Overview • By Rob Gill


Global evolution


How is the changing payments landscape affecting corporate travel programmes?


T


hey say that a week is a long time in politics, and while the corporate card industry may not move quite that


fast, the last 12 months has heralded significant changes in the sector. These developments include the consolidation of some of the major global card players, the introduction of new European Union (EU) regulations and the ceaseless advance of technology in the form of virtual cards and mobile payments. And this is just to scratch the surface of what has happened since last year’s BBT Corporate Cards supplement. “The last 12 months have been some of the most dynamic for the industry,” explains Melissa Gargagliano, head of EMEA commercial cards at Bank of America Merrill Lynch (BoAML). “We saw a major issuer exit from the international markets, which reinforced the sheer focus that issuers need to have on their margins while surpassing client expectations,” she says, adding that the industry “is facing increased regulatory pressure, in the form of a number of key directives and regulations that directly impact the card industry”. So let’s look at some of those issues in


more detail and how they have affected – and will continue to impact – corpo- rate travel buyers and their companies when it comes to their payment options and programmes.


STATE OF THE MARKET It’s often said you can tell a lot about the state of the world economy by looking at spending trends within the corpo- rate card market. This outlook has not been particularly rosy recently, with a


In association with


“The last 12 months have been some of the most dynamic for the industry”


slowdown in growth in key emerging markets, such as China, and US GDP also sluggish. Even the UK, which has been a relatively good economic per- former in Europe during the last couple of years, saw its growth estimates being cut back during the budget in March. 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”. Steve Robson, Citi’s head of commer-


cial cards EMEA, agrees that “general eco- nomic woes are a challenge” and points out that one of the major reasons for low oil prices has been a slowdown in China and also world trade gener- ally. “We have a situation where ev- erybody is losing a bit of confidence. When this happens we see compa- nies cutting back on travel and we’re


definitely seeing that in the market generally,” he adds. “Overall, there’s been a flat level of


travel – some companies are travelling more and others are spending less. In the commodities sectors, there is definitely a lot of M&A [mergers and acquisitions] activity, such as the Shell and BG Group merger. This means there will be fewer people working for these companies and that will result in less travel.”


CONSOLIDATION These tough market conditions have undoubtedly played a part in the con- solidation within the sector over the last 12 months, with US banking giant JP Morgan Chase ending its corporate card programme outside the US, and Visa Inc swooping to acquire Visa Europe to create a single global Visa company. JP Morgan withdrew its corporate


card services from the EMEA region in December 2015, so that it could “concen- trate on areas where we can best meet clients’ needs for a competitive offering and superior client experience”, which means the US.


This decision led to many non-US companies having to find new card providers in the last few months of 2015 before the withdrawal of this service. JP Morgan had been offering an interna- tional commercial card service through a partnership with Airplus, which was originally launched in 2012. Meanwhile, US-based Visa Inc is spending up to Ð21.2 billion to purchase Visa Europe – a move which will see Visa Inc add more than half a billion card accounts and more than Ð1.5 trillion in annual card payments. The sale is due to be completed during the current financial quarter running from April to June 2016.


How this will impact the corporate


card market is obviously unclear at this point. But Visa Europe’s UK & Ireland managing director, Kevin Jenkins, says the deal will allow a combined Visa to “accelerate the next generation of pay- ments in the UK”. He adds: “The deal will give consum- ers and financial institutions across the UK greater access to global scale, technologies, investment and resources.”


BBT CORPORATE CARDS SUPPLEMENT 2016 7


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