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Business travel solution providers are quickly perking their ears up to the demand for better ways to pay travel suppliers, and to reconcile that transaction data.
Lately, service providers have been turning to the virtual card to address needs for electronic payment. There are barriers to accessing a virtual card payment program, however — particularly for businesses that aren’t using a Travel Management Company.
Graeme Descoteaux, head of corporate travel at LateRooms.com Business, explained that, while virtual card adoption is on the rise, not all firms are able to handle the added costs that can sometimes arise.
“While virtual cards have played a prominent part in business travel for some years now, we’re also aware that travel management companies that offer these services also charge additional fees to the client,” Descoteaux said. Smaller companies may need a virtual payment solution, but don’t always necessarily need a travel management company to provide middle-man services for booking and payment.
Another key barrier is the fact that a significant portion of companies still aren’t using any type of card — physical or virtual — for corporate travel. According to a Mastercard report, citing PayStream Advisors data, 40 percent of executives said their firms don’t use cards for T&E spend, instead relying on manual processes to manage expenses, reconciliation and reimbursement.
Use of virtual cards, in particular, was cited by Mastercard as a characteristic of best-in-class leaders when it comes to optimizing a corporate travel program. Use of single-use Virtual Card Numbers with custom spend control settings are especially beneficial factors of the virtual card.
But, just as supplier acceptance of cards can be cost prohibitive, according to Descoteaux, service providers that charge for use of a virtual card solution can bar SMBs from benefitting from the payment tool. As a result, those companies fall back on manual processes or other inefficient tactics.
“Currently, our customers are using multiple credit cards … to pay for numerous things — as well as to book their employees’ accommodations,” he explained. To address the issue for companies booking accommodations, LateRooms.com Business recently announced a partnership with Diners Club, launching its Business Statement Account to consolidate businesses’ travel spend on a single virtual card program.
The solution aims to enable smaller firms to use virtual cards, and to address the friction linked to use of multiple physical cards, which lead to backups in the reconciliation and expense management process.
Descoteaux explained that clients can use a virtual card with a unique code, assigning that card number to a particular vendor and a particular value. Once a hotel vendor has accepted the payment, “the card will then become unusable and ‘dead,’ so to speak,” he said.
Streamlined reconciliation and enhanced visibility into travel payments is also crucial for value-added tax (VAT) and other tax compliance.
The adoption of a virtual card program may not necessarily put an end to all points of friction in corporate travel payments and expense management, however. According to Descoteaux, “commercial credit cards still have a place for those who may need to book over the phone or online,” but the ongoing use of multiple cards and other payment rail solutions will add friction in the reconciliation and reporting process.
Research released earlier this year from the Global Business Travel Association (GBTA) and AirPlus International found the vast majority (nearly 90 percent) of surveyed U.S. corporate travel buyers don’t rely on single-use virtual cards. Interest is strong, but adoption is limited, thanks to concerns over supplier acceptance, challenges in program adoption and implementation and questions over spend control capabilities, researchers found.
Separately, GBTA’s 2017 Business Travel Payments Study also found that cash and personal credit cards remain common tools that business travelers use to book hotels, resulting in a lack of spend visibility and reduced ability for managers to enforce travel policies, according to the GBTA Foundation’s director of research, Monica Sanchez.
GBTA analysts have also found that, while moving the needle in electronic corporate payments is an uphill battle, the business travel segment of the market is ahead of the pack. Most of the surveyed business travel buyers in the U.S. are using central travel accounts, also known as ghost accounts, that allow managers to centralize and consolidate management of business travel spend. Adoption is likely to rise, as nearly one-quarter of non-users of these ghost accounts and virtual card solutions say they are likely to adopt virtual cards at some point in the future.
Descoteaux says he sees interest in these solutions as well.
“Businesses are always looking for ways to improve the speed of processing [and be] savvy about costs,” he said, adding that the rising use of mobile and digital booking platforms could yield greater adoption of payment solutions supported on those digital portals. “We have noticed that, from a PA level to the board, those bookings now utilize apps and online resources themselves, directly … We are now the generation of iPhone users, and people can literally book efficiently 24/7.”
The challenge for businesses and their service providers now is to provide the same efficiency in payments, without compromising control, visibility, and integrated data.