With the glaring exception of the world's largest corporate
card provider, American Express, sources speaking with Travel Procurement said one substantive change they have witnessed
during the past few years is that corporations increasingly are declining to
include rewards programs in their card schemes.
These observers said the reason for this is that
corporations are realizing that with stronger mandates in place since the
recession, the need for points programs as an incentive to use the company card
rather than personal cards has diminished. The now-commonplace integration of
card data with expense management systems also has boosted corporate card
compliance because it's so much easier for employees to submit expense reports.
"Less than 10 percent of clients are now looking for
rewards programs," said Kevin Phalen, head of global card and
comprehensive payables at Bank of America Merrill Lynch. "It's extremely
rare that a Fortune 1000 client
mentions a need."
"There has been a shift," said Joanne Robinson,
founder and CEO of payment industry publishing and events company Commercial
Payments International. "A lot of corporations are now negotiating that
out and they want it back in rebates, so they're trending away from them more
and more."
Corporations typically are paid a rebate by card providers
based on volume and also depending on such factors as the speed at which
travelers pay their bills and whether a loyalty program is in place.
"The most common approach is for an organization to be
quoted the same rebate grid regardless of whether it's rewards or non-rewards,
and then rewards become an opt-in at the cardholder level," said Frank
Martien of First Annapolis Consulting. "Those who select it have to pay an
annual fee. Some corporations will reimburse for that, but most won't. That fee
is used to fund points redemptions as well as operations around the rewards
program. If employees are particularly clever at redemption, then that
redemption overage is deducted from the rebate on the back end. We have also
seen contracts for which rewards-eligible spend is ineligible for rebates, and
sometimes those also carry an annual fee."
MasterCard does not have a rewards program—its bank card
issuers do—but the company is in a nice position to observe trends. Group head
for global T&E Richard Crum said, "The rewards program is lower in
priority of how they select the card provider. There has been a general trend
of companies not offering their cardholders the option to participate in reward
programs over the years. Anyone who has been in a relationship with a card
issuer for a long time knows it's not free, but now they're finding ways of
taking that money and investing in other types of loyalty. A company I talked
to recently took the money they were investing in a rewards program and did
their own rewards for the right behavior. If you process the expense report
quickly by some metric, you'll get points from the company or some rewards. Or
if you keep your card up to date, in terms of making payments, if you only put
business expenses on it, etc. They said, 'What we want to do is not motivate
for every dollar you spend, but for every time you do the things that matter to
us as a company.' "
American Express, on the other hand, indicated it is not
seeing this trend. A company spokesperson said the share of charge volume going
though cards that are associated with its Membership Rewards program actually
has increased during the past three years. The spokesperson suspected that
perhaps one difference for Amex is the types of clients it attracts and echoed
what other sources said about companies in certain industries—particularly
professional services—that still keep rewards programs in the mix.
"It's a different generational makeup, and mandates
just don't work with the younger employee base, so that's where we see lots of
rewards take-up," the press official said. "For us, a large portion
of even new charge volume is rewards-enabled, so we would dispute that idea"
that it's diminishing.
Indeed, every observer contacted for this article said
consulting, law and other professional services represented an anomaly as they
still highly value the points programs.
This report
originally appeared in the May 2013 issue of Travel Procurement.