VIRTUAL CARD NUMBERS A TRAVEL MANAGER’S … · VIRTUAL CARD NUMBERS A TRAVEL MANAGER’S GUIDE...

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WHITEPAPER

VIRTUAL CARD NUMBERSA TRAVEL MANAGER’S GUIDE

How VCNs can help travel managers respond to their company’s challenges

POWERING BUSINESSPAYMENT FORWARD

TRAVEL MANAGER’S GUIDE — WHITE PAPER 2


CONTENTS

3 Introduction4 Whatisavirtualcardnumber(VCN)?5 Everyoneinyourcompanygains7 WhatareVCNsusedfor?8 WhatarethebenefitsofVCNs? 8 Bettercontrol 9 Betterefficiency 10 Betterdata12 HowdoVCNswork?14 HowfastareVCNsgrowing?15 HowtointroduceVCNsintoyourtravelprogramme



Arevolutioninpaymentcontrolandsimplicity,virtualcardnumbers(VCNs)arethenewstandardforcorporatepayments.Theyareasdramaticanimprovementinthewaypeoplepayeachotherastheintroductionofchequesinthe17thcenturyorplasticcreditcardsinthe20thcentury.

VCNsareincreasinglydrawingattention,butanynewconcepttakestimetobedinandbeunderstood.ThiswhitepaperisdesignedtohelpyouunderstandeverythingyouneedtoknowaboutVCNs–whattheyare,howtheyareused,howtointroducethemand,aboveall,howtheyimproveyourbusiness.

AtConferma,wehatejargon,sowehaveavoideditasfaraspossible.Thatseemsfitting,becauseVCNsaremainlyaboutsimplifyingover-complicatedprocesses,especiallyintravelpayments.Bymakingthingssimpler,wecanalsomakethemlessexpensive,sotherearemajorwinstobegainedbyadoptingVCNs.Wehopethispaperwillexplainexactlyhow.

If,havingreadthiswhitepaper,youwanttofindoutmoreorstartimplementingVCNsintoyourcompany’stravelprogramme,pleasespeaktoyourbank,travelmanagementcompany,orself-bookingtoolprovider.

Simon BarkerChiefExecutiveConferma

INTRODUCTION

1950sCreditcards

1650sCheques

700BCCash

TodayVirtualCardNumbers(VCN)

Other names for VCNsThevirtualpaymentsindustrydoesnotyethaveastandardisednameforthevirtualnumbersitgenerates.AtConferma,welabelthemvirtualcardnumbers(VCNs),butelsewhereyoumayseethemcalled:

—Single-useaccounts—Single-useghostaccounts—Virtualcreditcards—Virtualaccountnumbers—eCards—vCards

Thenamesaredifferent,buttheyallmeanthesamething.

Virtual card numbers

Your essential guide to VCNs



Avirtualcardnumber(VCN)isa16-digitnumber.Itisusedinthesamewayasthenumberonthefrontofaplasticcreditcard.ThedifferencewithaVCNisthat:—Itisgenerateddigitallyatpointofsale—Thenumberisusedforthatsingle

paymentonlyandisthendiscarded.

Ifrequired,avirtualcardsecuritycode,alsoknownasCVV,CVV2orCVC,thethree-digitnumberprintedonthebackofaplasticcard,canbegeneratedatthesametimeastheVCN.YoucanalsoplacerestrictionsonwhattheVCNisusedfor–includingthesupplier,theamountandthedaterangeinwhichtheVCNcanbecharged.

Issuers,usuallybanks,generatethenumbersfromtheirownlicensedrangesoftrillionsofcardnumbers,knownasBINs(orBankIdentificationNumbers).Allthemajorschemes(e.g.Visa,MasterCardandAmericanExpress)andmajorcorporatebanksnowofferVCNs.Theircustomershaveavarietyofpaymentoptionswiththemfromfullcredittodebitandpre-paid.Inthecaseofcorporatetravel,theVCNpaymentisusuallycentrallybilledtowhatisoftenknownasalodgeaccount.Unliketraditionallodgeaccounts,whichhavebeenaroundforover40years,VCNaccountsapplyauniquecardnumbertoeachtransaction.

