I have just returned from a very interesting trip exploring volcanoes. Remarkably, watching the growth of new structures as a result of volcanic eruptions, for example the new island called Lo'ihi forming underwater in the Hawaiian chain, I began to think about eruptions in the corporate travel world. Remarkable perhaps, but let's not be surprised in our ever-changing line of business.
The most significant eruption on the near term horizon, the one most likely to cause the development of new solutions in the travel industry, and the one dependent on new lava flows of data, is, as I see it, being heralded by the seismic noises heard in the payment space.
The old payment systems are breaking down and those that hold to them are paying more than they need. The tried and true methods of using a corporate card, perhaps a ghost card, or a personal card with an automated expense report and direct pay do currently, of course, have their advantages.
Let's sit comfortably on the beach and avoid the lava for now. A corporate card provides control. A travel manager can get up to the minute spend details, exception reports, direct feeds to expense systems, discounts, payment terms that provide cash flow for the company. In some cases, points can be accrued either to the corporation or to the individual. Individual travellers can earn special recognition levels, gold, silver and such and a black card for the President. Much can be negotiated, strong relationships are forged and the system works well.
Some problems do exist though, not with all cards in all circumstances, but enough to be a nuisance. Cards do not always provide a detailed record of a transaction. Air purchases do not always contain sufficient detail to include reason codes, or comparative fares. Hotel card charges do not include details either. Here partnerships with travel management companies and other direct suppliers are essential to augment payment information and to merge the necessary data.
Increasingly apparent is the promotion of supplier cards as the way to get the best deals. These are very popular with airlines and car companies who want to market directly to their customers. Their data systems, augmented with data from social media collected about each individual - and don't think for a nanosecond that this is not going on - know just what to offer and when. Bonus miles for that holiday in the summer with the family, or a discount? They know. This is an emerging trend which will compete with corporate programs and whose rumblings are getting louder and louder. It has been one of the concerns circulating around NDC. Costs, opportunity and payment issues all complicate control issues as this trend continues.
Another trend is the use of limited use cards. These set spend limits for each trip, collect the data report on it and do have many advantages. Several companies have moved successfully into this market and it is a trend that will continue. Behind each of these solutions, however, are the traditional banking systems. In the end it comes down to risk. A single use card's backstop is the issuing bank which assumes the risk and must cover those risks with increased fees, not easily understood or identified. This is exactly the same model used by the standard corporate card programmes. In the end both use the same system and it is this system, this lava of change, that is cracking through the surface of business as usual. The rate of change may appear as a trickle at the moment, but every day the lava flow is expanding.
It is from the focus on risk and cost that is setting off the seismic rumblings that foretell change. Many of us find the costs of paying for the risk difficult to quantify. The EU, however, doesn't find it difficult because it is being spelled out to them by very vocal constituents in the chain. It is the merchants themselves who are paying the fees to cover the costs of the transactions, ie the technology behind the flows of money, the cost of risk and the profits of the entities in the chain. Obviously, it is the end user of the systems, the buyer, who pays the fees which have to be included in the cost of services sold.
In April this year European MEPs voted to cap transaction costs (0.3% for credit cards and 7 euro cents or 0.2%, whichever is lower, for debit cards) in an effort to return more to the vocal merchants, and onwards, in an amount quoted as being in excess of €10bn annually, to the end consumer. Though rumblings will continue for some time as politicians and vested interests vie for control, change is inevitable. This is because of a related seismic change: emerging technologies are changing the way funds move, substantially reducing risk, increasing speed, and consequently reducing cost. In fact, if we look at other models, it is likely that change will occur while the politicians are still having breakfast in the cabana, lava flows growing around them.
We just have to look at the way Uber and Airbnb have so rapidly changed the model. With regard to payments much can be understood from important innovations in banking transactions amongst what is referred to as "the underbanking population," particularly in Africa. Just as mobile phones outpaced the need for physical infrastructures on that continent to support phone systems so, too, are the payment mechanisms bypassing existing bank card processors to meet the needs of the underbanking. The same technology that works for that group works equally well and probably better for those who have sophisticated banking practices. M-Pesa is just one of the many solutions expanding the market. Vodafone is currently testing the offering in Romania before expanding further into Europe. New innovations in the movement of money emerge frequently, PayPal being an early mover, but Stripe, Adyen and others are moving in.
Which companies are running any analysis on this? Who can look their bosses in the eye and document the value of the established programme quantified against emerging trends? Who is looking? How can this be achieved? Are we even asking these questions? The deck chairs are shifting on the beach; let's begin the discussion.