Global pharmaceutical services provider Parexel is in the business of helping its clients run clinical trials for new medications in development. So it seems fitting that when senior director of procurement and travel Benjamin Park set about curing some of the travel booking and payment issues that plagued his department, he took an experimental approach.
Park recruited Parexel's corporate travelers for a pilot initiative to transform the company's T&E processes by eliminating corporate credit cards and expense reports, largely by adopting virtual credit cards. While it's still a bit too early to characterize virtual cards as a cure-all, he says the results thus far have been promising and the prognosis looks brighter still as Parexel expands the program to five additional European countries.
The Diagnosis
As at most companies, Parexel travelers have a habit of shopping for lower fares and rates on their own—and quite often finding them, according to Park, even though the company has incorporated third-party content channels to fill the gap, particularly for hotel content. Park believes the "lowest-cost" game is a race to the bottom that travel managers shouldn't play to win.
Instead, said Park, whose travelers are largely road warriors, "you actually have to look at the process" to drive compliance and support data capture for duty of care. Offering a better way to book and pay that doesn't require any out-of-pocket spending for travelers or the productivity drag of expense reporting might be just what the doctor ordered.
For air and car rental bookings, Parexel has long used a central Business Travel Account model. But when it came to hotels, rather than using the "stick" to demand travelers book through the proper channels, by mandating compliance or refusing to reimburse for out of channel bookings, the company instead decided to use a "carrot" to incentivize good booking behavior. Plus, Park emphasized, the company needed a solution that actually addressed traveler pain points.
Simplicity Solution
"We looked at simplification of the [expense] process, and we put the traveler into the center of the experience," Park said. "We were looking into what were the pain points of most travelers. And actually, it is payment; to have the credit card, pay the credit card and do the expense reports," he noted. "So then we looked at how we could make that easier. Virtual payments were an answer to that."
Virtual credit cards, unique card numbers that can be issued with set credit and time limits for specific charges, have grown increasingly popular in the corporate travel industry, especially in Europe. Among virtual cards' key offerings are the ability to control spending, simplified reconciliation and greater security due to their one-time-use nature, a particularly attractive concept in the age of large-scale data breaches that have befallen hotels and other merchants, exposing the card numbers stored in their systems. If a stored virtual card number is caught in a breach after use, it's essentially valueless.
Meanwhile, from the traveler's perspective, virtual cards offer a convenient way to pay for travel bookings without having to front the costs—either through a traditional corporate credit card or their own personal card—and subsequently file expense reports for reimbursement. Instead, the cost is charged directly to the corporate.
Virtual cards also are useful tools for authorizing payments by outside contractors and recruits, who simply can be issued virtual cards for incurred expenses rather than waiting weeks for reimbursement. The capability to extend to a growing number of contract employees the same improved payment experience Parexel would offer its 20,000-plus full-time global workforce was attractive, Park noted. "Not only at Parexel, but industrywide, every company is working with more contractors, independents, consultants and third-party vendors who are also traveling," Park noted. "In most travel programs I've seen, they have a very good program for full-time employees, but then everybody who's not a full-time employee is treated second class. They don't have a profile. They're guest-booking. They don't get a credit card. We said, 'Since this is the future [of our workforce], we need to have a program which works for them, as well.'"
(Not So) Minor Complications
While the benefits of a virtual card program are clear, there are significant challenges to getting virtual payment to run smoothly in the hotel sector, even in Europe, which is far ahead of the U.S. but still often suffers friction when it comes to hotels' virtual card acceptance procedures.
The process of actually transferring a virtual card number to the hotel can be cumbersome, with fax often required rather than email, for data security reasons. Even after a card is received, there can be bumps in the road during the check-in process, as front desk staff may be unable to locate the virtual card number or unsure of how to go about processing the payment. Those issues are exacerbated by the highly fragmented nature of the hotel industry and the high turnover among staff, factors that make it difficult for hoteliers to implement large-scale education and training on virtual card acceptance.
The complications have left many a business traveler stranded at check in with a failed virtual card payment and having to revert back to a traditional corporate card, or even their own personal card, in order to successfully check in. "If you issue a virtual card for a hotel, until the point of check-in of the traveler, there was no confirmation that the hotel has received the payment authorization and accepted," Park said. "Basically, the backup plan is the traveler needs a credit card in their pocket, which is the old world."
Those problems were what Park had to solve if his virtual card initiative was to succeed for Parexel. But the company was far from alone in facing the challenges that have nagged virtual card acceptance for years, and a new crop of virtual card specialists has come to the fore with some promising paths forward.
Crafting a Cure
Among the leading players in pushing for the expansion of virtual cards has been Conferma Pay. The U.K.-based company, which distributes virtual cards for a variety of issuers and networks, has rolled out several initiatives aimed at smoothing acceptance. In 2016, Conferma launched a program that enabled virtual cards to be sent via a secure email system that met Payment Card Industry Data Security Standards encryption standards, obviating the need for faxes. Dubbed Conferma Connect, that initiative followed a direct connection virtual card billing program the company rolled out with several hotel partners earlier that year.