Furthermore,traditionallodgeaccountscarrysomesecurityconcerns.Insomecases,thelodgeaccountdetailsmaybeknowntonumerousindividualsattheTMCbooking(andpayingfor)travelonyourbehalf,whetheritbestoredwithinprofiles,writtenonstickypaperor,evenworse,memorisedbymultipletravelagents.Becausethatlodgeaccountisusedformultipletravelbookings,itcarriesalargeenoughcreditlimittocoverallyourcompany’shotelbookings,airticketsetc.leavingyourcompanyexposedtothepossibilityofcardmisuseorevenfraud.WhenadifferentVCNisusedforeachtransaction,thecreditlimitavailablecanbelockeddowntothepennyorcent.

WHAT IS A VIRTUAL CARD NUMBER?

Where do the numbers come from?



Travel manager—Faster,moreaccurate,more

detaileddataontravelspend—Bettercompliancewithtravelpolicy—Potentialtosupportopenbooking

strategies—Bringsspendofinfrequent

orirregulartravellers(e.g.contractors)intomanagedglobaltravelprogramme

—Noneedtochangeprocesseswithusualsuppliersandintermediaries

HR—Closercontrolofemployeespend—Compliantpaymentprocessforall

personnel,includingcontractorsandtrainees

—Saferpaymentmethodfortravellers

—Abilitytolinkeachtransactionbyemployeenumber

—Globalsolution

IT/Information Security—LimitedworkinvolvedforIT

department—Improveddatasecurity

EVERYONE IN YOUR COMPANY GAINS

VCNstickmanyboxesformanydifferentfunctionswithinyourcompany.Hereareafewexamples:

Finance department—Automatedreconciliationof

purchasesandpayments—Reducedriskoffraudoroverspend—Fullcompany-specificdataforcost

reallocations—Automatedintegrationwithexpense

management,generalledgerorERPsystems

—Lowerprocessingcostsfortravelandfinancepartners

—Improvedcashflow—Canbeusedwithexistingbanksand

otherfinancialservicespartners—Earnrevenueshare/rebatesfrom

yourbankonpayments

Travellers—Noneedtocarry(andlose)cards—Nopersonalliability—Swift,automatedpaymentwith

automateduploadtoonlineexpensetools

—Touchless–inessencethecorporatetravellerneednotevenknowaboutthemethodofpaymentbeingused



How VCNs solve the top priorities of travel managers

EachyearaleadingTMCCarlsonWagonlitTravelsurveystravelmanagersgloballytounderstandtheirmajorprioritiesfortheyearahead.VCNshelpaddressthetopsixprioritiesidentifiedfor2014:

1 2 3

4 5 6

Find innovative ways to generate savings HowVCNshelp:—Betterdataforbetternegotiations

withsuppliers—Lowerfeesforprocessessuchas

billback—Lowadmincosts(e.g.eliminating

reconciliation)

Further promote the travel programme

HowVCNshelp:—Bringstravellerswithoutplastic

corporatecardsintothetravelprogramme

—Enablespaymentsindestinationswhereusingplasticcorporatecardsmaybeconsideredunsafe

—Allowstheoptionofopenbookingthroughtraveller’schoiceofbookingchannelsolongastheypaywithacompanyVCN

Drive growth in online adoption

HowVCNShelp:—Asadigitalprocess,VCNsarethe

idealpaymentsolutionforonlinebooking

Redesign the travel policy

HowVCNshelp:—Ratherthantravellershaving

torememberwhatthepolicyis,therulesareembeddedintothepaymentprocess.Thatmakesnon-complianceimpossible

Optimise end-to-end travel processes

HowVCNshelp:—VCNsmaketravelpurchase-to-pay

seamlessbyprovidingauniqueIDthatrunsthrougheverystepoftheprocess

—Post-travelexpensereportingiseliminated,asisreconciliationofbookingsandtheirpayments

Develop a mobile strategy

HowVCNshelp:—VCNsaretheperfectpayment

methodformobilebookingasthereisnorequirementtostorepermanentcardnumbersonthedevice,providingaddedsecurity.Moreover,asNearFieldCommunicationbecomeswidelyaccepted,mobileVCNscanbeusedforancillaryspend(restaurantbills,taxisetc.),improvingexpensereporting



Theanswerisverysimple.VCNscanbeusedtopayANYsupplierwhichacceptscardpayments–fromstationerytomedicalsupplies.Theyareespeciallyhelpfulinindustrysectorswithfrequent,recurringelectronictransactions.

