Corporate Travel Automation & the Opportunity for Commercial Card Solutions

CONFIDENTIAL: This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior approval by First Annapolis Consulting, Inc.

Prepared for:

November 7, 2012

Corporate Travel Automation &the Opportunity for Commercial Card Solutions

First Annapolis Consulting, Inc. | Confidential | 2NVBTA_12Nov7

IntroductionsNVBTA Travel Automation & Cards


IntroductionsNVBTA Travel Automation & Cards


Organizations are automating travel management to streamline processes.

Corporate Travel Automation

Source: “Globalization of Corporate Travel Programs,” AirPlus survey of ACTE buyers (2011). “European Expense Management Study,” Amex & A.T. Kearney (2008).

Travel p

lanning

Trip Bookin

g

Central B

illing

Expense Claim

€0€10€20

€30€40

€50€60€70

€80€90

€100

Automation costs less per trip

Unit

Cost

2001 2006 201120%

40%

60%

80%

100%Organizations are automating

travel processes

travel policypreferred supplier

agreementstravel agency

corporate card

reporting solution

expense solution

online booking

Automation also improves visibility, traveler compliance to policy, and ability to negotiate discounts.

Lowerperformance

Average

Bestperformance

NVBTA Travel Automation & Cards


20%

24%

38%

57%

% Trips outside North America

Almost everyone with >$1 mil in travel has a TMC. Walking card usage rises with spend.

TMCs & Travel Card Usage

<$1M

$1M to <$10M

$10M to <$50M

$50M+

56%

78%

76%

76%

8%

14%

16%

22%

36%

8%

7%

2%

Required for Travel Booking

Single TMC Multiple TMCs Traveler Choice

28%

18%

14%

7%

30%

52%

65%

81%

74%

56%

49%

38%

Cards UsedCentral Bill Walking

PersonalAnnual Travel Spend:

Source: Corporate Travel Policy: Benchmarking and Insight, prepared by TRW Travel & Expense Management LLC, July 2010. n = 689 U.S. and Canadian organizations.




Meanwhile, liability structures are drifting further towards corporate.

Individual vs. Corporate Liability

2006 2009 2011

28% 25% 23%58% 63% 65%

Liability Agreements for Travel Card SpendingIndividual Corp

Source: First Annapolis Consulting market observations; 2011 RPMG Corporate Travel Card Benchmark Survey Results.

ApprovesCardholder

SetsCredit Line

BillGoes To

Payment Made By

PaymentGuaranteed by

Walking Travel Card

Individual liability Issuer must check credit Issuer offsets rebate

Corp liability / individual payClient invoiced ifcardholder goes

120 days past due

Corp liability / corp pay when expensereport approved

Other

Cards

• CTA / travel agency lodged• Purchasing• ePayable / virtual

Legend:

Card Issuer Cardholder Client


Market averages can be used to benchmark your travel card program.(note: bars indexed to 100% in each category)

Travel Card Benchmarking

Note: figures are rounded.Source: 2011 RPMG Corporate Travel Card Benchmark Survey Results.


% of employees w/ card

Annual transactions / card

Average transaction size

Annual spend / card

Spend (% of revenue)

21%

60

$162

$9,756

0.50%

20%

73

$188

$13,812

0.60%

27%

75

$206

$15,480

0.80%

Mid marketLarge corpFortune 500

# of cards Annual Spend

5,623 $55 mil

755 $10 mil

178 $2.8 mil



A summer 2012 1st Annapolis survey shows travel cards and CTAs lead for travel spend.

B2B Spend by Form of Payment

B2B spend riding on commercial card network rails:

Notes:For Travel Spend, meeting cards were less than 2% and prepaid was less than 1%. Both payment methods were combined into commercial cards (plastics issued).For Direct Spend, SEPA accounted for 1% and was combined with ACH.Virtual / Ghost Cards includes travel agency lodged / central accounts as well as ePayables solutions that ride the p-card rails.Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

Travel spend

Indirect spend

Direct spend

58%

25%

10%

10%

10%

7%

0.213181818181818

2%

20%

28%

9%

41%

48%

5%

8%

Comm'l cards (plastics issued) CTAs / ePayables Personal Cards ACH Wire Checks

defined herein as spend not related to direct operations - office supplies, computers, telephones, etc

defined herein as spend related to direct operations - raw materials, delivery, etc, but explicitly excluding payroll

Q3/4/5: What is your best guess of the approximate $value breakdown by payment method for ...



Segmentation shows some remaining bastions of personal card and check usage for travel.

Travel Spend by Form of Payment

Notes:Minor adjustments were made to Comm’l (Plastic) spend percentages to eliminate rounding errors.For Travel Spend, meeting cards were less than 2% and prepaid was less than 1%. Both payment methods were combined into commercial cards (plastics issued).Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

Q3: What is your best guess of the approximate $value breakdown by payment method for Travel

>$500 mil

<$500 mil

Healthcare

Physical Products

Public Sector

Technology

62%

46%

60%

53%

53%

70%

10%

11%

6%

12%

9%

11%

20%

25%

10%

31%

15%

19%

2%

2%

4%

2%

3%

6%

16%

20%2%

20%

Comm'l (Plastic) CTAs Personal Cards ACH Checks

gov / educationnon-profitutilities

manufacturingwholesaleretail



This survey also revealed key drivers for selection and use of commercial cards.

Drivers for Card Usage & Growth

Process sav-ings33%

Revenue share22%Control &

compliance17%

Data & re-porting 15%

Working capital

benefits10%

Rewards3%

Reasons for Card Use

Improve control &

compliance32%

More rev share23%Lower cost

of accep-tance17%

Improve on-line solution

14%

Supplier en-rollment

11%

Rewards3%

Key for Increasing Card Use

Revenue share24%

Issuer creden-

tials21%Integration

18%

Online so-lution15%

Ability to grow

program15%

Rewards5%

Selecting An Issuer

Q: What are the reasons for credit / payment card use in your organization?Q: What would be the key factors in increasing usage of credit cards?Q: What weighting / importance do you assign to the following factors in selecting card issuers?Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.



