The corporate expense management market doesn't look like it once did. The traditional strategy of handing an employee a corporate card, hoping they make responsible purchases and depending on accurate expense reports has evolved into a market that embraces automation, artificial intelligence, mobility and an array of card products, from P-cards to virtual numbers.
While this industry is largely reliant on corporates' adoption of innovative technology, it is also instrumental to getting issuing banks in on the movement.
The commercial card and expense management market is yet another space in which collaboration between FIs and FinTechs has proved key to driving innovative tools – especially as corporates grow weary with the traditional legacy services their banks provide.
"Banks have, for decades, provided their corporate clients with the same payment cards with low or no improvement, other than insurance opportunities or lounge access," said Jørgen Christian Juul, founder and CEO of Cardlay, a Denmark-based FinTech that aims to enhance banks' existing corporate card and expense management services.
Banks' existing offerings have also been plagued by "very low enrichment of data," Juul added, "and on top of this, a low focus on the 'digital end-user experience.'"
That's not to say that corporates should shift away from their banks altogether, however. According to the executive, the key is to work "with banks, not against them" – a sentiment that has become a mantra for many in the FinTech market.
Disruption from FinTech rivals, coupled with tighter regulations like interchange fee caps, are pushing FIs to explore new revenue streams, Juul said.
"Therefore, the banks are open for cooperation with relevant FinTech partners to conquer an open position in the market with an optimized product that builds the enrichment in real time, on top of transaction data," he stated.
APIs Add Fuel
Last weekend, the EU's PSD2 regulations came into effect, an initiative that many analysts expect to have massive implications for the way banks and FinTechs collaborate. At the crux of those collaborations is the API, which has earned a sudden wave of attention in the financial services space as an efficient mechanism for banks and FinTechs to share data.
Juul emphasized the API's role in Cardlay's own operations, which recently saw backing from investors to the tune of $5 million in venture capital.
Open Banking and PSD2, he said, are "an invitation for new FinTech players and new services, which is for the benefit of users." Cardlay deploys APIs which, the executive noted, can facilitate integration with other infrastructures "better and quicker" than some other technologies.
APIs, combined with direct partnerships, offer "a true win-win situation," said Juul, "since it creates both additional revenue streams for the bank and a stronger retention strategy for their users."
The Power of Data
The corporate card and expense management market is now flooded with new platforms for entrepreneurs, SMBs and large enterprises. Technologies are also exploring how to use these solutions not only for employees traveling on business, but also to manage and analyze spend at corporate events, in accounts payable and in procurement.
Regardless of the card product or platform a company uses, though, Juul said there is one element critical to improving these processes: data.
"I totally agree [that] many new different cards have been invented, and we will see an increase in virtual cards, wallets, digital payments," he said. "What Cardlay enriches is the transaction that needs to be processed throughout the company – and the recognition of previously used data."
APIs facilitate the sharing of data between banks, FinTechs, corporates and their card and expense management platforms. But technologies like machine learning and artificial intelligence become instrumental to making use of that information, the executive noted.
Research shows that corporate treasurers are eager for tools like these – and when traditional banks don't offer them, businesses will look elsewhere.
A report released last November from East & Partners found that 13 percent of CFOs and treasurers surveyed said they have either partially or totally switched financial service providers for the purpose of gaining access to FinTech solutions. An additional 20 percent said they are considering doing so.
"Although FinTech innovation has been the domain of the retail and consumer market, corporate treasurers and CFOs within the largest companies from around the world are rapidly expecting the same levels of sophistication and innovation from business banking products and services,” said Martin Smith, East & Partners’ head of markets analysis.
While B2B FinTechs are pushing for innovation, the corporate market is notoriously difficult to tap as companies struggle to adopt new technologies. So while FinTechs can develop solutions that deploy APIs, AI and machine learning to improve services for businesses, working with traditional banks isn't only key to accessing the data necessary to improve business processes, said Juul, but to actually gain traction in the industry.
"The corporate segment for banking services is quite conservative, and it would be difficult and, for sure, very expensive to gain traction going to the market directly," he said. "We believe that the banks' focus and willingness to work with FinTechs have changed during the last two years – now they recognize that they have a need to focus on and develop services for their customers' growing needs, and they simply do not have the skills or management in-house. That is why they are now reaching out to FinTechs."