The travel connectionVCNswereoriginallycreatedtosolveparticularpaymentchallengesinthetravelindustry,suchashotelbillback(seebelow)andlow-costcarrierbookings.Today,VCNscanpayforanykindoftravelbooking,including(seediagramright):

SuppliersacceptVCNsdirectlyfromcustomersandalsofromTMCsandotherintermediaries.Forexample,onlinetravelagentsoftenuseVCNstopayhotels,especiallyforpre-paidroomreservations,andlow-costcarriers.

Flights(bothIATAandlow-cost,viaaGDSoronline)

Accommodation

Rail

Car rental

Ferries

WHAT ARE VCNs USED FOR?



VCNs’ killer appAuniquenumberforeverytransaction

WHAT ARE THE BENEFITS OF VCNs?

Better controlEliminatefraudandunauthorisedspending

Control what employees spendYoucansetwhateverparametersyoulikeoneverypurchasemadewithaVCN.Tailoredcontrolsinclude:—Themaximumorexactamountthatcan

bepaid—Whoispaid—Whenthepaymentismade

Minimise fraudAconventionalplasticcardcanbestolenorlost.Andevenifyouremployeehangsontotheircard,thenumbercanstillberecordedandmisusedbyfraudsters.WithVCNs,fraudisalmostimpossiblebecausethenumberisusedonceonly,andonlywhen,whereandfortheamountyouspecified.

Maximise transparencyVCNsgiveyourcompanyaclearaudittrail,throughtheuniqueIDofthecardnumber,ofexactlywhopaidforeachpurchase.Traceabilityisanincreasingpriorityaspressuremountsoncompaniestoimprovecorporategovernanceandprocesscontrols.

Control without interferenceVCNsletyoustayinchargewithoutgettinginthewayofyouremployees.Apartfromhavingtosupplymandatorycompanyinformation(suchasemployeenumberandcostcentre),therearenonewordifferentprocessestheyhavetogothroughtomakeaVCNpayment.

Maintain PCI compliance InthecaseofConferma,allourVCNtransactionsareLevel1PCI-compliant.

ThemanybenefitsofVCNscanbedividedintothreemaingroups:—Bettercontrol—Betterdata—Improvedefficiency

UnderneathallthesebenefitsisthekeyadvantageofVCNs:usingacardnumberonlyoncegiveseverypurchaseitsownuniqueidentifier.Thatallowsdatatobecustomisedandtrackedallthewaythroughthelifecycleofthebooking.

TheuniqueIDmakespaymentsbothsimplerandmoreflexible:

Simpler—thepaymentcanbetrackedinstantly.More flexible—eachpaymentcancarrymorecustomisedrulesanddatawithoutanyadditionalwork.

Allthebenefitslistedbelowarevariationsonthesetwothemes.



Plasticcardswereabrilliantmid-20thcenturyinvention–buttodaytheystillbringmid-20thcenturyadminchallengeswiththem.Takingpaymentsvirtualsweepsawaythoseproblems.

Automate reconciliationOr,moreaccurately,getridoftheneedforreconciliation.Allcompaniesdislikethelengthymanualchoreofreconcilingpurchaseordersandpaymentstatements.Nottomentionit’ssubjecttohumanerror.WithVCNs,theuniquepaymentnumbergeneratedatpointofsalemeansthepurchaseandpaymentareinherentlyreconciledassoonaspaymentismade.

Achieve guaranteed matchingEvenaftermanyhoursofwork,manualreconciliationisrarely100percentaccurate.ThankstotheuniqueIDoftheVCN,yourmatchingcannowbeperfectforthefirsttime,leadingtobettermanagementinformation.

Reduce head countEliminatingmanualreconciliationreducesheadcountinsideyourownbusiness,allowingyoutoredeployresourceelsewhere,whileprocessefficiencieslikeautomatedhotelbillbackreduceheadcountforyourTMCandotherserviceproviders.Thisshouldleadtolowerfees.

