Interview: Visa Global Commercial Products Head Tad Fordyce

Visa global commercial products head Tad Fordyce recently detailed a new global card option for multinational corporations. Business Travel News payments and expense editor Mary Ann McNulty talked to Fordyce about demand, multinational developments and other trends. An excerpt follows.

Visa just announced a new multinational card option. Are some companies now calling Visa directly for multinational needs instead of issuing banks?

Yes. We've got a specialized sales team that sources requests for proposals and interacts with parties. We don't issue cards, but work to find the right issuers for clients to connect with. We're getting calls for the largest of the deals, particularly governments. One of the biggest, the Australian government, said MasterCard and Visa will identify three to four banks that each wanted to have bid. It's the corporate going direct to brand. We're seeing that more often, especially with global multinationals calling us. Increasingly, we feel it's important to build those relationships. Many of the banks issue multiple brands, and we can't always rely on them to carry our flag the highest. Having the opportunity to have a direct dialogue with the end customer is great.

How big is that opportunity for commercial cards?

Every year we size the commercial consumption expenditures—all b-to-b and government spending. In 2010, the most recent figures, the total was $90 trillion on a global basis. Collectively, the bank card industry—Amex, MasterCard, Visa and Discover—in the commercial space in 2011 had $750 billion on cards, so we've really only scratched the surface as an industry in capturing what really is the opportunity. Obviously all of it won't be cardable, but that's kind of the landscape as we look at the opportunity. There is huge upside.

A consulting firm report estimated that just 1 percent of travel and entertainment expenses landed on corporate cards. What's your take?

All the statistics I've seen would suggest that commercial cards, particularly in the industrialized world, are pretty prevalent. We just did a cash management survey that said that in the United States, 76 percent of corporations already had a card or are implementing one. Once you get out of first-world countries, there's a lot of spend, but not on the card—for example, Indonesia is a country with 150 million people and zero commercial card penetration. In the United States, Europe and other places, people sometimes lose sight of the basic values—the efficiencies, transparency, controls—that cards bring. In the U.S. market, that's been forgotten as they focus on rebates and other issues. In many ways we're looking forward to going into some of these countries where that basic value proposition can be communicated and appreciated.

What are you doing to go after such opportunities?

One of the challenges is that the processors and banks just don't have capabilities in some countries. Small businesses are one thing; they can roll out small business cards on a consumer platform. But once you get into true commercial cards, you've got enhanced data, tax reporting, corporate hierarchies and information management systems that have to be dealt with. Long-term, there are real opportunities to introduce some of those capabilities to banks and corporations.

What other trends are you seeing?

For the first time, probably in the next year or two, we expect T&E spend on the industry's commercial cards to be outpaced by procurement spend. As we look at our cards and the industry, T&E is where commercial cards grew up but what's exciting is that end customers are beginning to adopt our payment solutions for more traditional types of purchasing. Corporations are seeing the value in electronic payments and are using them for a wider range of procurement activities.

Are you seeing corporations move travel and entertainment spending to the procurement platform?

Yes and no, and that gets to the second trend: virtualization. Commercial cards have traditionally been plastic, walking cards. But with virtualization [where only a single-use card number, not a plastic card, is issued for payment], we are seeing a change in payables, where virtual cards are embedded in those solutions. Those are proliferating. We recently hooked up our [payment management firm] CyberSource to the Visa Payables Automation solution. It's still early to talk about results now as we're still in pilots, but it allows straight-through processing. Merchants enroll in the platform. We get a payment instruction file from the buy side's procurement system or ERP. We then work with CyberSource to initiate payment on behalf of the merchant and it flows through the system as normal. From a supplier's point of view, all they have to do is have an account with an acquiring bank. They don't need a point-of-sale terminal. They don't even have to receive cards. There is no need to have an account on file, and no PCI risk because CyberSource handles the transaction for them. The pilot has been underway since April, so later this year or next we expect it to become more generally available. We expect it to be very popular, particularly for merchants today that don't accept cards. CyberSource has relationships with 22 processors globally so they have really good coverage for us.