[UPDATE: Dec. 2, 2016: Sabre announced that it added a virtual payment option for airline bookings within the Sabre Red Workspace, furnished with payment firm Conferma. Sabre described the new “standard form of payment” at the agent point of sale as an industry first. The integration “eliminates the need for mid/back-office providers and online corporate booking tools such as GetThere to modify their business processes and incur additional technical expenses,” according to the company. “When using virtual payments within the GetThere booking tool, we provide incremental detailed reconciliation data available for expense management.”]
Though it hasn’t expanded much beyond the familiar use cases, virtual payment is drawing attention from payment industry players and corporate travel intermediaries. Those entities during the past few years have flooded the market with product and partnership announcements.
Working with payment tech firm Conferma, which is in the thick of facilitating virtual payment for corporate travel, Sabre’s GetThere is among the latest to get in on the action. The company on Tuesday said it integrated hotel virtual payment technology into the online booking tool and expects to add air booking capabilities next. Sabre already implemented air and hotel virtual payments for use at the agent desktop.
Virtual cards and their auto-generated, single-use numbers can stand in for traditional plastic corporate cards. They have several advantages. Administrators can specify spending limits, dates and merchants. Each transaction is uniquely identified, making tracking, reconciling and auditing easier.
Virtual cards also can reduce fraud in a couple of ways. Predetermined spending amounts remove any risk of employee overspending. There’s no static number to be lost or stolen. Just changing to a new payment mechanism can reduce vulnerability for corporations. Payments industry analyst Frank Martien of First Annapolis said he’s heard of virtual card fraud rates of 0.03 percent, “which is like half of what you would see on walking plastic.” He said a traditional corporate card, which “typically carries a higher credit line than your average consumer card,” is an appealing target for “the really sophisticated fraudsters.”
Virtual cards have gained popularity as a payment option for contractors, trainees, recruits, new hires, infrequent travelers and younger employees lacking credit. They appeal to the likes of the energy/resources/marine sector, trucking and logistics companies, temp placement firms and other organizations where individual plastic isn’t universal. Virtual cards also can be a solution in parts of the word where walkaround cards are less common (like Brazil, where Sabre last month introduced its Virtual Payments product for hotel bookings through agencies and the GetThere booking tool).
According to Conferma, virtual payment enablers now include the four largest corporate travel management companies, several booking tools, some big banks and the networks of American Express, MasterCard and Visa.
Like Sabre, Travelport and Amadeus have incorporated virtual payments into agent desktop tools. Travelport is majority owner of payment solutions provider eNett, which reported revenue growth of about 50 percent last year. Amadeus offers virtual payments through its e-Travel Management booking tool via a Conferma partnership.
Despite all the activity, industry research shows that no more than about one in 10 companies are using virtual cards. Providers expect demand to grow.
“There are certainly companies or segments of travelers where travel managers have very acute interest but I think there is a broad interest in virtual payments overall,” said Sabre Corporate Solutions vice president Yannis Karmis. “We’ve had technology companies and professional services companies coming to us.”
In an October poll, Carlson Wagonlit Travel found that about one-third of 1,100 travel and meetings pros around the globe indicated virtual payments are a “high” or “very high” priority for this year.
Like Sabre, CWT uses Conferma technology to provide virtual card numbers. For now, that’s only for offline transactions; the TMC expects to provide the capability for online transactions this year.
In a lot of cases, hotel bookings are the entry point. “There seems to be a huge surge in companies wanting to do third-party billings at hotels,” said Rebecca Martin, president of Memphis-area A & I Travel Service. “Until recently, we had this antiquated system where you take a photocopy of a credit card, fax it to a hotel and set it up that way. I have a department that sits here and manually does it. It’s a real pain.”
Now, based on customer demand, A & I is exploring new payment alternatives. “Companies want better control, they want PCI compliance and, a lot of the time, they do not want to hand plastic to travelers anymore,” Martin said.