Integrate seamlessly with your other processesVCNdataflowsautomaticallyintoyouraccountingorERPsystemswithminimalornoimpactonyourusualworkflows.Thesameistrueforyourserviceproviders–theycarryonworkingalmostexactlyasbefore.

Manage all travellersCompaniesdon’tlikegivingcorporatecardstoeveryonewhotravelsforthem.Examplesincludenewhires,interns,temporarystaffandcontractors.Therearealsosomecountrieswhereplasticcardsareinappropriateforculturalandeconomicreasons.VCNsprovideanefficientwaytopayforallthesetravellerswithoutcomplicatedinvoicingandbillbackprocedures.

Improve cashflowBringingmoretravellersundertheumbrellaofcorporatepaymentsolutionsthroughVCNsalsoimprovescashflow.That’sbecauseVCNsoftenreplacelesscashflow-friendlypaymentmethodssuchasinvoicing,cashadvancesandperdiemallowances.Cardpaymentsalsoenableyoutobeincontrolofwhenyoursuppliersreceivepayments,unlikemoreclunkypaymentmethodssuchasBACSorcheques.Thiscanleadtoimprovedrelationshipswithsuppliersastheyreceivepaymentquickeranditalleviatesanycashflowconcerns.

Cut down on post-trip expense reportingVCNpaymentscanbefeddirectlyintoautomatedexpensereportingsystemsatpointofsale.Thatleavesfewerexpensestobereclaimedretrospectivelyafterthetrip,savingtimefortravellersandfinanceadminsalike.AVCNisonlyinsertedintothebookingorprocurementchannelatPOSoncealldatamandatedbyyourcompanyispresent.

Gain a universal payment solutionVCNsareaccepted:—Inanycountrywhereplasticcardsare

accepted—Bymillionsofserviceprovidersand

suppliers—Acrossawiderangeofcurrencies

Better efficiency Ditchoutdatedmanualadminprocesses



Gain detailed data Gain complete dataWhenitcomestohotelbookings,billedvolumeisaround25percenthigheronaveragethanbookeddatabecauseoftaxesandextras.Thatgivesyouamuchhigherspendfiguretouseinnegotiationswithhotelsuppliers.

Thedifficultyofreconcilingtraditionalcardpaymentsmeanssomedataalsogetslostintheprocess.WithVCNs,theuniqueIDofthecardnumbermeansthedatacanneverbelost.

Dataisalsomorecomprehensivebecausethespendonirregulartravellers(temporarystaffetc.)iscapturedalongsidemoreregulartravellerswhocarryplasticcards.

—Forbothoffline(throughtravelagentsusingGDSs)andonlinetravelbookings

WhyVCNsgiveyoumorechoiceofsuppliersandintermediariesYetanother,oftenoverlooked,benefitofVCNsisthattheygivecompaniesmorechoice,moreflexibilityandmoreindependence,bothintheirtravelandbankingrelationships.

MaintainbankingrelationshipsANDindependenceAllbankswithcorporatedivisionsnowofferVCNs,soexistingbankingrelationshipscanberetainedornewonestakenonwithnodisruption.

MixandmatchyourtravelserviceprovidersVCNsareauniversalpaymentsolutionwhichcanbeusedwithmostbookingtools,TMCsandotherserviceprovidersacrosstheworld.ThatmeansyoucanmixandmatchyourchoiceoftheseserviceprovidersbecausedatafromallofthemcanbeconsolidatedthroughdeployingVCNsasacommonpaymentmethod.

Better data More,richer,faster

Traditionally,travelmanagersgathertheirdatafromtwomainsources.Bothhavetheirshortcomings:

Traditional ways—TMCdataisdetailedbutonlyshowswhat

wasbooked,notwhatthefinalbillwasafteramendmentsandextras

—Carddatashowswhatthefinalbilledamountwasbutisusuallyverythinondetail

VCN wayVCNdataisthebestofbothworlds,becauseitisbothworlds:itisbothbookedandbilleddatathankstotheuniqueVCNrunningthroughoutthebookingandpaymentprocess.Forthefirsttimeyouhavedatathatisbothdetailedandshowswhatwasactuallypaid.



