To Go Where No V-Card Has Gone Before

The more complicated the B2B payments problem, the less complex its solution has to be for businesses to implement. PYMNTS sat down with WEX’s SVP and General Manager of Virtual Payments, Jim Pratt, to get a look inside their V-card strategy and how companies from health care to hospitality marketplaces are making use of it.

Over the last 10+ years, WEX has partnered with several online travel agencies to deliver virtual payment solutions. Based on your experience, what constitutes a successful virtual payments strategy?

JP: A successful virtual payments solution provides security and efficiency for the online travel agency (OTA) as well as a seamless experience for its consumers and suppliers, like hotels. But it’s not as simple as it sounds. Imagine you went to Expedia.com and booked a hotel room at the Marriott using your personal credit card. That personal card number stops with Expedia — it is not passed on to the Marriott. The service we provide enables Expedia to make a call out to WEX for a single-use virtual card number to book that reservation. The number is specifically generated for that reservation, and it is available for an amount that Expedia sets to represent its negotiated rate plus taxes and any other relevant charges.

Further, the single-use virtual card number may have controls on it limiting the window for its use and allowing for pre-authorization. This way, Expedia is able to manage its credit line and ensure that it is not charged for anything beyond the contracted room. For instance, if a traveler watches an in-room movie and orders room service, those charges will not go back to Expedia because they would surpass the allowed value on the card.

Beyond the reservation, OTAs need help managing their large portfolio of transactions. Expedia has more than 20 websites offering travel. The company processes more than 50 million transactions each year, and as is true with many online agencies, 30 percent of those transactions are international.

Having the ability to settle in multiple currencies (we support 19) creates additional savings for OTAs: It allows them to avoid foreign exchange or cross-border fees, or both in some cases. Additionally, having a single global platform also helps providers like Expedia handle highly variable volumes. It is critical that there not be any recycling of account numbers because at the company’s rapid rate of use, the same account number could end up recycling multiple times before being accessed by any hotel recipient; this would create a tracking and reconciliation nightmare.

How well-suited is WEX to serve the global travel payments marketplace?

JP: We think we are pretty well situated. We calculate that we have about a 20 percent market share in what is a $69 billion online hotel travel market. We work with the world’s leading travel companies, including Expedia and Priceline, as well as Agoda in Thailand, Hotwire, HotelTonight and many others. We have some of the top Australian OTAs as customers as well.

Beyond these leading, global online travel agencies, our payments solutions are being used by many other travel companies, regardless of the geography or market segment they compete in. This includes retail travel agents, wholesalers, tour operators and tour management companies that are also leveraging our virtual credit card platform.

Our global expansion plan is to serve these customer segments we know well, in the geographies that have the highest opportunity for travel growth. Asia Pacific, South America, and Europe all provide fertile grounds for rapid expansion.

We have local teams across the globe in 10 locations, enabling us to have local knowledge of the travel industry in each market. We are leaders in this space and have the technology and expertise to bring security and a seamless experience to travel companies around the world.

This past summer WEX acquired Evolution1 to delve more deeply into health care payments. How can the virtual cards that you offer travel agencies and others globally play a role in the health care industry?

JP: It may sound odd, but we think it helps a lot. We’ve prioritized expansion into high-growth, high-demand industries with large, complex payment systems where we can leverage our platform capabilities.

For example, with the introduction of the individual mandate and the continued rising cost of health care, employers have shifted a larger burden of costs on to their employees, resulting in a rise of consumer-driven health care plans. These plans demand that consumers take greater control of spending and become increasingly involved in payment processes.

The acquisition of Evolution1 has helped us simplify the business of health care. We empower consumers to leverage the cost savings opportunities of account-based health care savings plans by offering them the tools and resources to efficiently pay for current needs and save for future medical care. Additionally, we enable employers and consumers to tap into our offering by maintaining and bridging connections with leading third-party administrators, health plans, banks, exchanges and payroll programs. We also provide an exceptional experience for consumers across online, card and mobile transactions, and customer support communications. Finally, we invest in strategic research to ensure availability, performance, security and scale of technology and payment solutions.

Evolution1 distributes products and services through 500 partnerships and does business with 125,000 companies. This network provides a direct connection with partners, and WEX is exploring its bank issuing capabilities with Evolution1’s existing business base.

B2B spend is growing as corporations look to increase their adoption of virtual cards. B2B is also very complex. How is WEX prepared to support organizations in new verticals that do not have a virtual card solution?

JP: To support organizations in new verticals that don’t have a virtual card solution, we use a strategic process to identify areas for investment.

For example, we look for payment complexities that would be well served by our expertise in simplifying challenging ecosystems — areas where there is the need for strong reconciliation, high level of control, or higher instances of fraud that can be addressed. We seek out verticals that have large payment volumes in aggregate and numbers of transactions so we can maximize ROI. We also want to be sure that we are working in fields where there are engaged stakeholders ready to invest in advancement. Before we enter a new vertical with a product solution, we initiate a comprehensive series of benchmark reviews to gather sales feedback, validate the needs of the sector, and revise our offering to maximize resources and fit evolving market demands.

Then, we invest in a test-and-learn capacity — we look for opportunities to go deep with a partner or customer set to truly understand their needs and build our solutions almost alongside them. As we see success, we invest further. We know that we have an exciting ability to adapt our model across diverse fields, but we also recognize that strong ROI is important in maintaining our profitability and value to shareholders.

Jim Pratt

Senior Vice President and General Manager of Virtual Payments, WEX