But Conferma's latest development is based on the notion that the most transformative technology for virtual card acceptance is one that's already in the pocket of nearly every corporate traveler—the smartphone.
The company is piloting an update to its mobile app for iOS and Android that enables a virtual card number to be stored within the app. Upon check-in, the traveler waves his or her phone at a near-field communication-enabled payment terminal at the front desk, then provides an additional authentication factor, such as a thumbprint, for secondary authorization. For the hotel, check-in proceeds just as if the traveler had arrived with a traditional plastic card, meaning no special training or processes are needed.
Conferma CEO Simon Barker called the mobile wallet initiative the "final piece of the puzzle" that began with direct connections and continued with secure emails. Mobile phones are ubiquitous and travelers have a high level of trust and comfort with their smartphones, and now mobile wallets enable users to store multiple virtual cards. For instance, one card number can be earmarked for the hotel and another for meals and other incidental costs incurred during the trip.
In fact, Barker pointed out, the company's initial plan was to leverage mobile wallets and virtual cards for incidental purchases; it was only later that the idea extended to hotel bookings. "We didn't come to mobile wallets specifically for hotel acceptance," Barker said. "We were doing the mobile wallet because, ultimately, our goal has been to capture all the spend on a business trip. For a lot of the incidentals like taxis, restaurants, coffees or what have you, there's a disproportionate cost to expense them [compared with the price]," he added. "So integrating with mobile wallets enables travelers to pay for incidentals, and more importantly, we can capture all the data from a trip and bring it all into one statement, which has been the goal of the corporate expense world for 20 years."
From there, Conferma realized that mobile wallet-stored virtual cards also can alleviate the pain points of hotel check-in and check-out, especially as NFC payment terminals became more ubiquitous among major hotel brands. And with most corporate travelers familiar with mobile devices and wallets from the consumer side, the process "is just second nature," Barker noted.
In fact, arming corporate travelers with the confidence that virtual cards will make their lives easier is key to driving usage of the cards and kickstarting a virtuous cycle, as the resulting uptick in demand for virtual card acceptance in turn pressures hotels to improve their acceptance processes.
Virtual card adoption and acceptance is "a classic chicken or egg problem to some degree," noted Mario Zorn, associate director of product development and innovation for AirPlus International, one of Conferma's virtual card issuer partners. "You need two parties willing to play along when you want to change something at the point of sale: the buyer and the seller," Zorn observed, comparing the growth of virtual cards to the spread of mobile payments at large.
To drive awareness of the benefits of virtual cards, AirPlus and Mastercard launched an educational website aimed at travelers, hotel managers and other stakeholders. Educating all parties on how virtual cards can solve multiple problems is vital to growing the sector, Zorn said, especially in the U.S. and other markets where penetration is relatively low. "Our approach at AirPlus is not to push virtual cards into the market by all means but to solve our customers' pain points in the first place and make their stressful business travel lives easier and more relaxed. If that can be done with virtual cards—and it looks like it can be done—we are happily pushing them further."
However, it's unlikely there will ever come a day when each and every hotel can accept a virtual card with no problems, Zorn said. That means flexibility will be paramount when developing solutions that leverage the benefits of virtual cards without overly relying on them.
To that end, AirPlus is testing programs in Europe and Asia that combine virtual cards with other payment methods, including physical corporate payment cards and Curve, a "smart card" that aggregates multiple payment cards and allows a cardholder to use an accompanying mobile app to select which stored card to use for a particular purchase. "We do not want to limit ourselves to a certain technology but instead want to build the right customer experience," said Zorn. "So far, these projects look very promising, and we get a lot of positive responses from our test customers and partners."
Positive Prognosis
Parexel chose a virtual card issuer and distribution platform—neither of which Park was at liberty to name—and added a value-added tax reclamation process to the back-end in markets like Germany and the Netherlands, further automating the experience for his travelers. The VAT service obtains hotel folio data, enhances that data to break out VAT charges and reports back to Parexel, who then can reclaim any eligible VAT payments.
It's just another part of improving the payment experience for the traveler, according to Park. And while his grand experiment hasn't been perfected just yet, he's confident it's getting ever-closer to the goal of making travel payments "essentially invisible" for the company's travelers. "We're getting good feedback and we're seeing the adoption [of the virtual card program] going up," Park said. "Right now, it's definitely above 80 percent."
The feedback from Parexel's finance department and other internal stakeholders also has been positive, Park said. And that satisfaction reflects the view that making T&E processes easier for employees pays off in the form of a happier, more productive and more loyal workforce. "[Internal stakeholders] are big supporters because they are looking to enhance the experience to the employees, to be a more attractive company," noted Park. "If travel is part of your daily job and [the company has minimized] expense reports for you compared to another competitor where it takes three or six weeks to get the money back, maybe this is the driving decision at the end to come to us to stay."