Several key corporate travel and expense elements, such as booking, trip management and expense reporting, in recent years have grown steadily more integrated, with providers offering a combination of those services under one roof. As the historical barriers have blurred, stakeholders from senior executives to travel managers to individual travelers have reaped the benefits of moving from a piecemeal approach toward a more connected model.
But one bedrock piece of the corporate T&E ecosystem—payment cards—has remained stubbornly apart, still largely siloed as a separate service provided by a traditional bank.
However, a small but growing number of providers recently have begun offering integrated payment and expense management under a single umbrella, touting the combination as the most effective way to finally bring payments to the party, in turn offering corporate clients better spending controls, improved data and operational efficiencies.
A Natural Partnership
Unified payment cards and expense management systems offer several advantages over a non-linked model, in which an outside card program must be grafted to a company's expense tool, proponents note.
Chief among those benefits is greater control over spending, with integrated services enabling managers to set transaction and budgeting parameters for specific cards. Those criteria can be as broad as overall spending limits on given cards for a certain period of time, or as fine as barring purchases from a particular merchant category code, or even a specific vendor. Approval settings can be combined for even more granular control, such as allowing a card to be used to make a ride-hailing purchase only after a specific time of day, and only up to a certain price.
Traditional corporate cards typically don't offer such controls, instead leaving it up to managers to set and communicate policies and subsequently catch unapproved expenses during the expense reporting process.
"If management decides they need to pivot a travel or expense policy, that often gets communicated in an email or a policy change in the expense management system, but the policy change doesn't get effectively enacted unless they've got the ability to put controls on the card itself," said Eric Friedrichsen, CEO of Emburse.
Formed from the 2019 merger of Certify and Chrome River, the expense conglomerate signaled its emphasis on payments when it rebranded in January 2020 as Emburse, the name of a startup payment card provider that was acquired by Certify/Chrome River in July 2019. Soon after the rebranding, Emburse began rolling out a companion payment card across its six expense brands, starting with Abacus, which added the Emburse Card in February.
Along with increasing compliance with spending policies, integrating also can make expense tracking and reconciliation itself more efficient by enabling card purchase details to flow directly to a companion expense management system. That obviates the traditional cyclical process of tracking down receipts, approving and reimbursing reports and paying a monthly invoice to a card-issuing bank. Instead, companies can get ongoing, real-time visibility into their cardholders' spending.
"Processing expense reports and reconciling corporate card statements creates an incredible amount of work every month for accounting and finance teams," said Naveen Singh, CEO of Center, the provider of a recently launched integrated system featuring a Visa-branded corporate debit card with a companion expense management tool. "One of our goals in designing a new approach to managing expenses was to drastically reduce the time required to complete routine operational tasks."
That's music to the ears of many buyers, who cite the inefficient use of time and manual labor needed to manage approvals and reconcile expense as a major pain point, according to Karoline Mayr, founder and principal consultant at Get Travel Solutions.
"Has anyone actually asked ourselves why we keep using corporate cards, use monthly statements, reconcile, look for receipts and go through this very messy process every month?" asked Mayr, who has extensive experience as a travel buyer.
"In almost every company I have worked at in the capacity of a global travel manager, the month-end close is very stressful and painful," Mayr recalled. "At one company, we were expected to close the books two days after the month end. This puts a great strain on the entire team, especially finance ops, accounting, audit and travel."
Expensify founder and CEO David Barrett agreed, saying bluntly, "reconciliation is a nightmare."
Expensify, which had offered an expense management service for more than a decade, launched its own companion payment card in October 2019. Along with automatically routing purchases to the expense tool, the Expensify Card features daily settlement, which allows client companies to better track outstanding costs and avoid end-of-month surprises.
For Expensify, breaking the mold of the monthly reconciliation model simply was a matter of reimagining ingrained processes that took hold in a less-technologically advanced era, Barrett said.
"Again and again when we try to explain the necessity and universality of the monthly billing cycle, we keep coming back to a very simple reason: habit," said Barrett. "It is a strongly ingrained habit that originates from the days of mailing a physical check, a process that feels infeasible to do more often than monthly."
The Time Could Be Right
Given the potential benefits of combining payment and expense services, why have suppliers only recently begun to bring such offerings to light?
