Plenty of innovation has transformed corporate travel payments since BTN Europe last published a special report on cards in 2020, with those changes generally falling into two categories.
One is an upgrade of the technology underpinning virtual cards to make them much more workable. The other is a wave of travel providers joining the payments game: becoming purveyors of payment products in their own right and in some cases buying up payment companies.
The advances in virtual cards should reduce, perhaps even eliminate, travel managers’ nightmare fear of declined payments for their travellers at hotel front desks and in other establishments. The essence of the problem was that first-generation virtual cards weren’t fully digitalised.
Although the one-time card numbers were created automatically at the time of booking, they weren’t delivered digitally to hotels and other merchants. On the contrary, confirmation of the numbers was e-mailed or even faxed (yes, faxed), running the risk of being sent to the wrong department or potentially not being sent at all. Even if the confirmations did arrive, they then had to be communicated to the hotel front desk, whose staff needed training to recognise the payment method as genuine.
“Training means that front-office staff are now more familiar with virtual payments or at least know that some of these are central card accounts,” says Ajay Singh, vice president with responsibility for payment and expense at BCD Travel.
But training cannot eliminate human error, whereas digital delivery can. This is now happening via two different routes. The first, launched earlier this year by travel tech company Grasp Technologies with Marriott as its inaugural lodging partner, is fully automated transmission of the virtual card number to the hotel.
“We used some customised fields to create a standard that makes a flow all the way from the point of sale through the global distribution system into the property management system and the back office,” says Grasp president and CEO Erik Mueller. “It’s essentially the same thing as if it were booked online with a normal credit card. We’ve documented this with Marriott and are sharing it with anyone else who wants to use the same workflow, so we can finally unplug that fax and get on with our day.”
The solution is scalable, meaning there is more to come, according to Mueller. “In the case of Marriott, I think it had seven different PMSs across its properties,” he says. “It took about 90 days to roll it out to all of them. It’s not a big lift. It’s just getting people to commit to moving forward on it, so adoption should be fairly easy. We’ve got two other major chains looking at implementing the same process. It will never be 100 per cent but if we get most of the major chains it will decrease that friction.”
While this is a very helpful workaround to the challenge of recognising passive first-generation virtual cards, an even better solution would be not to require a workaround in the first place. That ambition can be achieved if virtual cards can become active, contactless forms of payment that can be stored in a mobile wallet like Apple Pay or Google Pay. That is exactly what is now happening: virtual cards are finally going genuinely mobile.
“Virtual cards came with their own barriers and challenges, for example getting the payment details to the merchant, whereas being able to add a virtual card into a mobile wallet widens the scope of how that payment can be used and with less or no friction,” says Clive Cornelius, head of travel segment for Visa Europe.
“Before, it was just an image of a card that people still had to manually enter into the payment terminal. It was still a process you had to persuade people to buy into. Now it’s in a mobile wallet that I place near an NFC [near field communication] reader and it goes through as a payment. The technology advances allowing the mobile wallet means we’re in a much better place than a few years ago to get wider adoption of virtual.”
The imminent removal of virtual payments’ disadvantages means travel managers can refocus on their many advantages. “Virtual cards will gain widespread acceptance for two reasons,” says Arthur D. Little senior advisor Patrick Diemer. “First, they are more secure than a traditional credit card because you can only use the card once; and second because they offer enhanced reconciliation capability.”
AirPlus International executive marketing director Michael Heilmann says virtual cards can now also score heavily by simultaneously meeting the needs of both employees and employers. “It takes huge hassle away from the traveller by saving on expense reporting [because virtual cards are billed centrally],” he says. “From the corporate perspective it adds more information to your overall programme management in that you have overview of more of the spend being carried out across your organisation.”
An early corporate adopter and cheerleader for virtual payments has been Ben Park, senior director for procurement and travel at Parexel. He thinks many other corporate clients will now follow. “The development of virtual cards and their increased integration into online booking tools has really changed everything,” he says. “At the same time, travel buyers are looking into where they can continue to add value by optimising programmes, which always fosters innovation in the market.
“New technologies usually follow the adoption bell curve, with innovators, early adopters, and then the laggards at the end. Within the last years, I believe we have entered the stage of the early majority looking into this topic,” says Park.
One opportunity he is particularly excited about is “trip budgets using virtual cards and managing them through digital wallets.” In this scenario, an allocated budget for a trip is assigned to a dedicated virtual card number loaded into the traveller’s mobile wallet, and then all expenses to that value are paid using that one virtual card number. The positive benefits for budgetary compliance, reduced expense reporting duties and simple reconciliation are clear for all to see.
While virtual payments are gaining traction, the other big development is the increasing integration of travel and payments through travel companies launching their own payments solutions and buying up payment companies.
The trend is becoming apparent through the corporate travel eco-system. Among travel management companies to have launched payment products is TripActions. It positions Liquid as a combined payment and expense management platform whose policy controlled payments allow detailed management information, swift reconciliation and minimised expense reporting for the traveller.
Meanwhile, hotel management company HRS launched its own payment platform in 2019, and followed up in August 2022 by acquiring and integrating Paypense, also a combined card and expense management platform. Another development the same week was travel tech giant Sabre acquiring Conferma Pay, one of the oldest and best-known virtual card technology providers.
Theories abound for what lies behind this frenetic period of the travel industry’s integration with payments. Heilmann believes the travel service provider payment offerings will appeal more to smaller customers. “Corporates are looking more and more for an end-to-end solution for their travel programme and some players have been picking this up,” he says.
“Small and medium enterprises do not have a sophisticated infrastructure in place. They want somebody to integrate and connect the dots. For the larger corporates, my assumption is that selling such a package won’t prove very successful because they will already have partnerships of their own.”
Visa's Cornelius believes travel providers are plugging perceived gaps in their coverage. “The travel ecosystem realises how important payment is and therefore they are thinking about how best they can embed that in their processes and capabilities,” he says. “They are seeing payment as being as important as the booking.”
Cornelius continues: “There’s always been an element of travel and payment processes being plumbed together, but the ownership has been different and there have been partnerships. What will be interesting to watch is partnerships versus acquisition. I think it will be both.”
Acquisitions are becoming more viable for travel companies, according to Pascal Burg, a director of multinational payments consultancy Edgar, Dunn & Co. “The market caps of some of the fintechs went really crazy during Covid but have come down a bit over the past few months, so maybe they are a bit cheaper to buy,” he says. “I don’t think it’s going to stop here.”
Diemer takes an alternative view of the trend. “I think this is a sign of the potential revenues which everybody believes financial service providers are earning,” he says.
He recommends that any travel manager looking at card solutions from travel companies should investigate the money flow between those players and their financial service sector partners in the background.
“I would always say it’s worth looking at new products, even though from the corporate’s point of view the work becomes more complicated,” says Diemer. “There could be innovations, or new credit lines, or easier processes in these new products. But the payment process is not broken and therefore there is no pressing demand to make a change. From a corporate point of view I would say 'what is their use case? What processes can I do more easily?'”