2008 Business Travel Survey: Spending Consolidation Boosts Card Suppliers

JUNE 09, 2008

2008 Business Travel Survey: Spending Consolidation Boosts Card Suppliers

Issuers noted double-digit percentage year-over-year growth in corporate travel and entertainment transaction volumes in 2007. They saw increased efforts by corporations to consolidate spending onto cards, including global efforts by multinational companies, and continued growth of card use in the small and midsize markets. The recently contracting payment landscape, however, could bring additional challenges to payment negotiations this year.

Executives from the major payment networks credited increased spending by companies and more cards issued for the volume growth, with Bank of America's 37 percent the highest reported. Corporations dealt with increased travel expenses without decreasing activity, they said, and also more successfully pushed cards for more purchases.

"Companies have gotten more strategic in how they look at card distribution, and mandates have added to that," said Janet Zablock, head of Visa's U.S. Commercial Solutions Group. "We've also seen increased travel and increased hotel spending."

Networks reported greater acceptance of their cards, and a few spending categories that generally are difficult to push onto corporate cards became more receptive in 2007, according to Carol Batzli Barkley, senior vice president for U.S. Bank Corporate Payment Systems. Taxi drivers in Philadelphia and New York City, for example, began facing mandates to accept cards for payment, she said.

American Express, still the dominant player by far in terms of T&E volume share, reported a 14 percent increase in its volume in 2007. At the same time, its Global Network Services, which allowed American Express to begin partnering with banks for card issuance more than 10 years ago, grew its spending volume by 49 percent to $53 billion. It launched several new cards, including the China CITIC Bank card and two premium products—the Citi Chairman Card and the Bank of America Accolades American Express Card—bringing the total number of bank partners to 117.

Eduardo Vergara, senior vice president for global marketing and strategy at American Express Global Commercial Cards, said volume growth came more from card growth than increased spending. "Companies are being very careful with expenses," he said. "The biggest driver on our side is clearly new client acquisition."

That acquisition already has accelerated this year, when American Express this spring completed a $1.1 billion acquisition of GE Corporate Payment Services, the sixth-largest issuer of corporate cards. The entity—created by General Electric in 1992 to issue T&E cards to its own employees—used the MasterCard and Visa platforms for its clients, who now are being converted to the American Express platform. GE, its largest single client, already has signed a multiyear deal with American Express.

With the loss of a major issuer, buyers will have a little bit less leverage at the negotiating table, said Bob Langsfeld, a consultant with Incline Village, Nev.-based Corporate Solutions Group. "The marketplace has squeezed up," he said. "The pricing probably is not as advantageous, and the tools and opportunities of reporting and content haven't changed much, so the challenge of integrating the data from multiple sources into one reporting process remains..."

Source

http://www.btnmag.com/businesstravelnews/headlines/frontpage_display.jsp?vnu_content_id=1003813560&imw=Y