One key factor is the availability of payment card issuance services based on application programming interfaces from such providers as Stripe and Marqeta, which have made it much easier and faster for corporates to issue their own physical and virtual payment card products. That process, which traditionally necessitated lengthy development time, complex agreements and long-term contracts, now can be accomplished via several lines of code, Emburse's Friedrichsen said.
"The advent of these services have helped make card issuing a lot easier," said Friedrichsen. "It's much simpler and quicker for organizations to issue cards than they could have in the past, and it allows us to innovate much more quickly as far as our services."
But those advances wouldn't have been enough to truly get the ball rolling without another key element: banks' willingness to cede their traditional role alone at the center of a payment product, and instead partner with providers in a smaller but still crucial role.
"The reason why this model wasn't possible before is that banks had to evolve their business goals effectively to support this new vision, where, while the card is important, the software integration with the card is what makes the card valuable" noted Center's Singh.
"Most banks are great financial service companies, but they're not great software companies," Singh continued. "So, banks had to learn to partner with tech providers rather than compete with them. There's still lots of work banks need to do to enable those tech providers to issue cards, and there's lots of value a bank still adds, but that's by playing more of a platform role."
Friedrichsen agreed, noting that Emburse seeks to "partner with financial institutions, not compete with them." In addition to issuing cards, the company relies on banks to float financing for cards set up under a credit card model, he added.
For expense providers, adding a payment card isn't just a matter of offering a useful companion product—it also has the potential to open up a significant new revenue stream in the form of the "swipe fees" merchants pay whenever they accept a purchase made on the card. Those fees typically are shared between issuing banks and payment networks such as Visa and Mastercard, but corporate payment card providers can arrange to keep a percentage as well, justifying their cut by the overall increase in purchase volume driven by those providers' cards.
Swipe fee revenue makes providers less reliant on subscription and licensing fees from client companies, enabling revenue models where a client is charged less depending on the overall purchase volume from their cards—or isn't even charged at all.
Emburse offers just such a pricing model, according to Friedrichsen, while Singh said Center earns the "vast majority" of its revenue off of swipe fees. In some cases, for particularly large or high-spend organizations, Center may even essentially pay the client to use its card, in the form of cash-back rebates, Singh added.
A Scalable Solution?
New market entrants offering a combined card and expense service might have a relatively easy time convincing a startup or smaller business of their value proposition. But it likely will be a much taller task to carve out market share among major corporate and enterprise-level clients, most of which have entrenched relationships with legacy corporate card providers.
"Most large global companies have preferred relationships with corporate card issuers, such as American Express, Citibank, that can provide them coverage across markets, higher global volume-based rebates and enhanced data for reconciliation," said BCD Travel vice president of payment strategy and products Ajay Singh.
Despite the difficulty of penetrating the major corporate market, some niche cases could serve as potential footholds for emerging combined providers, Ajay Singh noted.
"Many large corporate clients are exploring integrated travel, card and expense solutions for non-employee travel or for emerging countries where they don't want to issue a corporate card to employees, or where the employees may not have a personal card," said Ajay Singh.
It was with just that use case in mind that Emburse recently launched Reach, which works with the Emburse Card to enable job candidates, external consultants and other non-employees to pay for flights, hotels and other expenses without having to front their own funds and wait for reimbursement.
While Center currently is focused on the small and midsize business segment, Naveen Singh sees potential in scaling up to serve larger clients and is undaunted by the challenges inherent in doing so.
"If you think about goals and trends affecting the enterprise segment, they're the same as midmarket and small business customers. They have the same needs as far as spending controls and operating efficiencies," Singh observed.
Emburse, too, is starting by targeting smaller companies, but plans to serve bigger clients, with Friedrichsen calling large corporates "a critical part of our market."
While all-in-one payment and expense providers likely won't make a major dent at the enterprise level, their value proposition likely will have a ripple effect throughout market segments, predicted BCD's Singh
"Most technology disruptions start small and grow over time, and many incumbent leaders are able to benefit from it and create additional value," said BCD's Singh. "Every service provider, small or large, has to continue innovating, piloting and launching new solutions for the benefit of the client."