Cash & Liquidity Management

What’s on the cards?

Published: Apr 2015

Glass ball looking out over a lake at sunset

Previously seen as a necessity for travel and entertainment purposes at large organisations, corporate cards have evolved into an entirely different and powerful tool that can drive visibility and control across corporate spending. Offering the possibility of streamlined cash management processes and improved working capital efficiency, corporate cards are becoming increasingly popular among the broader treasury community – not just the big companies.

When asked about significant shifts in the profile of corporate card users over the last 12 months, Brendan Walsh, Executive Vice President, American Express Global Corporate Payments, says the mid-market sector (companies with revenues of between $3m and $300m) is growing fast and that these enterprises are using cards for both travel and entertainment and business-to-business expenses.

“In slow growth economies, companies have a higher propensity to use their corporate cards for non-travel and entertainment spend. The working capital advantage from usage of corporate cards is key and not just for the cash flow benefit from spending now and paying later – in fact, companies are using their corporate payment products to facilitate payments between a company and its suppliers.” In this scenario, companies still benefit from extended payment terms and suppliers get paid much more quickly than they would have by invoice.

In economies with slow growth, many large clients are also reducing their travel, notes Walsh. “But in markets where growth is buoyant or international trade is burgeoning, travel volumes among companies of all sizes are increasing once again, although clearly this trend differs according to proximity to trading partners.”

Elsewhere, companies in developed economies are looking to capture more cross-border transactions on plastic rather than invoice, he adds, observing that corporates are making more business-to-business and international payments by card. “This is a huge growth area and business-to-business volumes are increasing every year.”

ING’s Global Head of Card Solutions, Erik Tak, agrees that use of corporate cards for travel and entertainment is expanding as business travel recovers from the recession. “In addition, more companies are looking to improve the management of their expense reimbursement process and deploy automated expense management systems that are most effective when used in conjunction with a corporate card programme to increase process efficiency and achieve cost reductions,” he says.

Tailored to the market

Nevertheless, commercial card programmes differ greatly around the world (corporate, purchasing, fleet and payable solutions) so trends will vary by geography, observes Tad Fordyce, Senior Vice President, Head of Global Commercial Solutions at Visa.

“For developed markets, we have a wide variety of commercial solutions, while in emerging markets the most commonly found product is the traditional corporate card. In terms of trends, we have seen two main ones. The first is that we are beginning to see more middle market companies adopt these payment tools in North America. Traditionally our products were adopted by large corporations, but as this market reaches high levels of penetration, financial institutions are turning their attention towards middle market corporations.

“The second trend is the emergence of payables solutions, where virtual accounts are embedded in the accounts payable software, so invoices can be paid by card in a similar fashion to how they can currently be paid by ACH, cheque and wire.”

He says increased volumes of business-to-business and international payments made by card can be identified in two ways. “We continue to see corporate cards being used for international travel. As payables solutions proliferate, companies are also using their virtual account numbers for procuring goods and services overseas and driving more cross-border transactions.”

Martin Chapman, Travel & Entertainment Payment Solutions Manager at MasterCard shares the view that corporates are making more business-to-business and international payments by card. “As businesses come to realise that traditional methods of invoicing are slow and time consuming for their employees, they are shifting transactions onto purchasing cards and corporate card-based purchasing.”

Safety in numbers

Security is a vital consideration when companies are considering a shift to cards. So is identity theft a major issue for corporate card users and suppliers and have anti-fraud technologies kept pace with the efforts of fraudsters? “Chip and pin on corporate cards is minimising fraud, in addition to card issuers’ own security practices, which can easily detect out-of-pattern expenditure,” says Walsh.

Meanwhile, Tak states that while identity theft has not been a significant issue in the corporate card space, fraud is an ever present threat and corporate card issuers have made significant investments in recent years in the protection, prevention and detection of card based fraud. “For example, we have introduced three key tools in the last 12 months that assist in containing fraud. These include the deployment of a new system that moves the authentication of ecommerce transactions from a static password that was easily forgotten to a more secure, one time password that is sent to cardholder via SMS on their mobile phone.

“Another SMS-based service is a security alert service that contacts cardholders when our systems detect a possible fraudulent transaction. Lastly, by offering a mobile app to our cardholders, they are able to see their recent transactions in almost real-time, thereby making the detection of fraud much faster.”

Chapman says EMV chips are taking the fight to the next level, while the industry works on future technologies such as biometric authentication. “Identity fraud is an issue for the card industry, but less so for corporate cards. As corporate schemes predominantly service digitally (removing paper lowers cost), use secure file storage and apply greater internal controls, the opportunities for fraudsters to access and apply for credit using an employee’s identity are reduced.”