It’s a similar situation at Chicago-area AmTrav, which has seen growing interest among clients for prepaid hotel rates, according to president Craig Fichtelberg. With prepaid rates, hotels still need a form of payment when a guest arrives. Virtual cards give the hotel that payment information ahead of time. Fichtelberg said AmTrav is working with two virtual card companies for that process.
Fichtelberg also has noticed a trend at some companies away from walkaround plastic for travelers. “We have companies in multiple sectors that fall into that category,” he said. “It seems like corporate cards are declining and virtual cards are increasing.”
First Annapolis’ Martien said a primary benefit is directing spending from a traveler’s corporate card to a centralized payment solution, especially for car rentals and hotel bookings. In program configurations where travelers are personally liable for card charges, “the issuer is willing to give them only a certain credit line,” he explained. “That may be insufficient, so the more you can divert spend off of that individual card to a centralized solution, the better.”
At fashion retail company H&M, all hotel, airline and car rental reservations are prepaid. Very few of the company’s typically young travelers carry corporate cards. H&M wanted a new solution rather than pre-existing centralized payment programs like ghost cards, which came with an increasing amount of paperwork as the company grew in the United States, according to travel manager Marie Moynihan.
The H&M process is based on required use of the Concur Travel booking tool and the AirPlus card (Concur and AirPlus first partnered on virtual payments in early 2014). When travelers book a hotel room, “the system sends a unique third-party credit card authorization to the hotel to a designated fax number,” Moynihan said. H&M “completely automated” preset spending limits. The system calculates the room rate multiplied by the number of nights, tacks on 20 percent to cover taxes and adds another “buffer zone of sorts” to account for things like parking or breakfast.
Moynihan said virtual payments aren’t easy to implement. It took H&M five years to achieve complete automation, connecting the various travel management, payment and supplier systems. “There are a lot of moving parts that have to come together,” she said. “A lot of companies don’t realize that just because you have a virtual card doesn’t make it fully automated. Some have to hire staff to plug in the card information and send it to hotels.”
Sources noted several challenges in making virtual payments work with hotels. They range from ensuring accurate fax numbers to overcoming possible confusion when multiple travelers from the same company check in at the same time. Some hotels may not accommodate virtual payments at all, or may insist on their own process.
Sabre’s Karmis acknowledged the change management necessary to switch to a new model. He suggested travel program managers may first need to talk with their organization’s mobility, HR and recruiting teams, and of course card program administrators.
Another consideration is whether and where a company’s bank offers virtual payment for corporate travel. Karmis said Sabre works with several banks, and more will be added based on customer needs. That, he added, differs from other virtual card programs that may have only one or two bank partners. “So if your preferred banking partner is not one of those two, you are out of luck,” Karmis said.
Martien pointed to another factor regarding banks, one that could be the “fly in the ointment” slowing virtual card adoption. So-called “know your customer” processes in the United States include checking against the U.S. Treasury Department’s Office of Foreign Assets Control. OFAC is tasked with controlling transactions and freezing assets of those deemed threatening to national security. “The big debate is on whether one needs to do KYC checks on anyone who can access or use virtual card solutions,” he said. “Some banks have at least contemplated trying to get a list of authorized users from companies. Other banks have updated commercial card agreements and delegated that KYC responsibility to the corporate.”
Additional information: Reviewed research includes a GBTA Foundation/TSYS survey of 240 travel managers conducted about a year ago that found 8 percent of represented organizations use single-use virtual cards to pay for business travel-related expenses; a separate GBTA Foundation survey conducted a few months later, sponsored by U.S. Bank, that polled 182 travel buyers and put the number at about 10 percent; and an AirPlus International poll last summer of 139 North American corporate travel buyers. Nine percent of AirPlus respondents said virtual/single-use cards are the “primary” payment tool for handling their organizations’ recruits. Six percent said as much for both infrequent travelers and contractors.