INNOVATIONS IN VIRTUAL TRAVEL PAYMENTS

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1 PAYMENT SOLUTIONS NEWS, SPRING 2019 INNOVATIONS IN VIRTUAL TRAVEL PAYMENTS IN THIS ISSUE PRODUCT SPOTLIGHT Learn how PNC s Visa Virtual Travel Card Service can help to streamline business travel operations, while providing added benefits for both your travelers and your company. p3 QUICK TIPS Wondering if virtual travel cards are right for your company? Check out the answers to common questions about them and how they can be used. p5 BY THE NUMBERS Take a look at how growth in business travel is driving demand for a variety of payment options and management tools. p7 COMMERCIAL PAYMENT TRENDS Catch up on the latest news in payments and revisit topics from previous issues. p8 A NOTE FROM JEFF FELSER, SENIOR VICE PRESIDENT U.S. businesses are looking for commercial payment solutions to address a diverse set of needs. Many are looking to not only lower administration costs, but to also: Improve reconciliation rates and reduce the likelihood of disputes with suppliers and customers Provide greater insights into spending patterns, which can be leveraged to improve working capital management and negotiate better deals with specific vendors Execute faster payments Reduce exposure to fraud At the same time, the commercial payments landscape is changing as new technologies come on board. U.S. companies adoption of these new technologies is seen in the steady growth of U.S. commercial card volume, which rose 129% between 2009 and (During the same period, U.S. gross domestic product grew by just 35%. 1 ) $542 $616 U.S. Commercial Card Volume ($BN) $708 $797 $887 $989 $1,066 $1,142 $1,242 PAST ISSUES Source: The Nilson Report

2 INNOVATIONS IN VIRTUAL TRAVEL PAYMENTS 2 PNC has been one of the leaders in the transition to electronic payments. Between 2009 and 2017, PNC commercial card (corporate and purchasing) volume rose by 214%, compared to a 145% increase for all Visa and Mastercard issuers. 2 Now, as U.S. businesses begin to reap the benefits from the latest commercial payment solutions being offered such as real-time payments, mobile payments and same-day ACH payments (all of which have been covered in recent issues of Payment Solutions News) I d like to discuss another growing payment solution: Virtual Card Payments. Virtual Cards Payments Volume ($BN) $83 $ Source: First Annapolis (now Accenture), reported in "Noventis Trend Watch: V-Cards Provide SMBs with an Easy Path to E-Payments," PR Newswire, December 19, 2017 Since a virtual payment card program is easier for corporate travel managers to monitor and control than a program with hundreds or thousands of standard corporate cards issued to employees, it can be a great choice for traveling employees who do not qualify for a corporate card while also limiting the need for reimbursement of business expenditures to employees. Previous issues of Payment Solutions News, most recently in Summer 2017, have highlighted the benefits of corporate cards for both business travelers and corporate travel managers, as well as discussed the launch of mobile wallet functionality for corporate cards. And PNC continues to provide innovative travel payment solutions for our commercial clients, most recently with our introduction of the Visa Virtual Travel Card Service. This innovative solution is featured in the Product Spotlight of this issue. Take a look to see how it may help with your company s travel needs. THE EMERGENCE OF VIRTUAL CARD PAYMENTS One of the key trends in the commercial payments space is the growing interest in and adoption of virtual card payments. Virtual cards have the same functionality as traditional corporate or purchase cards but, as their name attests, they are not physical cards. Instead, card processing platforms generate a unique 16-digit account number and code for each transaction, providing greater benefits in the areas of security, purchase control and more detailed transaction data. As a result, we expect virtual payments to grow exponentially in the coming years. COMMERCIAL TRAVEL AS A VIRTUAL PAYMENTS INNOVATOR Travel departments have tended to embrace new electronic payment solutions more quickly than any other department within an organization. This is due in large part to the many types of transactions initiated by travelers; the fact that people making these transactions are geographically dispersed, often internationally; and the desire to reduce stress on traveling employees. For example, traveling employees without corporate cards must often personally pay for their travel and entertainment expenses, collect the receipts, and then complete and submit an expense report that must be manually reconciled against the purpose for the employee s travel. This often results in costly administration, a greater potential for fraud, errors in reconciliation and few insights into spending patterns which, in turn, drives travel program administrators to look for more a more effective commercial payment solution.

