United States Requires Virtual Cards In Next Federal Payment Program

By | April 3, 2017

The largest charge card program in the world is getting with the times, or maybe ahead of them.

Bidders for the third generation of the U.S. General Services Administration’s SmartPay must include virtual cards. Until now, they have been an optional component in the governmentwide program. SmartPay2 runs through November 2018. SmartPay3 will pick up from there. GSA issued the request for proposals in February and finished collecting bids last week.

The SmartPay program encompasses purchase, travel, fleet and integrated card programs. The current, second generation is furnished by Citi, J.P. Morgan Chase and U.S. Bank. Virtual accounts have been considered a Tier 2 “value-add” feature. For SmartPay3, virtual cards will be a Tier 1 “core” feature. Each federal agency will determine use cases. Government travel management contractors, including TMCs like CWTSato and tech providers like Concur, will need to support them.

In the corporate world, the application of virtual payment for travel has been somewhat limited. Companies that do not have younger employees or non-employee travel are less likely to appreciate the benefits.

Consultants including Andy Menkes of Partnership Travel Consulting and MW Travel Consultancy principal Martin Warner said virtual payment is becoming more common in corporate payment solicitations. Better collaboration between travel management, finance/treasury and procurement helps uncover payment pain points and improves RFPs, said Warner. Still, virtual travel payment has had hiccups. In the United States, it still is mostly used for hotel stays. A few other industry consultants said most clients haven’t gone down the path.


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“Companies with more established card programs seeking advanced fraud protection or other improvements might see virtual payments as a core RFP element,” according to Debra Moss from Acquis Consulting Group, “but they’re the minority.”

According to a GBTA Foundation survey in early 2016, sponsored by U.S. Bank, 6 percent of 179 buyers said their companies apply single-use virtual accounts for transient travel or meetings. Another 20 percent expected to do so in the coming two years. Nearly two-thirds said they weren’t sure when, if ever, their companies would.

For GSA, virtual cards are among SmartPay3’s “new, innovative solutions and avenues for incorporating appropriate future payment processes.” GSA is focused on getting better data, reporting and analytics; fraud detection and security measures like tokenization; and program efficiencies.

Other new Tier 1 elements relate to mobile capabilities. Mobile apps “shall, at a minimum” let users make purchases, pay invoices, get alerts and view statements and payment info.

Also required are EMV chip cards (PIN is the preferred verification method, but agencies can request a signature-and-PIN set-up), declining balance cards and ePayable supplier-initiated payments. Contractors must support authorization controls that can deny transactions at domestic and international points of sale.

Like SmartPay2, SmartPay3’s travel component will include centrally billed and individually billed accounts. GSA said federal agencies and organizations “generally” use travel CBAs for airline ticket purchases via such third-party systems as the GSA E-Gov Travel Service and the Defense Travel System. The “tax advantage travel card” is a new account type in the SmartPay3 solicitation. “It provides a means for agencies to obtain tax exemption at the point of sale for rental cars and lodging,” according to GSA.

Like SmartPay2, SmartPay3 contracting card companies must provide programs supporting the GSA City Pair Program and FedRooms, with lots of data reporting for both.

GSA intends to award multiple SmartPay3 contracts. If all contract options are exercised, they will run until 2031.

Additional info: How big is SmartPay? Big. It currently supports 3 million accounts across more than 560 federal agencies and organizations. In fiscal 2016, 91 million transactions generated $28 billion in spending, including $8.1 billion for 43 million travel card transactions. Since SmartPay began in 1998, it has handled $432 billion in federal spending, earning rebates of more than $3 billion.

GSA noted that while state and local governments currently are not authorized to take advantage of SmartPay3, they may be in the future. Bidders must be able to support that possibility.


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