2009 Business Travel Survey: Payment Vendors Push Consolidation, Globalization

Payment issuers and networks, faced with contracting volumes of travel and entertainment spending, are advocating global growth, better compliance and spending consolidation as a way to forestall expected volume declines this year.

Following several years of double-digit percentage year-over-year volume growth, volume levels by major corporate card issuers were a mixed bag in 2008. While Citi and BMO Financial Group reported 2008 volume increases of at least 20 percent compared with 2007, other issuers reported year-over-year declines in volume. No issuer stated expectations of rising volumes in 2009.

"For signing new customers, it was a banner year for us, but across the board, companies are being very judicious about travel budgets, and they've cut back extensively this year over last year," said Jeff Rankin, senior vice president for U.S. Bank Corporate Payment Systems, which reported a 2.3 percent year-over-year drop in T&E charge volumes in 2008. "The trend started in the middle of last year, picked up steam in the fourth quarter and is holding true in the first and second quarter of this year."

In the meantime, the financial services industry at large is undergoing its own problems in the economic downturn, and it is changing the faces of some of the industry's key players. Even before the Wall Street meltdown last fall, one of the major corporate card issuers—GE Money's Corporate Payment Services—was acquired by American Express, and Discover Financial Services acquired the Diners Club International network from Citigroup. Following the meltdown, there was a bevy of merger and acquisition activity—Wells Fargo's acquisition of Wachovia, JPMorgan Chase's acquisition of Washington Mutual and the U.K.'s Lloyds TSB's takeover of competitor HBOS—that continued to contract the field.

The industry unrest has spurred some corporations to broaden their scope in searching for corporate card suppliers, said Kevin Tait, senior manager of business development for BMO Spend & Payment Solutions, which is included in the survey for the first time this year. Only recently a player outside the procurement card field, the Canada-based BMO saw its requests for proposals for T&E card programs from the United States more than double last year, he said.

"Companies have enough concerns without having to worry about the soundness of their vendors, so a lot of eyes are shifting north," Tait said. "We're a dominant player in Canada, and we're moving that expertise into the U.S. marketplace."

With T&E spending not expected to pick up in the near future, card issuers and networks are focusing on other methods to keep their volumes strong. Rather than try to generate more spending, corporate card suppliers now are looking for ways to get more of the spending that's already happening onto corporate cards.

Globalization has been a key area of growth for corporate card vendors in recent years. "They're trying to consolidate, and instead of having four or five issuers in the United States or North America, they want to handle things on a global basis," U.S. Bank's Rankin said.

Visa's Global Commercial Payment Solutions joint venture, formed almost eight years ago, has helped boost those globalization efforts, Rankin said. The partnership allows U.S. Bank to consolidate data from cardholders across the globe.

"Large companies are trying to leverage infrastructure and reduce cost, so there continues to be interest in having card programs managed from one headquarters," said Laima Kardokas, senior business leader of Visa Commercial Solutions. "Companies that might have acquired companies in other countries are looking to leverage their relationships with banks."

Marcie Verdin, group head of the large market segment for MasterCard's global commercial products, said global acceptance continues to rise in most locations—including the Middle East, Africa, South Asia and even the United States—in the range of high single digits to teens. Even so, the economic downturn could be stalling some globalization efforts, she said. While MasterCard still sees requests for proposals that are global in scope, most are from companies that already have global card programs in place, she said. "Like everything else, customers are in a status quo mode and aren't making drastic changes right now."

Helping companies push for more mandated use of corporate card is another way to grow volume in tough economic times, she said. "If we can capture the cabs and the black cars and the out-of-pocket expenses people are still used to paying for in cash, we can get more spend," Verdin said.

Most issuers report increased interest from companies both in meetings cards, offered by all the major corporate card issuers, and one-cards that combine T&E and procurement capabilities. Visa's Kardokas said a recent RPMG Research Group study of 1,200 companies found that in 2007, 69 percent were using card programs for multiple purposes, and by next year, 77 percent expect to do so. While one-cards often have been marketed to small and midmarket companies, the interest within large market companies also is growing, Kardokas said.

At the very least, companies are seeking to consolidate purchasing and T&E to a single vendor. In 2006, about 20 percent of RFPs BMO received were looking for combined travel and purchasing services, Tait said. In 2008, that jumped to 57 percent. "This is happening as organizations are putting all these purchasing silos under a single person," he said.

Meetings, meanwhile, still remain a comparatively untapped area in terms of corporate card penetration and are a rapidly growing source of business, according to issuers. U.S. Bank's Rankin said that coincides with companies consolidating meetings management to a single department rather than having all divisions plan their own meetings. "The card is a tool they are implementing to hone in on that reporting," he said.

Data also indicates that more companies are shifting to central rather than individual corporate payment and liability structures. Preliminary data in a MasterCard-co-sponsored research study conducted by Prof. Richard Palmer of Eastern Illinois University and RPMG Research Corp. shows that more than half of Fortune 500 companies have corporate liability in their card programs, up from one-third in 2004. Issuers and networks cite improved expense reporting capabilities and a need for tighter spending controls as a driver of the shift, and the economic climate could accelerate that growth even further in the next few years.•