Gain richer dataYoucanboltlargeandvarieddatafieldsontoeachVCNtogivetravelmanagers,purchasersandCFOsalikethedetailedmanagementinformationtheyneed:—Purchase/bookingdata–allthedetails

capturedatpointofsaleonthepurchasesystem/bookingtoolorbythetravelagent

—Paymentdata–alltheinformationprovidedbythecardissuerwhenthepaymentismade

—Invoicedata–someVCNproviders,includingConferma,canalsotakeadirectinvoicefeedfromthesupplier,includingfullcostitemisation(alsoknownasLevel3orfoliodata)andVATdetails

—Companydata–thecompany-specificinformationyourequiretobeenteredatpointofsale–e.g.employeenumber,projectcodeetc

Traditional paymentsWithtraditionalcorporatepayments,theclientreceivesamonthlystatementcontaininglimiteddetail(usuallyjustsuppliername,dateofpaymentandtotalprice).Often,moretimeisneededafterreceivingtherecordstoreconcilethepaymentdatawiththeoriginalbookingdata.

VCN paymentsVCNscanprovidenext-dayreporting,withpurchaseandpaymentdataalreadyreconciled.

The Three Vs: why better management information from VCNs boosts your businessDataprofessionalstalkabouttheThreeVsofbusinessintelligence:—Volume—Variety—Velocity

Aswehavejustseen,VCNsimprovealloftheThreeVs.Thatimprovementcangivetravelmanagerstheedgeinallsortsofways,including:

Suppliermanagement—Armyourselfwithamoredetailedunderstandingofyourspendwhengoingintopreferredvendornegotiations.

Employeemanagement—Monitoremployeespending,notonlytocheckforcompliancebuttoensuretheyaremakingthewisestbuyingchoices.

Movefaster—Identifyandcorrectunexpectedbehaviourortrendsbeforetheybecomeasustainedproblem.

Speed up reporting



InthecaseofVCNsprocessedbyConferma,thewayatravellerwouldnormallypaybycardisalmostunchanged.

HOW DO VCNs WORK?

Paying for an air ticket

Step 1 — The booking

Thecustomerusestheirselfbookingtool(KDS,GetThere,etc)OrTheTMCconsultantbookstheflightasnormalthroughaglobaldistributionsystem(Abacus,Amadeus,SabreorTravelport).OrThereservationismadeviaadirectbookingsite.

Step 2 — The payment

Traditionally,theconsultantwouldcopyandpasteineitherthetraveller’splasticcreditcardnumberortheiremployer’scentralaccountlodgenumber.Instead,withVCNs,theagentdoestwothings:

KeyinemployeeinformationPaymentcannottakeplaceuntilrequiredfieldssuchasemployeenumberandclientcodearecompleted.

GenerateaVCNTheagentclicksanoptionontheirbookingscreentogenerateaVCN.Theprocesstakeslessthanonesecond.Theagentacceptsthenumberasa“CardholderNotPresent”transactionandpaymentiscompleted,asitflowsthroughthestandardcardacceptancenetwork.



Hotelpayments(usinganymethod)areslightlydifferent.Guestsdon’tusuallyknowattimeofbookingwhattheirfinalbillwillbeonceextrasandtaxesaretakenintoaccount.

Step 2 – The booking guarantee

SameasStep2forair,excepttheVCNisgeneratednottocompletepaymentbuttoguaranteethebooking.

Step 3 – The tolerance level

TheTMCorself-bookingtoolcommunicatestothehotelamaximumamountthatcanbechargedtotheVCN.Normally,thisisthebookedroomrateplusanadditional“tolerance”leveltoallowforextras,suchasfoodandbeverage,andtax.Forexample,ifthetravellerisstayingatahotelatLondonHeathrowforarateof£200,theiremployercansetatoleranceof20percent,sothemaximumpayablethroughtheVCNwillbe£240.

Step 4 – Payment at check-out

Atcheck-out,theguestverifiesthebillandthenthehotelreceptionistcompletespaymentusingtheVCNprovidedattimeofbooking.Iftheguesthasexceededthemaximumamountauthorisedonthecard,thecardwillbedeclinedandtheywillbeforcedtoeitherpaythedifferenceoutoftheirownpocketor,ifthereisanacceptablereasonfortheoverspend,theycancontacttheTMCtoissueasecondVCN.

