The future for business travel payments: virtual cards

The requirements for managing business travel spend are evolving: travellers want better, faster and simpler reconciliation and control.

Traditional payment solutions have been dominated by two methods: the individual corporate card, the most common method of payment; and the lodge card, which is “lodged” at a travel management company where travel bookings can be made. Though they remain popular settlement options, organisations are beginning to demand more from their card providers.

Lodge card clients, for example, are facing challenges when looking to expand business travel bookings to hotels, car hire, low-cost airlines and rail, making data for reconciliation purposes limited in these areas. Meanwhile, the individual corporate card experience may be hampered because of its dependence on timely expense report submissions by travellers. These challenges, combined with rising expectations prompted by digital and technological advances, mean business travellers’ are beginning to shift their attention to the virtual card.

The last few years have seen an increased adoption of the virtual card technology, to the point where it’s now seen as a permanent fixture in clients’ business spend management programmes. While organisations initially used virtual cards to pay for low-cost airfares, the use case and benefits offered by virtual cards mean that companies now use virtual cards to pay for practically all business travel commodities, including non-low-cost airfares, hotel accommodation, rail etc.

The need to optimise spend-visibility and control, to combat the pressing issues of card misuse and travel policy compliance, have ushered an increasingly visible shift towards virtual card. Organisations now expect tighter controls than the individual corporate card allows. Technological adoption along with an increased recognition from corporations and banks mean that the use of virtual cards is now big business in the travel industry.

The virtual card is user-friendly and requires no IT setup. During a booking, a 16-digit virtual card number is requested from the card provider via an encrypted XML message protocol. The unique virtual card number is then returned to the travel management company for the transaction to be completed while enhanced travel data is captured up front by the payment system. All of this is done in a matter of seconds with seamless reconciliation and the highest level of visibility.

The enhanced data captured includes cost centre, check in/out date, employee ID and other client defined fields that are lodged as part of the virtual card account request and then matched with the transaction and presented back to the organisation. With a unique 16-digit virtual card number being generated for each transaction, and without the need for plastic, the benefits are obvious. Through one central travel payment process, virtual cards can make bookings for car hire, accommodation, rail tickets, and all air travel. This provides a single method of payment for booking business travel. Companies are increasingly relying on rail and car hire to get around the challenges associated with air travel. Virtual cards give the flexibility and completeness that can accommodate a business traveller’s way of life.

Another significant benefit is that companies can capture more detailed data, which in turn gives them increased clarity about their finances. This makes centralising travel spend much easier, allowing firms to drive cost savings and improve reconciliation. The days of filing countless receipts and wasting days at the photocopier are over: centralisation means travellers do not need to spend time manually reconciling individual travel expenses.

With a single card account number for each transaction, usage parameters can be customised to help make certain there is appropriate spend amongst employees. Opportunity for fraud is significantly reduced thanks to this unique transaction number.

Several organisations have opted to incorporate virtual cards as a payment method in order to enhance their business travel experience, taking advantage of the enhanced data these cards provide to facilitate easier reconciliation of business travel spend. The future is well and truly virtual.

Mel Gargagliano (pictured) is the head of commercial cards, EMEA for Bank of America Merrill Lynch Global Transaction Services