AirPlus Bounces Back After 2016 Losses & Prepares to Launch in New Markets

AirPlus CEO Patrick Diemer talks:

• Making the T&E process seamless
• Mobile A.I.D.A. delays in the U.S.
• Book of business after the EU Interchange Fee Regulation

In 2016, AirPlus lost 127,000 corporate cardholders and €12 million in profit, and it will register a €3 million loss in each of the next several years owing to the European Union's Interchange Fee Regulation. But the payment provider is taking steps to recuperate those losses. BTN payment and expense editor JoAnn DeLuna spoke with CEO Patrick Diemer about launching in new markets and revving up its application programming interface connections to make travel more seamless. AirPlus also is pondering a related move into travel booking and expense management.

BTN: AirPlus partners with booking and expense providers and travel management companies to provide a seamless booking, payment and expense experience. What's left now that you've done this for air, rail, hotel and car rental, most recently with FCM Travel Solutions in the U.S.?

Diemer: We are working on restaurants. We'd like [travelers] to look at their smartphones and have it show what's on their tab for the table, press a button for the tip, press another button to pay and then leave.

BTN: MasterCard is doing similar things on the consumer side.

Diemer: Yes, there are some developments. OpenTable is experimenting with this in Los Angeles. There are also a couple of apps in Europe. Business travel is on the forefront of this because, at the end of the payment process in a restaurant, the expense can be paper free. That convenience demand from travelers [is so high] that it will drive adoption in business travel.

BTN: What else is AirPlus doing to improve business travel payment?

Diemer: My hypothesis is that there will be a new layer of service providers that will integrate booking, payment and expense. This is happening with or without us, so we're working on APIs for those programmers so they can integrate our payment tools better than [they can integrate] our competitors' payment tools. The other question is [whether] this development means that we would need to become a booking or expense provider ourselves. We haven't answered that question yet, but we're looking into it this year.

BTN: AirPlus' Mobile A.I.D.A. virtual payment solution is set to launch this year in the U.S. How is that coming along, and why has it taken so long?

Diemer: [The delay] hasn't been because of the product but because of our status as a financial institution. In Europe, we have a payment institution license that [allows us to function] like a bank solely for payment services but without [providing credit] to corporates. This regulatory category doesn't exist in the U.S. [Here] you have to be a bank.

BTN: Will AirPlus become a bank then?

Diemer: We questioned whether we should become a MasterCard issuer in our own right in the U.S. or [if we should] partner with a MasterCard issuing bank. We didn't want to go through the capital and regulatory regime to become a bank, so we chose the second option, with Regions Bank in Birmingham, Alabama. It's taken a while for us to technically implement the A.I.D.A. product in the U.S. It's going to be the same product we issue in all other countries, as that is what our global customers require, one process.

BTN: How has the U.S. market played out for AirPlus, considering U.S. companies don't use lodge cards as much as European ones do?

Diemer: Globally, AirPlus is probably No. 3 based on [payment volume]. In the U.S., we're at the end of the food chain because of the regulatory environment. A.I.D.A. is a key development that has taken some time to get going, which meant we didn't have the same product setup that our competitors have in the U.S. We were not the first in the market, and we therefore are a small player.

BTN: Is the U.S. market a priority?

Diemer: The U.S. is a pretty developed market with a lot of competitors, and rebates play an important role in the U.S. market. Our priority for market development is really Asia/Pacific because there's so much more business there for us today. We have a number of other Asia/Pacific countries like Indonesia and Thailand to be launched later this year. We're also launching the Company Account product in Japan and forming a subsidiary in Brazil.

BTN: Does that mean you're going to scale back on your U.S. presence?

Diemer: No, we're not cutting back our U.S. presence. We're going to increase it, but the speed is going to be modest.

BTN: Last year was tough. Can you walk me through the losses that resulted from the EU Interchange Fee Regulation?

Patrick Diemer: The regulation had a one-time [loss] effect of €9 million because we had to migrate the portfolio and reissue all of our cards. Then there's the ongoing €3 million loss that will carry on. We had to give our customers a choice between paying a significant price increase for the type of corporate card they were using or changing to corporate liability. Given that choice, 22 percent [of clients] decided to no longer use corporate cards, which were predominantly cards that were not used frequently. That's where we see the permanent negative effect coming from.

BTN: In this new regulatory environment, I can see the opportunity for alternative forms of payment for infrequent travelers.

Diemer: Yes. We see a lot of customers pushing more onto the lodge account. We were quite afraid that customers were turning their backs on AirPlus or the product category, but that's not the case. Even customers who don't use a physical piece of plastic anymore continue to use a lodge card or a virtual central bill account. If travelers have to pay for something outside of car rental, air or hotel, like a restaurant, then they're asked to use personal cards and be reimbursed through the expense management systems.

BTN: How has 2017 been for AirPlus so far?

Diemer: Business is doing very well this year. [Year over year for the first five months of 2017, we saw] a 6 percent increase in global issuing volume, which is our key performance indicator. We [saw] more than 9 percent volume growth for our lodge account [product] and 31 percent growth for our A.I.D.A. virtual card product.