3 PRODUCT SPOTLIGHT VISA VIRTUAL TRAVEL CARD SERVICE As we discussed in the introduction to this issue, the switch to electronic virtual payments is being driven both by client demand for more effective commercial payment solutions and advances in payment technology. And companies with considerable business travel tend to be the early adopters of new commercial payment solutions, due to the types of transactions and the challenges presented by a disparate group of employees. Adoption of virtual card solutions is on the rise and projected to continue to grow, including spend on virtual cards used for corporate travel: According to a June 2018 Global Business Travel Association (GBTA) report, 11% of travel programs use single-use virtual cards and 25% of non-users say they are likely to adopt virtual cards in the future. 3 From the same report, 22% of company corporate cards are compatible with mobile wallets and 72% of non-users are interested in offering mobile wallets in the future. According to a poll conducted by Treasury Management International, Ticketing and Travel was identified as the B2B spending area where virtual cards would deliver the greatest value, followed by Hotel Booking and Payment. 4 And as the U.S. and global economies grow, spending on business travel continues to rise. 5 Global business travel spending rose 5.1% in 2017 to $1.33 trillion (and is expected to rise an additional 7.1% in 2018). U.S. business travel spending grew 3.1% in 2017 to $292 billion. PNC IS NOW OFFERING THE VISA VIRTUAL TRAVEL CARD SERVICE To meet this growing demand for innovative payment solutions for travelers, PNC now offers a Virtual Travel Card Service, an extension of our commercial card solution that further streamlines travel expense management for existing and new corporate card clients. With virtual cards, business travelers can use on-demand virtual card numbers for each travel event when booking air, hotel, rental car and rail reservations. This solution provides travel program administrators with stronger payment controls based on each traveler s specific itinerary. PNC is introducing this service in association with Visa and Conferma, established leaders in the development of virtual card solutions. This enables virtual card transactions to be conducted in conjunction with over 450 travel management companies and over 80 online booking tools that participate in the Conferma Travel Procurement Network. (Please check with your PNC Treasury Management Officer to determine if your travel management company is part of Conferma s network.) The Virtual Travel Card Service offered by PNC provides significant benefits for both travel program managers and traveling employees, including: Automated and accurate reconciliation An improved user experience Increased corporate card s share of business travel spend Greater control over card use Enhanced security Data from each transaction is matched to travel booking data. With virtual card transactions, business travelers have: No need to fund charges on their own personal card nor provide personal card information for booking purposes. No need to submit expense paperwork for reimbursement. Virtual travel cards can be used to capture spending from personnel who do not typically qualify for a permanent corporate card (e.g., part-time or temporary employees, consultants, contractors and employees who rarely travel). Spending limits such as amounts, travel dates and merchant category codes are set dynamically on each virtual card based on the traveler s itinerary, reducing the potential for misuse. Virtual card numbers are unique for each itinerary, plus there is no plastic card to lose, misplace or potentially be stolen.

4 VISA VIRTUAL TRAVEL CARD SERVICE 4 BUILDING A REPUTATION FOR INNOVATION AND SERVICE PNC has been at the forefront of introducing new travel payment solutions for our commercial clients. In 2014, we were one of the first U.S. banks to incorporate EMV (chip) functionality into commercial cards, which greatly enabled our clients employees to conduct transactions while traveling internationally. And in 2016, we became one of the first U.S. banks to incorporate mobile payment functionality into commercial card products. PNC s launch of the Virtual Travel Card Service is one more example of our commitment to provide cutting-edge payment solutions for our commercial clients. It also illustrates our continuing investment in virtual payment solutions in the corporate card space (e.g., mobile wallets for business) as well as in the procure-to-pay category (e.g., single-use ghost accounts and invoice automation), which have been covered in previous issues of Payment Solutions News. The Virtual Travel Card Service is available to PNC corporate card clients who meet certain spend requirements and features easy enrollment and set-up, led by our Commercial Card On-Boarding Team.