Organizations who put more travel spend on cards / CTAs realize more value-add.

Drivers for Card Usage & Growth

Q: What are the reasons for credit / payment card use in your organization? (all responses must sum to 100%)Q: What would be the key factors in increasing usage of credit cards? (all responses must sum to 100%)Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

0-19% 20-39% 40-59% 60+0%

10%20%30%40%50%60%70%80%

% of travel on a travel card or CTA <70% >=70%

Data & Reporting CapabilitiesFactor Weighting for Card Usage

0-19% 20-39% 40-59% 60+0%

10%20%30%40%50%60%70%80%

% of travel on a travel card or CTA <70% >=70%

Improving Control / ComplianceFactor Weighting for Growth

for respondents that place 70% or more of travel spend on travel cards or

CTAs, one-third would say data & reporting capabilities drives 20-39% of

the reasons why they use cards.

for 70%+ respondents, one-third would weight improving control &

compliance as 40-59% of the rationale for increasing usage



Mobile authentication for corporate travel payments is quite limited, but likely to grow.

Mobile Transaction Authorization

Yes, majority of travelers1% Yes, some travelers

10%

Yes, a few travelers

11%

No71%

Don't know7%

Are travelers currently using mobile for payment?

41%33%

25%17%

8%

Services for which mobile used to pay(for 22% of travelers paying via mobile)

Source: "Mobile Payment - How It Will Transform Corporate Travel and Expense Management," AirPlus, April 2012. Based on global 2012 survey of ACTE buyers.



Mobile apps are also niche; but fundamental to further enhancing traveler productivity.

Mobile Applications for Travel

Source: “Expense Management for a New Decade,” Aberdeen Group survey of respondents from EMEA (23%), N.A. (67%), AsiaPacific (6%), and South/Central America (4%) (March 2011).

Review / approve expense reports

Enter new expenses

Submit expenses

Import data from corp card

Expense type categorization

View itineraries

81%

81%

69%

63%

63%

56%

Utility of Mobile Expense Mgmt Apps

Faster Expense Approvals

Greater Visibility

Convenience for work / life balance

Faster Reimbursement

44%

38%

31%

31%

Key BenefitsSeries1

No; 93%

Yes; 7%

Using Mobile Expense Apps



First Annapolis is a specialized consulting firm focused exclusively on payments.

About First Annapolis

Client Payment Strategy

Man

agem

ent C

onsu

lting

(str

ateg

y, m

arke

t res

earc

h, b

usin

ess c

asin

g,

part

ners

hips

, im

plem

enta

tion) M

&A Advisory

(acquisition / divestiture strategy, buy / sell-side representation, transaction support)

CardIssuing

Debit / Prepaid

Commercial Payments

Merchant Acceptance

Background: Founded in 1991; privately held Headquartered in the Baltimore area

Professional Staff: 75+ professionals Balanced combination of industry,

functional, and consulting experience

Service Offerings: Management consulting and M&A advisory

services Practice areas aligned with all payment

products and services

Clients: Card partners (retailers, autos, airlines,

hotels, affinity groups, etc.) Banks and specialty finance companies Payment networks Processors and service providers Trade and government organizations Emerging payment providers

Strategy Development / Support(strategic planning, benchmarking, diagnostics, business casing)

Strategic Sourcing(insource vs. outsource, feature / functionality, vendor selection)

Partnership Finance(retail, travel, entertainment, oil, auto, affinity, agent)

Loyalty Program Support(platform/delivery, integration, implementation)


NVBTA Travel Automation & Cards First Annapolis Contact

First Annapolis Consulting | M&A Advisory Services

www.firstannapolis.com

900 Elkridge Landing Road, Suite 400Linthicum, Maryland 21090USA

Lauriergracht 1381016RT AmsterdamThe Netherlands

Frank [email protected](410) 855-8513


Now that we’ve caught a glimpse of some current trends in corporate travel automation, let’s ask the experts. Bill, if I could start with you, (1) could you describe some of the ways TMCs are facilitating more automated or sophisticated use of CTAs or walking cards? [allow Bill and other panelists to address question]. Now, Robin (2) what are some best practices you’re seeing with regards to travel spend data consolidation, reporting, and analysis - and - how are organizations creatively using this data to their benefit? [all panelists address question]. Terry, (3) what trends are you seeing relative to TMC and travel card mandates; and what are some best practice examples that come to mind? [all address question]. Bill, as you reflect on the panelists’ input, (4) what advice would you give to a client regarding how to identify and position an internal executive champion to push an organization towards further corporate travel automation? [all address question]. Robin, (5) over the next five years, what tangible benefits will mobile deliver for corporate travel automation / how will the business case be made? [all address question]. And Terry, do you see banks, card networks, TMCs, or all three types of providers, leading the charge in mobile - or - will mobile be driven mostly by players outside of corporate travel? [all address question]. Finally, Bill, what form of corporate travel automation have we NOT discussed that we’ll start reading about within five to 10-years’ time? [all address question]. And, Robin, what’s in store for us regarding future convergence of corporate travel management and payment practices across geographic markets? [all address question]. Terry, should M&A be on the radar; and what sort of business combinations up and down the value chain could impact corporate travel automation and payments?

Moderator Script & QuestionsNVBTA Travel Automation & Cards

Corporate Travel Automation & the Opportunity for Commercial Card Solutions

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Transcript of Corporate Travel Automation & the Opportunity for Commercial Card Solutions