Fordyce refers to anti-fraud technologies as a three-legged stool. For card present transactions, the rollout of EMV in the US market later this year will also apply to commercial card products, giving corporate users the same level of security as consumer cards. For ‘card not present’ transactions Visa is rolling out tokenisation, which replaces sensitive payment data with a unique identifier or token that is useless if compromised. The third leg of the stool focuses on encrypting data at rest. When the company talks to suppliers and merchants, banks and processors, it shares best practices to make sure data is encrypted, protecting it from fraudsters.

Value of integration

Besides security, proper integration is another tough challenge when it comes to cards. Louis Berard, a Senior Analyst at Aberdeen Group and author of a report on corporate cards published in October 2014 says lower mid-market organisations that leverage an expense management solution with corporate card integration achieve an 18% decrease in processing costs of expense reports, a 22% decrease in overall reimbursement timeframe and 84% fewer reimbursement errors.

His view is that companies that leverage expense management with corporate card integration benefit from greater visibility into business travel data and increased compliance with corporate travel policies. Integrating a corporate card and expense management system also presents the expense processing department with a more holistic view of the information.

There is a formal process designed for expense reports that clearly defines escalation paths and with this greater visibility, sourcing teams can capture spend and negotiate better contracts. While audits allow for the system to remain in ‘balance’, they also provide a greater opportunity to find new areas for cost saving or losses that may be occurring through leakage.

Berard recommends that organisations in the lower mid-market sector should strategically enhance their expense management programmes to spur performance across the scope of compliance, time (approval and reimbursements) and processing costs.

To effectively manage expenses, it is crucial for organisations in this sector to leverage the following recommended actions:

  • Look to corporate card and expense management integration as a means of improving existing expense management processes.

  • Conduct regular audits of expense reports.

  • Enhance visibility into expense spend through automation and corporate card/expense management integration.

Remaining challenges

One challenge that still requires some work where procurement card programmes are concerned, however, is supplier enablement. “Although the landscape is changing and suppliers increasingly value the benefits of guaranteed payment and speedy payment (within a couple of days), buyers are looking for ubiquitous supplier acceptance of cards and that is still work in progress for the commercial cards community,” says Tak.

For Walsh, the area that really needs more focus is implementing a true end-to-end solution to drive visibility, compliance and savings that can be achieved through best in class practice, he continues. “In most cases, by moving to best practice expense management companies can save 10% of their total processing and purchasing costs. These funds can then be reinvested to drive growth.”

Chapman, however, describes the challenges in using corporate cards as part of strategic procurement programmes as being around educating corporates about the benefits of using purchasing cards, which provide greater control, acceptance and flexibility resulting in detailed reporting and more efficiency in the supply chain process. “Outlining to businesses the benefits of making an investment in automating accounts payable systems (end-to-end) and moving away from traditional procurement processes to more efficient processes is the challenge.”

Further growth expected

Whatever the challenges though, Walsh says there is potential for future growth in cards across just about every market. “We see major potential for further use of corporate cards across the globe, from developing to developed markets. To put this into context, about $25 trillion is currently spent in cash and cheques which do not offer the visibility, compliance or data insights that corporates need. By comparison, $6 trillion is spent on cards.”

Tak agrees that corporate cards are a growing business in all regions, even in the mature US market where epayables solutions are driving transactions from cheque to card. “Within Europe, the trend is for large corporates and multinationals to consolidate fragmented card solutions from multiple providers as a way of driving more consistency, efficiency and cost effectiveness into their businesses.”

In Chapman’s view, markets such as Eastern Europe (Poland, Hungary), Turkey and Asia Pacific show the greatest potential for growth, albeit from a low base. “In developed markets such as western Europe, although growth percentages are small, the opportunity to grow the volumes of cards is still significant.”

Whereas Fordyce describes the emerging economies of Asia and Latin America as offering tremendous growth opportunities as they become more developed. “In general, our growth rate follows where we see the greatest economic growth,” he concludes. “Wherever you see robust economic growth, the corporations driving that growth are adopting card products to help control expenses.”

Case study



One company that has used its card provider to simplify its travel expense management system is EDF Energy, which has an annual travel spend of approximately £15m. The company’s previous system, which enabled its 15,000 employees to book travel, was growing increasingly complex and fragmented because it was based on a central booking and lodge card payment system for air travel. There was no single view of travel spend across the company, which experienced inconsistent application of travel policy. There was also the potential for unauthorised spending.

In addition, the system was not designed to accommodate low-cost air carriers, which encouraged users away from the self-booking tool, leading to an inefficient and expensive reconciliation process. EDF Energy wanted to consolidate and streamline payments into one centrally settled solution. To allow greater management visibility, it also needed payment data to flow seamlessly in to a standard expense reporting system.

To achieve this, the company decided to implement a solution from American Express that makes use of virtual accounts, with each traveller having an account lodged behind their profile in the company’s online booking tool. This is synchronised with the traveller’s profile held on the travel management company’s online booking system. “We are now able to deliver a vast amount of account numbers unique to individual employees to our online booking tool in a very painless and efficient manner,” says EDF Energy’s Financial Shared Services Director, Robert Gilhooly.

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