5 QUICK TIPS VIRTUAL TRAVEL CARD FAQS Wondering if virtual travel cards are right for your company? Here are the answers to some of the most common questions we've been asked concerning virtual travel cards. ABOUT VIRTUAL TRAVEL CARDS What is a virtual card? What is Visa Virtual Travel Card Service? What are the main travel applications for this service? Does this new service replace corporate cards? What are the main differences between virtual cards and central travel accounts (CTAs)? Do I qualify for the Virtual Travel Card Service? A virtual card is an electronic form of payment associated with a credit card number. There is no physical card involved in transactions. Offered by PNC to qualified commercial card clients, Visa Virtual Travel Card Service generates a unique on-demand virtual account number (VAN) for each travel event, thereby eliminating the need for employees to use a personal or physical credit card for booking and paying for qualifying purchases. The Virtual Travel Card Service can be used for air, rail, hotel and rental car purchases. No, the Virtual Travel Card Service is a complement to corporate cards. Virtual cards are often used for employees, consultants or contractors who travel for business but do not have a corporate card. Virtual cards also may be used for the airfare and hotel expenses of employees issued a corporate card to keep the cardholders credit card limits lower. One of the key advantages of virtual cards over traditional CTAs is that virtual accounts better support reconciliation because a unique card number is associated with each travel event. In addition, unlike CTAs, virtual accounts are only activated and stay activated for the time of usage and have controls to limit use to in-policy purchases. Clients must have an existing PNC commercial card program that is used for corporate travel, with at least $1 million in annual spend. USING THE VIRTUAL TRAVEL CARD SERVICE What travel spending qualifies for the Virtual Travel Card Service? What is the Conferma Travel Procurement Network? Virtual Travel Card Service can be used for air, rail, hotel and rental car purchases. Your company must use a travel management company that is part of the Conferma Travel Procurement Network. The Conferma Travel Procurement Network is a network of travel providers who have contracted with Conferma to connect their booking systems to Conferma s technology platform. Travel providers requisition single-use accounts and submit data describing the purchase, then use the virtual card number to complete the purchase. Conferma gathers data from the travel provider and merchant to automatically reconcile the booking/invoice data with the transaction data. Travel providers can provide this data to PNC clients.

6 VIRTUAL TRAVEL CARD FAQS 6 TRAVEL PROGRAM MANAGEMENT What are the key benefits of this service for program administrators? How does automated reconciliation work? Key benefits for program administrators include: Greater efficiencies from automated reconciliation Reduced fraud exposure through a range of spending controls Greater visibility into the organization s total travel spend Additionally, spending on virtual cards is included in the calculation for an organization s annual rebate. The unique identifier for each virtual account ties travel booking data to transaction data. How do travel program administrators control spending on the Virtual Travel Card Service? Program managers can set spending limits based on the travel itinerary, such as amount, travel dates and merchant category codes. What program billing methods are supported for the Virtual Travel Card Service? How does the Virtual Travel Card Service work with Visa IntelliLink or PNC ActivePay? How can I enroll my organization for the Virtual Travel Card Service? The program billing method is corporate pay only; individual pay is not supported. Virtual Travel Card Service data can be loaded to these platforms for summary viewing. Contact your PNC Treasury Management Officer, who will guide you through the enrollment process. Are incidental travel expenses accommodated on virtual travel cards? Yes, the virtual card program can be configured such that the final charge amount exceeds the booking amount by a defined percentage, specifically to account for incidental expenses while traveling.

