U.S. Bank Gives Care To Expenses

By BTN / November 05, 2000

U.S. Bank Gives Care To Expenses

BTN contributing editor Lynn Woods recently spoke with Minneapolis-based U.S. Bank president Robert Abele about some of his company's latest developments, particularly regarding electronic expense reporting. U.S. Bank, one of the nation's largest issuers of credit cards to the government and the commercial sectors, this year expects to have total charge volume of $16 billion, of which 50 percent is corporate, 40 percent procurement and the remainder fleet. 

BTN: How is the government and commercial rollout of Care, U.S. Bank's electronic expense reporting product, progressing?

Robert Abele: Care is installed, to some degree, at all government clients. The rollout should be complete in the next year or so. One of the complexities of the rollout has been ensuring that the government has the infrastructure necessary to use the application. There are Army bases and Air Force installations that have not equipped PCs with the right browser required to use Care. The U.S. Department of Defense has its own network that

you have to get on in order to get into the Net and there are firewall issues, which can slow things down. The government sets a pretty high standard in terms of the technology. That's the bad news. The good news is that people are getting there. We started the commercial pilots a year and a half ago. The challenge we had in meeting the government requirements was a pretty big one. It definitely slowed us down in terms of our commercial rollout, but I think we're well on our way to recovering from that. The good news is we're able to leverage some of the functionality we've developed for the government on the commercial side.

BTN: What is the penetration of Care with corporate clients?

Abele: We've got 28 corporate clients that are using some form of Care. It has a bunch of modules, including account inquiry, account setup, account maintenance and expense reporting, both standard and ad hoc. Managers can dispute transactions on the Web instead of having to call our customer service center or put the dispute in writing, which is a Visa bank card associate requirement. We've got an audit tool, so if you've made a dispute on the Web, we store that transaction and hence automatically create a paper trail.

BTN: What do corporate travel departments need to bring to the table to implement Care?

Abele: Care is a very sophisticated administrative reporting environment. If you're talking about account querying on the Net, that's pretty easy to do, but let's look at account setup: Instead of faxing a paper application to my system, you have the ability to stitch in the data from your own application into Care and boom, it feeds my system. We designed Care to be user friendly and intuitive, but we've also developed Web-based training tools for card-program administrators. We've got cost reallocation capabilities, which are really germane and pertinent on the procurement card program. You can go in and reallocate a transaction, splitting it into different cost centers. Again, there's some complexity because you're using a tool set that you've got to be trained on.

BTN: Has there been much corporate interest in one-card programs, in which T&E and purchasing transactions are combined on one piece of plastic?

Abele: There's not a stampede. We probably have one dozen clients that use a one card. It's predicated by your back-office capabilities: You've got to be willing to treat T&E transactions like procurement transactions, in terms of processing the charges, payment and settlement to your general ledger. A lot of organizations tend to manage T&E separately from procurement. T&E programs tend to be individual liability, with the traveler paying our bill and reconciling the expense by submitting a report either manually or through an expense reporting tool and then getting reimbursed by the company. With a purchasing card program, liability is corporate, with a central bill process.

The companies that go to a one-card program oftentimes are willing to take liability for both charges.

BTN: One difficulty many travel managers have with policy compliance is that rewards programs entice travelers to use their own cards and suppliers. Is U.S. Bank exploring a solution to this problem?

Abele: We don't think rewards programs are in a corporation's best interest. However, there is a segment of the market that is employee-centric and wants to offer rewards programs, such as law firms, PR firms and the big eight accounting firms. We have structured a program with Visa that includes most of the airline loyalty programs, but it's standardized and has all sorts of rules concerning things like Saturday night stays and 21-day advance purchases.

Financially, offering a rewards programs doesn't make sense for us. On a $100 transaction, we typically collect $2. I've got to use that $2 to fund all my fixed and variable costs and cover my margins. We also have performance rebates with clients, so we've structured a program whereby companies can use their rebates to help fund these programs. The non-bank card competitors in the corporate world typically are getting $2.50 or $3 for that same transaction, so they have a little more room to fund a rewards program.

BTN: Tell us about your new EProcurement Card.

Abele: We're taking our purchasing card to the next level. Historically, purchasing has been segmented into high-dollar/low-dollar high-transaction type of purchases. Only smaller-amount transactions get put on the p-card, and the attitude has been, "we don't need to spend a lot of time reconciling that stuff, it's not value added." But that's changing. Companies are now looking at their whole procurement spend and they're saying, "How can we begin to use the p-card to get at some of the larger ticket transactions?"

They're also working with the electronic procurement providers, such as Ariba, Commerce One and Remedy, which provide Web-enabled software that streamlines the purchasing process. Those folks provide the front-end procurement process, and we've got the payment vehicle. Somebody's got to manage the risk between buyer and seller and the back-end financial processes. We asked ourselves, "How can we stitch that together?" We've worked with the e-procurement vendors to provide the back-end reconciliation for clients using their procurement card. Transactions are reconciled from the time the order is taken to when it is billed. We can do online account set-up, enabling you to get a ghost account number for an employee to use instantaneously in your e-procurement system.

