Cash & Liquidity Management

Commercial card programmes

Published: Sep 2013
Coleen Lee, Regional Director for Corporate Procurement, Asia Pacific, Honeywell:

The challenges corporates encounter when rolling out a commercial card programme in Asia will differ considerably between jurisdictions. In a country such as Singapore, for example, it is relatively straightforward. It is a highly competitive market with a large number of providers, and companies tend to be more receptive to the use of commercial cards.

But for a country such as China, the process is much more complex. The regulators have only recently given permission to foreign banks to issue commercial cards. Even now, as the economy begins to open up, foreign issuers in China may not be acquirers or merchants. This situation can be a challenge for banks, as their submissions have to rely on local institutions’ network which could potentially impact the merchant’s fee for corporates. Therefore when working in China, you have to think very carefully about what you want to achieve from the card programme, and then choose one which is aligned with your company’s strategy and direction.

There are also challenges when establishing a corporate card programme in India, although not as extensive as in China. In India, the challenge concerns the management of cards. Although commercial cards are widely accepted, sometimes airlines refuse to accept the merchant’s fee, which will then get passed onto the agent and subsequently back to the company.

A tug-of-war between the company, employer and management is often a problem in India, too. Financial executives may not be keen on using the card because of the percentages the company is required to pay. Even 3%, after all, can become quite a substantial figure when you are thinking of 5,000 cards and travel costs totalling millions of dollars. However, with improved working capital and reduced administration hassle with an automated expense payment system and control, using a corporate card is an optimal direction to go in.

Other emerging markets, such as Vietnam and Indonesia, represent a significant challenge for us. Although commercial cards are available, the issuing banks are not where they should be as yet. As a big corporation we need to be able to have confidence in the bank’s IT system. Therefore, whether or not the bank has future plans to invest in developing its card products and its IT systems these always are important factors in our considerations when looking for card solutions in those particular countries.

Portrait of Jason Tiede
Jason Tiede, Head of Cards and Emerging Payments, Asia Pacific, Bank of America Merrill Lynch:

Our clients have found that launching a commercial card programme can be one of the more appealing ways to optimise working capital, increase process efficiency, gain visibility into purchasing trends and improve control of employee spend.

Travel and entertainment (T&E) typically accounts for 7%-10% of a company’s annual expenses. Building a sound corporate expense policy, and controlling and analysing this spend with an end-to-end corporate card solution, drives significant bottom line benefits for clients. Even more exciting is the continued growth of purchase card (p-card) programmes in Asia Pacific. With real-time card management tools and virtual cards, p-card solutions are extremely effective at eliminating costly and inefficient paper processes related to supplier payments. Besides driving process efficiency, p-card programmes extend days payable outstanding (DPOs) and are widely accepted across many supplier categories such as telecom, shipping and professional services.

Given the maturity of commercial card solutions, there are a surprising number of large, Asia Pacific-headquartered corporations that have not launched a commercial card programme. These companies may still be relying on antiquated spreadsheet-based expense reimbursement processes and personal credit cards. Historically, companies may have been concerned with providing cards with a corporate credit line to employees. But those fears have been alleviated through the formalisation of robust corporate expense policies, insurance programmes offered in parallel with commercial card solutions, and control features such as merchant category blocking and real-time card management tools. Once clients learn about all the benefits and features, they are encouraged, and sometimes surprised, that commercial card solutions actually increase transparency and control when compared to personal credit cards.

Characterised by unique economies and regulatory structures, most challenges for corporate clients in Asia Pacific revolve around delivering a locally relevant and compliant commercial card solution that maintains global consistency, visibility and control. It is important for clients to work with a bank that has a deep understanding of each country and, more importantly, delivers a truly localised product that is ‘wrapped’ with a global card management tool. Prioritising key countries based on the size of a client’s employee base, supplier demographics and the greatest travel and procurement spend is important to rapidly reap the greatest benefits.

Once key markets are selected, card acceptance is the name of the game. With companies and their clients, suppliers and partners rapidly expanding across the globe, a commercial card programme is only as good as the worldwide acceptance of the card itself. This is especially true in Asia Pacific where international travel is standard for employees and cross-border supplier relationships are common. MasterCard and Visa provide unparalleled global acceptance at more than 36 million merchants, as well as enhanced data for many spend categories such as airlines and hotels. The greater the card acceptance, the greater the visibility to global expenses and the significant value that can be derived through negotiating leverage with suppliers and travel partners.

Finally, clients are challenged to ensure the highest level of service for their employees when launching a commercial card programme across multiple Asia Pacific markets. Partnering with a commercial card provider with a passion for service is critical for long-term programme success. After all, a company’s employees are their most valuable asset. At Bank of America Merrill Lynch, we believe the greatest return on relationship is to provide not only world-class commercial card solutions but the highest level of service to our clients.

Portrait of Deven Somaya
Deven Somaya, Regional Product Head of Wholesale Cards, Asia Pacific, Citi Transaction Services:

Asia is an amalgamation of diverse geographies, market practices, regulatory regimes and cultures, and developing an understanding these differences is the first challenge for a multinational company (MNC) planning to roll out a commercial cards programme.

The region’s fragmented business landscape means that the majority of corporate payments are transacted in cash. What’s more, many countries in the region have their own proprietary networks for commercial cards, making it more difficult for MNCs to have a standardised regional solution. For example, in China, the local cards network, UnionPay, has its own systems, regulations and practices that are significantly different from what companies from other regions would be used to.

In addition, the regulatory situation in Asia is different compared with the rest of the world. Even though Citi offers a corporate liability programme across the region, which is consistent with how we operate as a global provider, the requirements from a documentation and a Know Your Customer (KYC) perspective mean that our clients need to do a lot more in Asia than they typically would in EMEA or North America. Citi’s corporate cards solution bridges the gaps for companies by providing a globally consistent, locally compliant programme across the region.

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