7 BY THE NUMBERS GLOBAL BUSINESS TRAVEL VOLUME AND PAYMENT TRENDS Global business travel has mirrored global GDP growth for the past decade, with a dip at the start of the Great Recession, followed by steady growth. This growth is expected to continue in the coming years. 6% 5% 4% 3% 2% 1% 0% -1% CHANGE IN GLOBAL GROSS DOMESTIC PRODUCT (GDP) AND GLOBAL BUSINESS TRAVEL SPENDING Global GDP Global Businesss Travel Sources: World Economic Outlook, April 2018, International Monetary Fund, and GBTA BTI Outlook Annual Global Report & Forecast % 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% Corporate cards remain very popular with both traveling employees and travel program administrators, but new business travel payment options are growing in popularity and adoption. Companies are also embracing a range of tools to enhance the efficiency and effectiveness of their business travel programs. CORPORATE CARD USAGE FOR BUSINESS TRAVEL EMERGING PAYMENT METHODS FOR BUSINESS TRAVEL 90% of travel programs use corporate cards 6 56% of travel programs use central travel accounts8 73% of travel managers are satisfied with data received from corporate cards (vs. 48% for personal cards/cash) 6 22% of corporate travel managers say their corporate cards are compatible with mobile wallets 8 72% of business travelers pay for dining with a corporate card 7 72% of travel buyers are interested in offering mobile wallets to travelers in the future 8 BUSINESS TRAVEL MANAGEMENT TOOLS 51% 54% 68% of travel programs use a travel and expense tool 9 of travel programs reconcile actual expenses with booking data 9 of travel programs offer a mobile expense management app 8

8 COMMERCIAL PAYMENT TRENDS COMMERCIAL PAYMENTS NEWS UPDATE Commercial Payment Topic B2B Payments Real-Time Payments Purchasing Card Recent News/Trends According to PYMNTS, 64% of B2B payments are still made with check. 10 According to a report from ACI Worldwide and Ovum, there was a 60% rise in the percentage of banks that expect real-time payments to drive revenue growth. 11 According to PYMNTS research: 12 70% of businesses said they would benefit from real-time payments instant funds availability 51% of companies are deterred from real-time payments because they do not understand it According to PYMNTS research, the average cost of processing a transaction using a paper-based order process is $89.99 vs. $20.14 when using a purchasing card. 14 Topic Covered in Previous Issues of PNC Payment Solutions News Summer 2017 issue: highlighted the key features and benefits of PNC s corporate card suite. Spring 2018 issue: discussed the launch of The Clearing House s RTP system (Real- Time Payments). PNC was one of the first banks to offer RTP to clients and, in August 2018, announced that our clients can now originate RTP payments. 13 PNC is one of the largest purchasing card issuers, and discussed the benefits of card optimization in the Spring 2017 issue. Same-Day ACH NACHA approved three new rules related to same-day ACH; the rules will be implemented over the next two years: 15 Allows same-day ACH transactions to be submitted to the ACH Network for an additional two hours every business day (effective September 20, 2019) Increases the same-day ACH per-transaction dollar limit to $100,000 (effective March 20, 2020) Increases the speed of funds availability for certain same-day ACH and next-day ACH credits (effective September 18, 2020) According to NACHA, same-day ACH volume rose 192% y/y in 3Q Business-to-business ACH transactions rose 9.6% y/y to 896 million transactions. Winter 2016 issue: discussed the launch of same-day ACH for credits in September 2016 and same-day ACH for debits in September 2017.

