WEX s Path To Payments Innovation

Transcription

1 WEX s Path To Payments Innovation Welcome. This is Ben Carsley of PYMNTS.com and I am joined today by Michael Dubyak, chairman, president and CEO of WEX, and Melissa Smith, president of the Americas at WEX. Michael and Melissa, thank you very much for joining me today. SMITH: Great to be here. Yeah, thank you. Well, as most of our listeners will know at this point, WEX is really a leading provider of corporate payment solutions and a multichannel provider with some pretty impressive numbers to boast of. You have over half a million accounts, 7.6 million cards, and I know that WEX and its subsidiaries employ more than 1300 associates. So basically my questions to you today are going to talk about how you guys got to that point and how WEX has fueled innovation and growth in B2B payments through its partnership strategies. Basically, to sum up, how you really become a pioneer in the B2B payments market. So Mike, I think it s best to start with you. And we re definitely going to get to how WEX operates in what s really a dynamic and changing market and how this benefits your

2 customers in a moment. But let s start with quite simply how you see the market changing right now. Yeah, let me start off by saying thanks for allowing us to at least give you more of our story and value propositions we bring to the market. We re celebrating our 30 th anniversary this year. And we definitely realize the payments marketplace is changing and the solutions need to be tailored to fit the increasingly complex customer and partner needs. And we have a lot of partners that we work with on all sides of our business. We were a pioneer in creating the fleet fueling market and closed network that we have, and security- rich control tracking capabilities through this closed network. We ve led the market in adapting products to address the shift from a more basic payment product to more data- rich payment solutions. Our customers place a high value on data and knowledge and the insights that can be extracted from that data to drive better decisions and performance for their core business. We have seen fuel expenses become the number one vehicle management expense. When you think about the price of oil escalating from the low $1.00 ranges, to now in the last five years, being somewhere in the range of $ per gallon. So more than ever, controlling this vehicle expense is critical for businesses. As innovators in the fleet segment, we went to market with a direct and partner strategy to optimize market penetration. Initially, we had innovative products and developed partnerships to gain greater reach into

3 the market. Another form of innovation, if you will. And then, we moved into the online travel agency side of our business, or OTA. We have seen a consistent expansion of our U.S.- based customers becoming more penetrated on the international front, as well as the emergence of international OTA demand for virtual credit cards to drive efficiencies in making payments to their networks of hotels. They need precise payment control and reconciliation capabilities, and our virtual payments solutions provide that. In the case of both fleets and OTAs, we work very closely with our partners and customers to address an increasing need to control expenses and expand our capabilities geographically. So Mike, I want to stay on this point for a minute because, obviously, this is a pretty complex area of the payment industry. So I guess my follow- up question to you is how then has WEX really led innovation amid such a changing market? Yeah, we like to believe we take a unique approach to innovating in the B2B market space and payment space. Right. We start by listening to our partners and customers, which is critical. We evolved from simple reports to online queries, ERP integration, customization where the customers control the information themselves and integration with telematics to mobile apps. In the OTA market, our integration of systems with our partners makes their solution more

4 seamless as a core part of their overall product solution. And our international expansion satisfies our partners expansion goals. Through those partnerships we ve evolved our business platform from meeting oil company needs to meeting the needs of a broader set of customers and new market segments. Our fleet card relationships go well beyond the traditional oil partner channels and are a natural extension in business models where commercial vehicles are part of the structure, such as leasing companies, telematics providers and vehicle service providers. WEX also has major fleet partner portfolios and we ve had extraordinary tenure with many of these partners over time. These partner relationships have been essential as a part of our innovative product evolution. The WEX culture of partnering - - and partnering is part of our DNA - - continually engages our partners in dialogue and their needs, their market trends, and of course, the solutions we bring to their challenges. That allows us to bring to bear the best products for our diverse customer needs, may it be our fleet customers or our partners in that space. We also employ a hybrid marketing strategy. We go to market directly with fleet and co- brand card solutions, and through these private and co- brand cards we have effectively deployed a hybrid marketing channel to optimize sales and penetration in this market. We not only became the pioneer and a leader in the fuel payments market using this partnering approach, but we also achieved great success in the U.S.- based global online travel agency, OTA,

