Virtual Payments: Best Practice for Business Travel

Around 85-90% of CTM customers are using virtual card programmes, and the odds suggest you are probably one of them. But do you really know the benefits of using these seamless solutions, and are you aware of the challenges specific to the corporate travel industry?

Virtual cards are the go-to technology and are gaining momentum by the day, doubtless spurred on by being exempt from the new security legislation, Strong Consumer Authentication (or SCA or PSD2), being implemented this winter and requiring two-step authentication. Fraud is a major issue globally with physical cards but virtual cards can be tightly controlled by specific merchant type, by spend range or amount and across a specific date range. They contain the same information as physical cards, i.e. an expiration date and CVV, and are primarily used instead of corporate credit cards to pay hotel bills. “Each payment has a unique virtual card number that accompanies the payment,” explains Robert Cope, Finance Services Manager at CTM.

“This provides a much tougher level of security and significantly reduces fraudulent instances.”

To date virtual cards have been targeted at non-frequent travellers and short-term contractors who would not normally be eligible for a company credit card. However, many industry observers believe physical cards will soon disappear and the default payment mechanism will be the virtual card across all traveller types.

“We’re seeing a move away from individual corporate cards for expenses,” says Cope. “I think this is partly informed by SCA legislation and the challenges around authentication.”

Adoption of virtual cards was slow initially because there was nothing to show at a hotel check-in desk and reception staff had not been sufficiently well trained on acceptance. Some travellers carry a copy of their virtual card on their phone as back-up but today, most large hotel chains are familiar with this payment method. Cope reckons adoption will accelerate with the changes to the PSD2 legislation.

Challenges for the corporate travel industry

Despite this increasing popularity of virtual cards, it’s not all plain sailing. Cope says it’s more difficult to use virtual cards as a payment method in some international countries for hotel payments, so default to a conventional plastic card. There are also some difficulties when using virtual cards for recurring payments. Nonetheless, CTM has seen a continued surge in virtual card use across its customer base. “From a procurement perspective, virtual cards offer an increased level of compliance. We’re able to set tolerance levels at an individual transactional level, to comply with travel policy. This is allowing procurement teams to drill down into spending patterns and ensure a level of control and compliance. We’re able to define spend on a virtual card based on supplier, spend type, destination, date range, traveller, job title and ensure validity based on those parameters.”

“We’re able to set tolerance levels at an individual transactional level, to comply with travel policy.”

Virtual cards satisfy travel managers’ demands for real-time data and for it to be rich in detail. Conventional payment methods such as lodge cards and corporate and purchasing cards do not provide sufficiently rich data. The rise of payment methods such as Apple Pay and WeChat testify an end of a wallet stuffed with credit cards. A younger workforce more accepting of direct consumption will also accelerate adoption levels.

Best practice for a seamless payments and expenses process using a virtual card:

• Ensure a clear linkage between the TMC and banking provider
• Make use of the enhanced data benefits to determine spend patterns and travel activity. It also allows for more calculated decisions in negotiating with suppliers/vendors
• Use a virtual card programme to automate policy enforcement (apply tolerance settings at a transactional level)
• Determine how a virtual card programme can assist travel managers with expense management efficiencies – digitalising travel bookings, payments and expense reclaims can remove the administrative element of business travel
• Clearly define the expense management policy
• Review and update policies and procedures specifically for company needs.