In 2013, banks handled $410 trillion in non-cash transactions and this figure is expected to reach an estimated $780 trillion by 2023.17 These transactions are slowly shifting to mobile — a trend that will continue with the advent of wearable technology, growth in smartphone usage and the expansion of merchant payment infrastructure.
Coca-Cola was an early tester of consumer mobile payments in 1997 when it introduced vending machines that let customers pay by sending a text message at a premium rate.18 Since then, a variety of mobile solutions have developed, including mobile banking apps, online wallets such as PayPal accessed through apps or browsers, payment through quick response (QR) codes, and most recently, contactless solutions such as Apple Pay where mobile phones are simply waved at terminals to deduct money from a pre-paid account. The key questions are: Where is the mobile payment market now? And what should we expect?
Apple expects the 100M+ iPhone 6 devices shipped to date19 to drive adoption of its Apple Pay mobile wallet solutions. In countries around the world, banks have started issuing compliant cards to enable consumers to use Apple Pay and competitors like Google Wallet and Samsung's LoopPay, although the situation varies between countries. In the United States, Apple Pay is compatible with all the major credit and debit cards including Visa, MasterCard and American Express. Meanwhile, in China, the world's largest smartphone market, Apple is in talks with Chinese banks, as well as e-commerce giant Alibaba Group.
The shift to mobile payments in managed travel will be largely dependent on consumer behavior, the adoption of corporate credit cards and an increase in the merchant network and terminals that support the technology. There are some barriers for merchants, such as mobile payments often requiring an expensive upgrade in technology without a reduction in fees, or hoteliers losing transaction data from travelers charging a service to their room and paying at checkout. In this last case, hoteliers will need to identify how they can best capture all the data on customers' mobile spend.
While about half of mobile users are comfortable using their phones for banking, only 13 percent have used their devices to pay at a restaurant or store.20 However, with forces such as Apple and Google driving mobile wallets, this new trend is likely to take off sooner rather than later.
New single-use "virtual credit cards" have entered the travel space over the past 18 months or so, offering a new way for travelers to settle travel expenses while their companies collect and reconcile expense data more easily. Through this system, TMC booking channels generate a unique 16-digit card number and 3-digit security code for each use linked to the client's central payment account. Like the lodge cards used to pay airlines, these "virtual credit cards" dispense with the need for travelers to pay expenses up front and claim them back. The difference is that this central payment system can be used with for a wider variety of suppliers, including hotels and low-cost carriers.
The fact that virtual cards are generated at the point of sale (currently a call to a TMC travel counselor) encourages travelers to book through the preferred channels. Program compliance can also be boosted by specifying specific uses (e.g. for hotel room nights with breakfast included).
This kind of solution offers various benefits:
More than two-thirds (69 percent) of surveyed travel managers expect these new virtual payment solutions to make an impact on their programs over the next five years. Implementing virtual payments was also highlighted as a top priority for 2015, according to a third of travel managers surveyed by CWT at the end of 2014.21 These results echo a recent GBTA Foundation finding that most surveyed travel buyers in the U.S. were interested in virtual card solutions or were already using them.22
Opinions vary between regions, reflecting differences in existing payment methods and market conditions. In particular, European travel managers consider virtual cards more important, given the more widespread practice of hotel "billbacks" or invoices sent to clients through the TMC, which becomes more efficient and manageable globally with virtual payment.
Surveyed travel managers expect corporate virtual card payments to make more of an impact in Europe, Middle East and Africa than North America.
From local pilot to international program: major recruiter implements virtual payment cards
A major retailer was eager to find out how virtual payment cards could improve payment and reconciliation processes for its recruitment program.
Like other large employers, the company often flew in candidates and new recruits for interviews or induction programs. Either hotels sent invoices into the company's accounting department, candidates paid for their lodging upfront and submitted an expense claim, or the company's recruiters used their own corporate cards and submitted an expense claim.
To explore how virtual payment cards could facilitate processes for everyone involved (candidates, recruiters and accountants), the company decided to set up a pilot study in the United States. Working with CWT and a major credit card company, it found 10 local hotels that were willing to participate.
As expected, the results were positive: simplified reconciliation processes with less error, along with an increase in credit card rebates. Key to this success was training travel counselors and hotel staff to correctly use virtual credit cards to support the travel program, and communicating clearly with everyone involved.
The company has since introduced virtual payment cards throughout the U.S., making the ability to handle these cards a prerequisite for its preferred hotel program. The company is also rolling out virtual payment cards with hotels in Europe. Most recently, it has grown the program even further by rolling it out with a major car rental company in the United States.
17 Source: BCG Perspectives, "Global Payments 2014: Capturing the Next Level of Value" (September 17, 2014)
18 Source: Nearfieldcommunication.org
19 Source: Statista.com
20 Source: Board of Governors of the Federal Reserve System, Consumers and Mobile Financial Services 2015 (March 2015)
21 Source: CWT, Travel Management Priorities for 2015 (January 2015)
22 Source: GBTA Foundation, Virtual Account Payment Solutions (July 2014)