The other thing we're doing with the EProcurement Card is certifying merchants. When you use that procurement card with your merchant base, you also need to ensure you're getting enhanced data capture. For example, you need to break out the sales tax for tax reporting purposes. We will work with a company's suppliers to certify them as Visa Level II data capable. We tweak and audit and look at compliance so there aren't back-end audit and data issues. If you're willing to use us as both the issuer of the p-card and the merchant acquirer, we can get a little sharper with our pencils in terms of setting up a preferred discount to the merchant. The merchant might be supplier-capable today. They might already be accepting the Visa card. But sometimes these larger-dollar purchases cause the supplier to balk. They say, "I'm not going to pay out a $100,000 transaction, that's going to cost me two grand." If you use me as the supplier, where I've got both sides of the transaction, we can skinny down that rate and make it more competitive.

BTN: When will the new card be available?

Abele: It's available today. We've been testing the card with approximately 20 clients over the past six to 12 months to make sure that by the time we announced it, we had the capabilities in place to handle more robust demand.

BTN: Any other new developments?

Abele: We bought Voyageur Fleet Systems from the bank associates last September. In acquiring Voyageur, we saw a great opportunity to deliver a stand-alone fleet card solution, as well as work toward integrating those fleet card capabilities into a one-card solution.

We also bought Royal Bank of Canada's commercial card portfolio last April. Not only does this give us a bigger book of business, but it also will augment our multinational strategy. Previously, our clients could use the corporate card in Canada, but they would receive a bill in U.S. dollars. Now I've got the ability to issue cards in Canada with the bill in Canadian dollars, and we're going to integrate the reporting with expenses incurred on U.S.-issued cards. One of the most compelling values of a global card is its ability to consolidate your buying power and give you the information you need to get a better rate.

BTN: Is there much interest in global card programs from your clients?

Abele: It's growing. Heretofore, we used other member banks that are part of the Visa consortium to meet the needs of clients who have programs in Europe or Asia. Quite candidly, this has had mixed success. Some members of the Visa alliance do a better job than others. Our challenge is to get everybody up to U.S. standards.

BTN: Can you provide an example of a type of capability that's available in the U.S. but not in Europe?

Abele: One example is MIS reporting. There are banks in Europe where you can't get data in electronic format, it's still paper based. That's no longer an acceptable way of doing business.

BTN: So what's your strategy for moving toward a global program?

Abele: Our focus this year is integrating the Royal Bank portfolio into our organization. Their product feature functionality is similar to ours, but there are some gaps, such as lack of fleet capability in Canada. We're going to look at filling in those gaps. We're also setting up a customer service center in Toronto. Beyond Canada, what I prefer to do internationally is identify a group of Visa issuers overseas that will get serious about deploying solutions similar to ours. If this leads to nothing more than consolidating the data, that's immensely valuable. These issuers overseas can provide the local servicing that's necessary.

BTN: So you intend to pursue partnerships rather than acquisitions?

Abele: Precisely.

BTN: Do you have any smart-card initiatives afoot?

Abele: We're doing a smart-card pilot with Siemens. We embedded the corporation's negotiated rates with two suppliers, Sheraton and National Car Rental, on a chip. It's actually worked pretty well; we've been trying to really prove the value.

In some respects, smart cards are a solution in search of a problem. The federal government's General Services Administration, for instance, has taken the corporate card, which has a magnetic stripe, and put a chip on it for identification and security purposes. A part of me says, "Is it worth it?" What additional functionality can you put on the card that really makes it a compelling value proposition for all the parties involved? It could be capturing corporate card information at the hotel and the car rental counters, so that when you return to your PC and slip the card in a reader, that data automatically gets uploaded into your expense report.

We're having discussions about smart cards with some of our clients. Next month we're going to have a smart-card roundtable to sort through some of the input we've gotten from them. If we're going to come up with solutions, I want to avoid individual runoffs that are pretty expensive and leave you with the question, Where does it lead? We're asking, "Is there some commonality in terms of what our clients are looking for that can create critical mass?"

BTN: Some corporations only recently have implemented corporate card programs, so are many companies ready for this type of innovation?

Abele: You're looking at a T&E market in the United States that's worth $150 billion to $170 billion. Only half of that market is captured on a corporate card, so there's still organic growth in the marketplace. Our statistics show that most of the Fortune 500 companies have programs, but there's still some that don't.

BTN: Are most using some type of electronic capability in their program?

Abele: Fifteen to 20 percent of our customer base are really sophisticated in what they're doing. They've spent the time to figure out how to use an online booking system and a corporate card program and integrate them into their expense reporting system.

It's a bell curve. People on the left side of the curve have figured it out, then you've a bigger swatch of people representing a real mixed bag: They've automated some of their expense reporting, but they don't have online booking yet. At the far end of the bell curve are companies where everything's paper, and our job is to preach and convert. If you look at this stuff realistically, it ultimately enables corporations to take more cost out of the process. In today's world, integrated solutions are what it's all about.

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