Pushing Prepaid Cards: Mastercard, Visa Explore Stored Value

Payment system vendors are attempting to muster corporate interest in new, prepaid corporate card options for a variety of business expenses, including travel and entertainment.

MasterCard International last month introduced the Travel Per-Diem Card, a prepaid card program that allows travel administrators to set and track daily spending limits for travelers.

Visa last year relaunched its gift card as the Pre-Paid Visa Card, while American Express last month began piloting a card option with company defined spending limits.


While the groundwork for MasterCard's Travel Per-Diem Card essentially is the same as other stored value or prepaid cards, the company said customers could set limits not only on spending amounts but also on where travelers can use the card, "which will help individuals comply with corporate travel policies," a MasterCard spokesperson said.

"Companies have enhanced controls on how that card can be used," said Steve Abrams, senior vice president of MasterCard Corporate Payment Solutions. "So you could put a limit not only on the transaction size and frequency—clearly you have an amount that cannot be exceeded because you've preloaded the card—but also you can actually identify only travel-related sources where this card can be used."

For situations in which a traveler justifiably steps outside the bounds of travel policy, officials said the Travel Per-Diem Card offers some flexibility, as travelers have access to the infrastructure for fund approval.

In addition to controlling spend and compliance, MasterCard said the new payment card offers a way to track expenses and streamline paperwork, as transactional information can be accessed by both the traveler and travel manager through Smart Data Online, the MasterCard reporting platform.

The company is stepping up its presence in the corporate card market with seven new applications for its Workplace Solutions suite. MasterCard last summer launched the first application, the MasterCard Payroll Card, which distributes wages on a payment card instead of checks. A meeting card, incentive card and several Human Resources-related options are other applications in the suite of payment programs that enable corporate customers to allocate business-related funds. The meeting card, for instance, gives meeting planners the ability to expense the cost of meetings that often would exceed the budget allowed on a typical corporate card (see story, page 29).


Meanwhile, American Express last month began to pilot the Corporate-Defined Expense Program, which Amex expects to launch for general availability in March. The product began with the idea of a relocation card, but the company did not want to limit its application to one function.


"Basically, the company can design what the card would be applied to," said an Amex spokesperson. "We're building a lot of flexibility. There will be a couple of model cards that would be pretty standard functionality, like a relocation card." For instance, a company could use the Corporate-Defined Expense Program card for travel expenses, wherein managers can set anywhere from monthly to yearly spending limits. Unlike the prepaid MasterCard application, Amex's Corporate-Defined Expense Program is a billed offering.

When Bank of America, an issuer of Visa cards, introduced its Visa Gift Card in May 2001, it was targeted to consumers as a universal alternative to gift certificates. However, since the card was released, corporate customers have found new ways to use it—first as an incentive for workers and then as a prepaid program for business travelers. "What's happened is companies picked up on this really quickly and the light bulb went on," said Gus Lejano, vice president of Bank of America Gift Card. "There's a huge need from companies that also were using gift cards as incentives for employees or customers."

After Visa discovered the corporate applications for the consumer-friendly gift card, it released in July 2002 its general-purpose brother, the Pre-Paid Visa Card. While the framework for the card remained essentially the same, name change and its power of suggestion helped shift the card's use to a more corporate-friendly market. "In the pay-in-advance world, it's all positioning and marketing," Lejano said. While the applications of prepaid cards for corporate travel are not as far-reaching as the traditional corporate card, there are situations when a company or organization would want to take the prepaid approach for travel.

"There are travelers who would not qualify for a corporate card or travelers who a company would not want to run the risk of issuing a corporate card. Also, this may be good for a one-time user or one-time traveler," said Carol Salcito, president of Management Alternatives Inc.

Cal Smoot, director of purchasing and travel services for the Church of Jesus Christ of Latter-Day Saints, has taken the prepaid card approach for some of his organization's travelers. The church sets monthly prepaid limits on Visa cards for missionaries in accordance with the cost of living in the region in which the traveler is placed.

Prepaying for travel can give companies a tighter rein on controlling spend and enforcing policy. However, one potential financial setback for companies that prepay for travel is the cost of cash, which refers to the amount of interest a company would otherwise gain from having the money in a treasury as opposed to writing a check or prepaying on a card.

"It's a give and take," said Grant Caplan, principal at Consulting Strategies. "Prepaid cards would allow you to manage travel, which would save money but you'd also spend money on the cost of cash. You have to weigh one against the other: perhaps minimize your use of the more expensive cash instrument and supplement it with a credit instrument as much as you can." Salcito added that the possibility of cash loss instills reluctance in companies to adopt a prepaid method on a wide scale.

Phil Dunphy, senior manager of global travel at New York-based Pfizer, is among several buyers whose card program already addresses the needs that prepaid cards attempt to remedy. He said he can set spend limits on corporate cards without the potential expense of prepaying.

"The way we're set up, we pretty much have the corporate travel system cards in place and can set limits if we want," said Tony Occhipinti, New York-based Omnicom director of corporate travel worldwide. "If we require restrictions, I can do that. Also, you can have an individual ghost card or individual cards with individual liability."

While some buyers are reluctant to consider prepaid applications for their travel programs, others recognized the circumstantial applications for stored-value cards, such as contracted work, infrequent travelers or travelers who do not qualify. "I'm not sure I understand the value it brings to an existing traveler," said Jim Lee, director of global travel for Morristown, N.J.-based Honeywell, "but let's say I had recruiting or hourly employees who wouldn't necessarily be traveling very frequently and they needed a card."