Paying for a hotel booking

Step 1 — The booking

ThecustomerusestheirselfbookingtoolOrTheTMCconsultantbooksthehotelasnormalthroughtheirchosencontentprovider(GDS,Hotels.com,etc).



1Conferma’sProgress,IntegrationsEmblematicofRapidlyMaturingSector,TravelProcurement,November20142Interview:AirPlusInternationalU.S.CEOYaelKlein,BusinessTravelNews,6August20143VirtuallyAnywhere,BuyingBusinessTravelcorporatecardssupplement,May/June20144Travelport’seNettExpandingVirtualCardPaymentsToSeveralNewMarkets,TheBeat,3March2014

Rapid expansionTherearenoindustry-widefigures,butallprovidersofVCNtechnologyreportstronggrowth.

Conferma saidinNovember2014thatithandled265percenthighervirtualpaymenttransactionvolumeinSeptember2014thaninSeptember2013.1

AirPlus InternationalsaidinAugust2014thatgrowthinitsvirtualcardbusinesswasup50-60percentyearonyear.2

Citibank saidinMay2014thatitsvirtualcardtransactionvolumedoubledin2012andtrebledin2013.3

TravelportsaidinMarch2014thatitsvirtualpaymentssubsidiaryeNettexperiencedtriple-digitpercentagegrowthin2013.4

A worldwide phenomenonAnadditionalbenefitofVCNsformultinationalcorporationsisthattheprocessforusingthemisconsistentworldwide.ConfermaalonehasfacilitatedVCNpaymentstosuppliersin184differentcountries.

The infrastructure for growth is in placeAllthemajorpillarsofthecorporatetravelindustryarenowconnectedtoVCNs,providingaplatformforrapidgrowth.AsofJanuary2015,forexample,allfourmajorglobalTMCsareusingVCNs,aswellasallthemajorGDSsandnearlyallmajorcorporatebookingtools,includingAmadeuse-TravelManagement,GetThere,KDSandTraveldoo.

HOW FAST ARE VCNs GROWING?

Mapshowingall184countriesinwhichconfermahashandledaVCNpayment

Evolvingmarket

AcceptVCNpayments

DonotacceptVCNpayments



Easy to convince senior managementVCNsaretheclassic“no-brainer”.Withmanyadvantagesandnodisadvantages,theonlyreasonseniormanagementmightresistislackoffamiliaritywithVCNsandacultureofdislikeofchange.

ForadetailedlistofbenefitsofVCNs,seeabove.However,thekeyadvantageswhichusuallyappealmosttoC-levelmanagementare:—Governance,e.g.fraudreduction,better

audittrail—Controloverwhatcanbepaidtosuppliers

andwhen—Visibilitythroughqualityandquantityof

data,especially(fortheCFO)theabilitytobreakdownandallocatecoststocostcentres

—Nodisruptiontoexistingtravelandfinancialintermediaries

Speak to your TMCTheeasiestandmosteffectivewaytointroduceVCNsistorequestthemthroughyourTMC.TheTMCwilltakeonthetaskofliaisingwiththerelevantstakeholders,including:—Yourbank—YourVCNtechnologyprovider—Youronlinebookingtoolprovider—YourTMC’sGDSprovider

AgreeatimelinewithyourTMCandyourrespectiveresponsibilities.NearlyallthetasksshouldbeyourTMC’sresponsibility,notyours.

Speak to your bankYourbankwillprocesstheapplication,setupavirtualcardaccountandconfirmthenecessarycredentialsthroughtoConfermaorotherVCNtechnologyprovider.

What the VCN technology provider will doThetechnologyproviderwillsetupthelinkswiththeTMC,GDSandbookingtoolandtesttheprocessbeforegoinglive.

No need to inform travellers and bookersGenerally,thereisnoneedtoinformtravellersorbookers,forwhomthechangeislargelyinvisible.ThemainexceptionisifintroducingVCNsmeansyouaremovinghotelpaymentsfromplasticcardstobillback.Ifthisisthecase,amendyourpolicytoreflectthisnewruleandcommunicateitverybrieflytotravellers.Youwillencounterlittleresistancebecausebillbacksavesthemadmintime.

HOW TO INTRODUCE VCNs INTO YOUR TRAVEL PROGRAMME

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