The biggest shake-up in corporate payments in 60 years is bringing together virtual, mobile and invisible payments as digital payments. This FinTech revolution doesn't just mean more convenience for travellers; it also makes payments the central component of managed travel programmes, giving unprecedented control and data to travel managers.
I have worked in the payments industry for more years than I care to remember. In all that time I have never seen such momentous changes than those that are taking place today. We are, without doubt, experiencing the biggest shake-up to corporate payments since the first plastic credit cards were introduced six decades ago.
What is sparking this revolution? We call it digital payments: a phrase to describe the coming together of virtual, mobile and invisible payments. We expect their combined effect to be startling. To be candid, the payments industry was slow to move into the digital era. Cash remains king in many countries, including my home market of Germany and our friends in the United States have only just started using chip cards (though without a PIN number, unlike most other countries). Now that is changing — quickly.
Goodbye to plastic cards and expense reports?
Corporate travel will also be transformed by the digital payments revolution. Plastic cards will become less important because travellers will either pay with their phones or, even more likely, payment will be made for them automatically in the background. And the much-disliked process of completing expense reports, even automated ones, will start to disappear too.
Not having to use plastic or make expense reports is clearly an enormous benefit for travellers. But what I think is sometimes missed is that travel managers will be major beneficiaries of the digital payments revolution too. Processes will be easier, data richer and, ultimately, control over travellers and the managed travel programme will be much improved.
Three kinds of digital payment
So how does this apparent miracle work? First, it's important to understand those three different types of digital payment.
Virtual payments
Issuing volume for virtual payments jumped 38% last year (compared with 8% for plastic corporate card). A virtual card number is normally used to make just one payment with defined conditions such as the amount to be spent, who the payment can be made to and when it can be used. The considerable benefits include convenience (they can be used for travellers without corporate cards), control, security, automated data matching between transaction and payment data and enhanced data.
Mobile payments
This technology is really taking off now that Apple, Samsung and Google have all entered the market. eMarketer.com forecasts that mobile card payments in the USA alone will rocket from US$8.7 billion annually in 2015 to US$210 billion in 2019.
This technology is very exciting and, again, perhaps under-rated in corporate travel. Paying with a mobile phone is like having a plastic card with a mini-computer attached. Suddenly, your "card" also has a display, a keyboard, the ability both to send and receive information and the ability to geo-locate itself.
These enhancements create so many opportunities for travel managers. Just one example is on-the-spot compliance checking. Policy rules could be built in so that the mobile warns the traveller at point of payment whether the transaction complies with policy or not. It doesn't happen yet, but there is no reason why the technology could not be used in this way.
Invisible payments
In 'Invisible payments bring expense transparency' I wrote about the exciting new world of invisible payments, where travellers no longer need pull out a plastic card or even wave their phone over a terminal like with ApplePay. One of the best known examples of invisibility is Uber. You register your card on the app once and after that, all you have to do is tap confirmation at the end of each ride.
See how a cashless trip could work
Eventually all payments will be authorised through apps and mobile ©ShinjiPhotographer/iStockMeet Claudia and CBA 2.0
So wrap these three innovations together as digital payments and what does it mean for corporate travel? Well, let me introduce you to Claudia, an imaginary business traveller for the also imaginary XYZ Holdings, based in Amsterdam. Claudia is visiting a client in Sweden. XYZ Holdings has a centrally billed travel payment account (CBA).
Many companies use CBAs today in the form of a lodge card which is embedded with a travel management company and used to pay for all transactions booked through the TMC. But the new-generation CBA is more than a lodge card. It handles payment for bookings not just through TMCs but also through other booking channels (such as suppliers' own websites) and it can handle payment made during a trip as well as before.
How digital payments help your travel programme
I believe that digital payments linked to CBA 2.0 will transform corporate travel profoundly. I also think it will place payments at the very heart of the managed travel process, whatever your company's approach to travel. Let's take two contrasting philosophies to see how.
The first is end-to-end travel management where travellers book a carefully controlled group of suppliers through mandatory booking channels and link it to a mandatory payment solution and expense tool. End-to-end has many benefits but getting travellers to use authorised suppliers and tools is becoming much harder. CBA 2.0 helps make the process much more user-friendly which removes travellers' reasons to resist it.
At the other extreme is open booking: allowing travellers to book what they like where they like. Here CBA 2.0 helps because it provides a point of consistency. As long as travellers use the approved payment solution, they can book anything anywhere and the data can still all be captured.
Some of this thinking will take time to get used to and there are four paradoxes underpinning digital payments that can make it harder to understand.
- User experience (especially flexibility) for travellers will improve massively BUT so too will corporate control of those travellers
- Digital payments will give travel managers more control over travellers at a time when gaining that control is becoming much harder
- The new world of digital payments will be based on one of the oldest concepts in corporate payments: the centrally billed account
- As payments become invisible, they will become more powerful and more central to travel management.
Payments will become the bedrock on which the entire travel programme is based. Payments will matter.