‘Cashless’ Multinationals: The Commercial Cards Conundrum

In a pronounced era of globalisation, multinational corporations (MNCs) that operate in multiple markets and regions have introduced global next practices that add greater value and help the corporate bottom line. The corporate benefits of a commercial card strategy, especially at a time when many parts of the global economy are still reeling under the effects of recession, cannot be over-emphasised. It holds employees accountable, adds value through data analysis and plans for the long term. Further, at a time when greater parts of national economies are shifting their focus to the service sectors, the need for a financial-cum-operational plan through the use of commercial cards is enhanced.

For corporates, there is greater real-time spend visibility and better understanding of where and how budgets are being deployed. Operational efficiency is enhanced, with back office time savings being redeployed to forensic audit and other higher value-add activities. With better expense management, companies have the potential to save up to 60% of their pre- and post-trip administration expenses. Employees too benefit in the process, as there is limited need for restrictions on personal credit. 

Nevertheless, over the last decade MNCs have increasingly relied on a ‘glocal’ (localised and global) strategy that underscores the fact that a cookie-cutter, ‘one-size-fits-all’ strategy may not always work in all countries. Many of them have realised that they need to combine global strategies with local ones. This is not only with regard to product-related strategies, but also in human resources (HR) and even in accounting practices, where there are traditionally greater efforts towards uniformity and global standards. Further, at a time when MNCs are moving increasingly towards emerging markets, especially China and India, this dichotomy plays itself out more in markets and practices that have not reached the same levels of sophistication as developed countries.

This paradox between the potential benefits, the strategies of global corporates and ground realities in markets is especially evident in the deployment of commercial cards across countries by corporates. The challenge manifests itself even more clearly in emerging markets. How?

Generic shared service deployment challenges apply: For any multi-market corporation, the journey to delivering a global solution has to evolve through the cycles of understanding today’s processes and process owners while re-engineering and developing standardised, improved processes (not merely automated) across multiple markets.

In addition for shared services, which are often not a core business expertise, companies need to meet the real in-market business needs while communicating the need for change, managing change and identifying local owners and champions. Quite often, many MNCs make the mistake of appointing a headquartered domicile administrator with limited cross-cultural experience as the head of their card programme. I even knew of one MNC whose global card and travel manager did not even own a passport prior to her appointment; hardly a preferred starting point.

Traditional commercial cards: (Travel and entertainment (T&E) and procurement for indirect spending) are small in proportion to total corporate spending and consequently are unstandardized. The pre-existing policies and processes for travel approval, booking, fulfillment, policy entitlements and reconciliation tend to vary widely. I once had a corporate client who realised mid-way through the implementation that it had a division with 27 different pre-trip approval processes, administered by different functional representatives.

While issuing every employee with a card is a standardised, straightforward process, alignment on policies and processes, and managing the change successfully towards a mutually-agreed new standard, is a key ingredient for successful multi-market commercial card programmes. Experiences of companies show that this is often not easy to achieve. Fragmentation of processes around T&E and indirect spend management is accompanied by fragmentation in process ownership. Quite often, different parts of the organisation will claim to own T&E in different divisions, countries and units. And many cases, in markets where country operations are relatively small by headcount, it may be hard to find someone to take ownership of the process. 

Changing habits: In many countries, employees and especially frequent travellers have benefited from personal credit rewards fuelled by their business travel activities. While this is not inherently a challenge posed by the nature of managing multiple markets, it is a delicate issue to tackle for many companies, requiring effective communication. The gravity of the problem can be better understood if we consider a scenario where a company’s star salesperson in the market resists commercial card usage. In such cases, it makes it a significant challenge to drive programme compliance.

Regulatory standards: Regulators have been increasingly proactive in overseeing financial institutions in general and, by extension, the payment card industry. This has resulted in more aggressive guidelines on card security technology and standards that will protect the system and cardholders in the longer term. It could mean that corporate employees don’t use a card as often as they could.

However, the market nuances of approaches on regulation make it important to understand how these affect the way banks issue cards in very fundamental ways. Several regulators impose restrictions on credit limits and this can make it difficult for frequent travelers, who may not have high reported incomes to get reasonable credit levels to support their business travel needs. However, there are proven solutions to operate successfully within the majority of the regulatory guidelines. The key to success is in acknowledging and accommodating a diversity of needs in a commercial card programme.

Challenges and Opportunities in Emerging Markets

Corporates in emerging markets typically come within a few categories:

  • The growing number of MNCs operating in these markets.
  • Traditional family business enterprises, many of which have not developed their processes and practices.
  • Small and medium-sized enterprises (SMEs), which comprise a significant chunk but nevertheless may not have developed the mindset to implement best practices.

The challenges and opportunities of commercial cards to make deeper penetration in emerging markets have to be understood in this backdrop.

The biggest challenge to a commercial card programme in emerging markets is the lower level of overall merchant acceptance of payment cards. The lack of traditional acceptance is also bringing with it challenges of different types of card acceptance; whereas in the past everyone essentially operated off a magnetic strip card. However, this tends to evolve over time, as a society progresses up the economic ladder. Indeed, we have witnessed that many of the emerging markets have the benefit of leap frogging technological evolution steps and going straight to the latest technologies in acceptances like Europay, MasterCard and Visa (EMV), near field communication (NFC) and mobile acceptance.

Mobile Acceptance

The advent of mobile commerce (m-commerce) is driving mobile acceptance, as evidenced by the meteoric rise of mobile payment card acceptance players such as Square and iZettle. Therefore, while progress has been made, they are slower in emerging markets.      

Fortunately, T&E merchants are typically the first to get carded in any market. Thus, while the perception of a lack of card acceptance with taxis and neighborhood eateries is something travellers articulate, it does not detract from the fact that 80-90% of T&E spend is card-able in most emerging markets across Asia Pacific, as they are made up mostly by air travel, hotel, transfers and official entertainment. While it does mean that some cash is still needed in developing markets, it’s important to note that the same employees, who complain about lack of commercial card acceptance to their companies, had been happily using their personal cards and cash without complaint prior to possessing a commercial card.

Conversely, it is the transparency that payment cards provide through real-time spend visibility and fuss-free reporting, that makes commercial cards a huge ally for line managers and auditors in limiting and detecting inappropriate or fraudulent business spending. It is significantly harder to doctor card data than it is on a manual cash receipt.


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