with mobile technology, and when you think about single-use account numbers, that's a big opportunity. Being able to go onto a website and pull in the account number for that travel purchase and have it all booked back to that number without the need to have a card—that's the stuff we're spending a lot of time thinking through both domestically and internationally. For example, employees going to a conference, and they only go once a year, could be assigned virtual account numbers for their travel. They go to a site and use that number, and it's all tracked back. It could take a lot of process and plastic out of the equation. When that happens I don't know, but it's on our radar screen.