Commercial cards remain merely a small fraction of the massive B2B transaction pool in the U.S., yet adoption is steadily climbing at an estimated compound annual growth rate (CAGR) of 10 percent through 2022. The same can’t be said for France, where Mooncard CEO Tristan Leteurtre has estimated that less than 10 percent of companies use commercial card solutions, unimpressed by the extra administrative work and lack of value-added services the market currently has to offer.
That adoption gap makes a compelling opportunity for FinTech firms, with the corporate travel and expense (T&E) management space an attractive avenue for corporate card growth. That’s the path Mooncard is taking, and investors recently backed the firm’s ambitions to replace manual T&E processes with card-powered automated tools.
However, according to Leteurtre, initiating a shift in the balance of payments technology market penetration isn’t simply about introducing a new tool and assuming people will use it.
“Culturally, corporate[s] are more comfortable when employees use their own money,” he told PYMNTS, speaking of the culture shift that will need to occur for commercial cards to gain adoption. “The company has total control over what is spent and reimbursed.”
Having employees front the bill while on a business trip, while allowing companies to retroactively reimburse those funds, may place the power in the managers’ hands when it comes to how much a company is willing to spend when employees travel. Yet, this strategy also comes with a long list of friction points, including reimbursement errors, manual paperwork and employee dissatisfaction.
Commercial cards can address these issues by negating the need for a business to reimburse an employee in the first place. The problem is that, today, said Leteurtre, the French market lacks options for corporate cards that have integrated, value-added functionality — like the ability to set spend limits and controls.
“Common commercial cards face two big problems,” he explained. “They don’t add value for the company, and lack the rules to control spending.”
He added that poor user experiences, and the struggle to integrate card spend data into existing finance and accounting systems, make corporate card adoption more of a hassle than it’s worth for most French companies. Data integration, controls and analytics are key components of a holistic commercial card tool that can address friction in T&E, but Leteurtre pointed to another technology that could also help drive corporate card adoption in the country: the mobile device.
What’s “most important” in the corporate expense management space, particularly in France, is the ability to address the administrative burden, and the mobile device allows expenses to be recorded and reviewed closer to the time of the actual transaction, he said. Allowing managers to view a receipt while an employee is on a business trip, rather than days or weeks after their return, is a critical component of the back-end accounting and reconciliation process, too.
Leteurtre also pointed to the ability for mobile devices to provide real-time alerts and notifications, reminding employees to take a picture of their receipt just seconds after a transaction — thus, addressing the challenge of lost or forgotten expense line items.
While corporate travel and expense management may offer a path for commercial card adoption in France, the journey is not likely to mirror that seen in the U.S. or elsewhere, however.
Perhaps the biggest example of this discrepancy can be found in the virtual card space. As commercial card adoption picks up in the U.S., FinTech firms are integrating virtual card functionality into their offerings, and touting the efficiency and security of single-use cards, particularly in the area of B2B eCommerce and procure-to-pay. Research from Accenture, published last year, found that virtual cards could, indeed, surpass physical cards in corporate card spend in the near future (not including physical purchase cards, though).
“Virtual card spend for purchasing activities is projected to grow at 19 percent annually due to buyer commitment, improved connectivity and enhanced supplier acceptance, with further growth potential as traditional boundaries blur,” Accenture said in its report.
In Europe, some analysts see the same pattern emerging. Currently, commercial cards account for just 3 percent of total card spend across Europe, consulting firm RBR found in its 2018 report, though analysts expect virtual cards to account for half of commercial card spend by 2022. A key area of growth for the virtual card, the report predicted, will be in the corporate travel space.
Leteurtre said he disagrees, however.
“We don’t see great demand or usage [by] our customers and prospects for virtual cards,” he said. “Of course, they can be useful for some precise use cases — for example, occasional internet purchases. But a big proportion of payments [in corporate T&E] are done in real life.”
Furthermore, he said, the administrative burden associated with virtual card solutions today makes the technology even less appealing for corporate travel managers looking to address the manual workload linked to manual expense reporting — particularly with virtual card solutions requiring managers to approve of transactions on demand.
That doesn’t mean physical plastic will come out on top, though. Rather, said Leteurtre, the mobile device once again shows its potential in this industry.
“There is a growing demand, and use of contactless, [near-field communication (NFC)] and mobile payments,” he said. “The plastic card has a dark future.”