5 space, counting among our clients three large U.S. OTAs. And more recently our partnering approach to business has enabled us to enter the healthcare market, as well. In 2012, we announced an agreement with one of the nation s largest healthcare payments and reimbursement processors. This deal highlights the capabilities and raises the visibility of our payment solutions in yet another large and growing industry and reflects a trend we re seeing, that is, embracing the move to electronic payments as a strategic move to streamline processes and reduce costs in the healthcare market. Melissa, I want to ask you about Mike s recap there. Because it sounds to me like WEX has not only taken a partnering strategy, but it s sort of applied a market- based approach to solving these payments problems, as well. So basically, what are your thoughts on that? And can you share some perspective on the market- based approach that WEX has? SMITH: Sure. As Mike said, partnership is key to what we do. And as an example of that, we have six of the largest leasing companies as partners that are very longstanding relationships. Three of the largest U.S.- based online travel agencies are also customers of ours. And we think about things in terms of looking at the market and how can we specialize in that market so that we re rapidly changing with the payments industry. WEX offers virtual, digital physical payment solutions across a wide spectrum of business sectors around the globe. The way that we think about our market

6 approach is to think of it in two ways. Our two core growing segments; the fleet payment segment, which is about 75 percent of our revenue, and in that case, we re thinking of solutions for fleet managers, small businesses, oil companies, and other key partners in the commercial and government spaces. And then on the other payment solution side, which is about 25 percent of our revenue and growing very steadily, we think of virtual payments solutions that are designed for businesses to save significant administrative costs. In the fleet payment sector our value is to reduce the costs that they spend throughout the value change of operating a fleet, so that includes things like fleet fuel solutions regardless of where the fuel purchases are made. If they re local, if they re over the road, bulk, mobile, you name it. That s an area that we want to make sure that that we are participating in and offering solutions to that customer set. We also offer telematic solutions, which just take all of the fuel payment solutions and add onto that an increased level of control over the fleet. We looked at the travel market and brought a number of our innovative solutions into that space, particularly with the virtual payments solutions that we re using with online travel on a global basis, as well as prepaid products in Europe for things like crew cards, currency cards. And so we ll look at what we think the market is, needs. We develop that functionality either internally or through acquisitions.

7 So Melissa, you know, these payments markets are clearly very complex. So it s interesting to me to hear about the solutions that WEX has really pioneered here through partnering and market- based approaches and how that s proven to be successful for you. But before I let you go, in closing, we re hearing a lot from you in particular about your entrance into the healthcare market. Tell us how WEX is approaching the healthcare payments market. SMITH: It s a great market for us. We ve recognized the space is not fully optimized with electronic payments or with data capture. Our virtual payments solutions offer efficiency and precision and it s a, two trillion- plus market and growing rapidly. We re really experienced at creating and evolving solutions to meet the needs of customers and partners in complex payments areas, and it s really hard to imagine a more complex area than the healthcare space. Their claims are paid to providers today in expensive and inefficient ways. Ninety percent are being paid via check, still. There s a number of payments that are still less than $300, about 80 percent of the volume are small dollar high volume payments. And you add that up and it simply costs too much for providers to make payments. So our precise virtual payments solutions are highly secure, they re cost- efficient solutions to streamline processes and reduce costs, which is something that we ve been able to show a benefit for both in fleet and in travel. Our virtual payments solutions provide flexible and scalable products so that we can

8 meet the complex payment needs in healthcare, as there are a number of complexities. Some of the key benefits of our products are the fact that it s a lower cost for the payer, often creating revenue streams to the payer. The payments become electronic, which makes them more secure and controlled. They can be accepted via existing provider card terminals, so from a technology perspective it s very simple to implement. And our virtual payments solution reduces payment fraud. If we link it into the electronic remittance device with our partners, then the electronic version of a payment explanation is included. So we think about this in terms of leveraging our partner strategy to innovate in this market and to really advance a new approach in healthcare payments, only more streamlined and cost efficient and we re doing so under the name of WEX Health, which is new for us. So this is interesting to me because whenever you can hear from a company that isn t really just talking about innovative ideas, but has actually already proven successful in implementing some of those ideas in the industry, you know, I think that s really of interest to our listeners. So to me, today was a great recap of how WEX has become the company that it is today, and also where it plans to go in the future. And Mike and Melissa, we appreciate the both of you sharing your experience with us today. Thank you very much.

9 SMITH: Yeah, thank you Ben.