Paul Raymond is director of strategic relationships at Conferma. With so much change happening around card payments and the EU, Raymond will offer an update and advice on adapting card programmes during a session at the Business Travel Summit Amsterdam.
What is the biggest political development to affect corporate payment programmes and how/why?
One of the most significant changes in the corporate payment space is the European Union Regulation on interchange fees for card-based transactions (also known as the IFR). This means that consumer card transactions are subject to a lower interchange rate. Additionally, individually settled corporate cards are defined within the same rules as consumer cards with the associated reduced interchange. However, payment cards that are for business expenses only and centrally billed to a company are not subject to the cap on interchange fees.
Our belief is that the differential in interchange for the two card definitions will lead to a significant move towards centrally settled solutions in order to maintain existing rebates and remove the exposure to potential transaction fees on individually settled cards. Centrally settled virtual payment solutions now offer an established route to address the IFR challenges and a growing number of corporates see this as the optimal solution when planning their corporate payment strategy.
What is PSD2 and what impact will that have on buyer's programme?
The objectives of the EU's wide-ranging Directive on Payment Services (known as PSD2) include regulating new types of payment service providers, prohibiting card surcharges and improving the security of online payments. It is scheduled to take effect in January 2018.
The outline of the directive has been agreed for several years, but the most recent draft suggests that corporate payments will be exempt. Corporate cards tend to be subject to much lower levels of fraud because their usage is already under stringent security processes. This means that the additional cost and complexity of PSD2 controls do not have the same level of urgency in the corporate payments space that retail payment mechanisms attract.
What opportunities and challenges will Brexit prove to have on travel programmes?
Clearly, the biggest challenge Brexit creates is that of uncertainty. It would be a brave person who was able to state with any confidence that the overall effect of Brexit will be either positive or negative. Ultimately, commercial practices will be subject to change and with that, there is likely to be cost implication. How significant those costs are will depend on the ongoing discussions between the UK government and the wider EU. At this stage, indications are that the divorce will be relatively amicable as both sides recognise the requirement to remain trusted trade partners, any more than that would be supposition.
If you were erring on the side of positivity the UK could characterise a decoupling from Europe as an opportunity to strengthen trade relations with other key partners, most notably the USA, and to leverage the independence to allow a more flexible approach to all aspect of a trade agreement. While this position has some credence, it is also possible to make an alternative argument that as a single entity the UK has less leverage in any negotiations and indeed the EU is weakened by the loss the UK`s involvement.