9 PAYMENT SOLUTIONS NEWS, SPRING Commercial Payment Topic Recent News/Trends Topic Covered in Previous Issues of PNC Payment Solutions News EMV According to Visa s latest Chip Card Update: 17 68% of storefronts accepted chip cards in December 2018 (3.1 million storefronts) There were 511 million Visa chip cards in circulation in December % of U.S. payments in December 2018 were on chip cards Counterfeit card fraud fell 80% between September 2015 and September 2018 Spring 2015 issue: published statistics on the emergence of EMV in the U.S. Winter 2014 issue: discussed enhanced versions of PNC corporate cards, including the addition of EMV functionality. Electronic Payments Juniper Research forecasted that global consumer spend on digital commerce will rise from $9.2 trillion in 2017 to $14.7 trillion in Spring 2015 issue: identified key trends related to the rise of electronic payments solutions. Winter 2016 issue: focused on changing business needs and electronic payments solutions. Dynamic Discounting Electronic Payables Invoice Automation Blockchain According to a PayStream Advisors survey of cross-border payments, 40% of companies report that 1 10% of their suppliers offer an early payment discount, while 7% report that more than 75% of their suppliers offer a discount. 19 According to a WEX survey, 50% of U.S. businesses have already implemented an electronic payables initiative, and 37% have one underway. According to PayStream Advisors, 92% of invoices received electronically are paid on time vs. 45% of invoices received in paper form. 20 PNC entered into an agreement to use Ripple s blockchain technology to enable our clients to receive real-time cross-border payments. 21 Winter 2016 issue: announced the introduction of the Dynamic Discounting module as part of A/P Advantage. Fall 2014 issue: highlighted the benefits of invoice automation, as well as provided practical steps to work towards payables automation. Fall 2014 issue: Discussed the benefits of electronic invoicing and summarized the invoice automation relationship with Tungsten Network. Fall 2016 issue: introduced distributed ledgers (the technology behind blockchain) and the financial services applications of distributed ledgers and blockchains. The issue also discussed PNC s investment in Digital Asset Holdings, a developer of distributed ledger technology.

10 PAYMENT SOLUTIONS NEWS, SPRING U.S. Bureau of Economic Analysis 2 The Nilson Report, issue 1134 (June 2018) and 951 (June 2010) 3 Travel Payment Goes Virtual, Business Wire, June 12, Virtual Cards Become a Reality, Treasury Management International, October GBTA Forecasts Seven Percent Growth in Global Business Travel Spend, Potentially Signifying End to Era of Uncertainty, GBTA News Release, August 14, Business Travel Payment Methods, GBTA, New Research Identifies Business Travel Dining Trends, Business Wire, GBTA, August 7, Five Business Travel Payment Trends, GBTA, Travel Buyers Looking to Bring Innovation to Booking Process, Business Wire, GBTA, August 9, Getting B2B Payments Out Of The Paper Check Dark Ages, PYMNTS, October 3, Banks Expect Real-time Payments and Open Banking to Drive Payments Transformation, Study Finds, Commercial Payments International, June 11, Businesses Want Real-Time Payments What Will It Take To Get There?, PYMNTS, November 20, PNC Treasury Management Clients Can Now Originate Real-Time Payments, PNC News Release, August 20, P-Cards Not Reaching Their Full Procurement Potential, PYMNTS, November 19, Same Day ACH Will Be Enhanced to Meet ACH End-User Needs, NACHA News Release, September 14, NACHA Reports Strong ACH Volume Growth of Nearly 7 Percent in Q3 2018, NACHA News Release, November 1, Visa Chip Card Update, June Study: Digital commerce spend expected to reach $14.7T by 2022, Mobile Payments Today, June 7, Cross-Border Payments Practices Cost Heavily from Fees, Time, and Manual Labor, Business Wire, September 18, B2B invoicing leaves early-pay discounts on the table, Payments Source, June 28, PNC to use Ripple blockchain tech for international payments, American Banker, September 19, 2018 This Payments Solution News was prepared for general information purposes and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, and does not purport to be comprehensive. Under no circumstances should any information contained in this newsletter be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. ( PNC ) will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. PNC and ActivePay are registered marks of The PNC Financial Services Group, Inc. All other trademarks are the property of their respective owners. RTP is a registered trademark of The Clearing House Payments Company LLC. EMV is a registered trademark in the U.S. and other countries, and is an unregistered trademark in other countries, owned by EMVCo. Ripple is a trademark of Ripple, Inc. registered in the United States and other countries. Visa, Visa IntelliLink and Visa Virtual Travel Card Service are registered trademarks of Visa International Service Association and used under license. Mastercard is a registered trademark of Mastercard International Incorporated. Bank deposit, treasury management and lending products and services are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Lending and leasing products and services, including card services and merchant services, as well as certain other banking products and services, require credit approval The PNC Financial Services Group, Inc. All rights reserved.