The genesis of this piece is about the somewhat rapid changes occurring in the corporate card market (corporate cards generally refer to the category of spend related to corporate travel) during the past 12 months, including drivers such as business conditions, market changes and technology advances. Tepid economic growth , with slowdowns in various developing countries and continued underwhelming activity in developed markets, is tending to keep spending levels in relatively modest territory. Travel spend can ebb and flow with business conditions, and a primary reason being that it is relatively easy corporate spend category for executives to apply budgetary pressure.
American Express CEO Ken Chenault admitted to investors earlier this year that the corporate market has been the segment he was “most disappointed in”. Amex saw card-billed business for its Global Commercial Services division fall by more than 2 per cent to US$182.1 billion last year.Chenault put this down to travel and entertainment (T&E) being the “easiest expense category to cut”, and added that corporate card spending had been in a “pretty consistent decline” since the start of 2014. Although he does believe there will be “improvement in the growth in commercial in 2016”.
Another change factor cited was the consolidation of issuers and networks, driven by both market regulations and a need for scale, having a possible knock-on effect in causing a major US issuer to withdraw from the international commercial cards business along with Visa finally concluding a consolidation with Visa Europe. The upcoming UK referendum on leaving the EU (commonly called Brexit) is also mentioned, but direct possible negative cause and effect implications are not easily identifiable.
Caroline Haywood, UK manag¬ing director of Airplus Interna¬tional, says corporate payments are “already globalised and not EU specific”, which means there should not be “a huge change in pro-grammes, card policy or structure” if the UK votes to leave. “The impact of leaving the EU on running a day-to-day corporate card programme would be minimal,” she says.
The third prong in the discussion is around technology, with the author citing both mobile and virtual cards to be having an impact. Mercator will certainly agree that virtual accounts is currently the major driver in the commercial cards business, most specifically on the procurement side, but to date mobile commercial payments have been a non-factor. The effect of mobile could be changing, however, given changing demographics in the corporate staffing mix.
Mobile is a huge part of the technol¬ogy improvements being introduced by payment companies and this should only accelerate with the use of smartphones or even wearable technology, such as the Apple Watch, to pay for smaller transactions. Apple Pay has already been launched in the UK, although most providers say that use by corporate cardholders has been minimal so far – but this trend is only likely to grow with Google’s Android Pay and Samsung Pay, both due to arrive on these shores later this year.
Mercator has extensive coverage of corporate card products, including recent publications on Asia Pacific and Europe, so subscribers can read in much further detail about the points in this article, as well as in-depth reviews of the full commercial card space.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
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