MasterCard: Card for Life - Alan Hawkins and Rene Stynen
Many multinational companies are becoming aware of the considerable savings achieved by using a single corporate card programme. FDE looks at why companies are waking up to the benefits.
US companies with revenues in excess of $2 billion have been using multinational corporate card programmes for years and enjoying the benefits. However, research shows that companies in the rest of the world have been slower to make use of the single corporate card. Even big multinationals have allowed subsidiaries and affiliates to make their decisions on card providers. Some have therefore ended up with 40 different card issuers worldwide working on different schemes, with different banks and different costs.
‘This is clearly inefficient in financial terms; for data collection and expense management,’ says Alan Hawkins, vice president at MasterCard Worldwide.
‘Corporate cards are effectively lines of credit lending agreements. Just like banking facilities, it is far more efficient and economical for a finance director to consolidate lines of credit into a single card, whether for travel and expenses (T&E) or procurement.’
The same research shows that, not surprisingly, the global companies with the highest T&E spend (averaging $107 million) have already adopted multinational corporate card programmes. But companies with a lower yearly spend of some $37 million (representing 60% of the global businesses sampled) have not yet moved toward the single card solution.
Yet, in the face of globalisation and tightening purse strings for a recession, the card market for multinationals is clearly moving toward a single card from a single provider. The complexity and expense of operating multiple corporate cards in different locations will no longer be sustainable.
‘The two main elements that have been driving the trend towards a singlecard provider have been control and integration,’ says Hawkins. ‘Control in terms of harnessing spend, especially for reducing costs and budgets, whether for T&E or any type of sourcing. You need effective control – which requires systems and providers with a greater sophistication to accomplish this.’
‘Here is where the integration comes in,’ says Rene Stynen, vice-president of large market global commercial products and MasterCard Europe.
‘Lower costs, better visibility and greater efficiencies are already being gained by multinationals that have moved to the shared service model. This may very well apply to an organisation’s travel requirements with the use of a single travel management company.
The single multinational corporate card is the next logical step in this consolidation of the services model. It will almost certainly apply to the true globally operating companies, as well as multinationals that operate around the world on the basis of a strong position in their home market.’
A corporate card for Europe
In Europe, the multinational corporate card is expecting growth to be in the T&E segment.
‘Corporate procurement cards, which have been around for some 12 years are strong in the United States where cheque settlements are still the rule. In Europe, however, with its efficient interbank clearing and settlements procedure, the classic corporate procurement card has had less application. Therefore, the traditional purchasing card is never going to develop the scale in Europe as it has in the United States. When it comes to procurement, Europe is an entirely different model,' says Hawkins.
‘The growth of e-business and electronic invoicing in Europe means that we have identified another area where we can provide a key service. For all the innovation in more efficient electronic invoicing, there is still a need for a payment mechanism in the middle. That is where MasterCard is focusing – trying to link up and down the value chain; seeking to integrate with einvoicing, procurement solutions and e-catalogue solutions.’
MasterCard has moved to position itself as the key network supplier of multinational corporate cards in the T&E space. It has done this by underpinning its issuing banks with a powerful global data repository. This unique real-time facility gathers and adds value to expenditure information, no matter where in the world a transaction is conducted.
Multinational companies are now being given unrivalled access to spend data through automated feeds that are channelled directly into their business’s own expense management and ERP systems.
Used in conjuction with the MasterCard inControl platform, it permits a company to both monitor and manage expenditure, in terms of what and how much each employee can purchase. There is also a whole routing work flow, so that transactions can actually be sent to a supervisor or department for approval before being authorised at the merchant.
Additional information such as general ledger (GL) codes can be added to the transaction allowing companies to include any data relevant to their processes. It is also possible to put alerts into the facility. So, if there is out-of-pattern spend or if people attempt to go outside their expenditure policy for a particular reason, a company can know in advance before the transaction is approved.
A further powerful feature of the inControl platform is that it can generate single use or ‘virtual’ card numbers.
This effectively means that a new credit card number is used for every transaction. This feature is particularly useful in procurement, where the growing amount of sourcing via the internet and web-enabled portals carries an inherent risk of fraud when the same credit card numbers and expiry dates are used repeatedly.
In addition to the virtual card, the number of which changes with every transaction, MasterCard also issued new ‘lodged cards’ to travel management companies.
‘As their name implies,’ says Hawkins, ‘these are not actual cards but an account number that is held centrally by a vendor, such as a travel management company, against which it books travel for an entire company. So the card is actually “lodged” with the merchant company. There is typically one single payment per month for all of the travel of that corporation.’
As with the physical T&E card, companies are still able to analyse the spend because GL and project codes are included in transactions and that data is pushed through the process so companies can allocate those costs back to the relevant people, departments or cost centres.