Leveraging the Payments Revolution

Zachary Aron Deloitte Consulting May 16, 2008

Agenda
Payments Revolution or Evolution?
SEPA EIPP Enhanced Data

Understanding Impacts Summary

Overview
In the right conditions, changes in the payments environment could facilitate:
Consolidation of corporate travel program administration Increase in commercial card adoption Increase in central bill/central pay Improvement in data to improve negotiations and compliance

Overview (Contd)
however, in the T&E space, these changes represent more of an evolution than a revolution
Concepts are 6 8 years in the making Barriers exist Benefits may not be realized in the short-term

What is Driving the Payments Revolution?

Introduction of new standards and regulations Increase in adoption and sophistication of new technologies Greater competition in the payments provider arena

What does it look like?

SEPA EIPP Enhanced Data

SEPA will allow the Euro-zone to be a domestic payments area

Source: European Payments Council

Benefit of SEPA to Corporate Travel Programs

SEPA Change
Elimination of cross-border settlement

Corporate Impact
Reduced complexity in AP processes, such as settlement, reconciliation and payment Increase in employee card usage

Benefit
Reduction in administrative costs, process efficiency

Increase in card acceptance throughout Europe through elimination of cross-border fees New data standards

Improved controls, visibility and data

Increase in use of data to support compliance tracking and supplier negotiations

Improved controls, cost savings

Potential SEPA Barriers

Assumes that Travel/Card programs are part of a decentralized AP department and that local servicing is no longer required

Corporate Impact
Consolidation of AP departments and travel/card programs Increase in employee card usage

Assumes that existing travel data is disaggregated and not Level III

Dependent on implementation and timing of SEPA requirements and will only impact a small component of T&E spend (e.g., meals, taxis, etc.)

Increase in use of data to support compliance tracking and supplier negotiations

What is EIPP?
Electronic Invoice Presentment and Payment
Automates and streamlines Accounts Payable processes Enables straight through processing (STP) Improves processing efficiency, reduces costs and provides enhanced visibility and control

Addresses the pain points of the invoice receipt-to-pay cycle

EIPP Growth in Europe

Adoption of EIPP is relatively low but is predicted to grow, especially in Europe SEPA standards will facilitate EIPP adoption in Europe
EIPP Adoption, 2003 2010

Source: Forrester 2008

Benefit of EIPP to Corporate Travel Programs

Invoice Receipt and Payment Process
PAPE R
PAY

PRINT

STUFF & FRANK

POST WORKFL OW

SORT

PRE PARE

SCAN

VE RIFY

INDE X

AUTOMATCH

Central pay for travel invoices Potential elimination of card payments in lieu of direct payment to suppliers

ARCHIVE

Source: Deloitte Analysis

EIPP Barriers
The benefit of EIPP is driven primarily from non-travel spend categories Companies have already made or are planning to make an investment in online booking and/or expense management systems
Source: Aberdeen Group 2006

What is Enhanced Corporate Card Data?

Enhanced corporate card data includes travel details, such as:
Airline: Departure date and city, travel leg detail, tax details Hotel: Check-in date, hotel folio number, daily rate Car rental: days rented, rental class, rental rate, additional charges

Source: ACTE Global

Advances in Enhanced Corporate Card Data

Visa U.S.A. and Hilton to Offer Enhanced Hotel Data; Agreement Offers Relief to Business Travelers and Financial Efficiency to Corporate Travel Managers February 2003 American Express Significantly Expands Global Corporate Reporting . . . New 'Variance' Reports Pinpoint Gap Between What Business Travelers Book and What They Actually Spend August 2004 MasterCard Worldwide and Carlson Wagonlit Travel Launch Enhanced Corporate Travel Data Solution October 2007

Benefit of Enhanced Corporate Card Data to Corporate Travel Programs

Enhanced travel data can support:
Supplier negotiations Supplier management Compliance tracking Security and risk management Tax reclamation

Source: Aberdeen Group

Enhanced Corporate Card Data Barriers

Ongoing challenges with data integrity, reconciliation and analysis Increase in suppliers data sophistication

Source: ACTE Global

Understanding Impacts Program Administrators

Potential motivations to consolidate administrative support or card programs Push to move towards central bill and central pay for unique commodities (e.g., meetings) Potential for increased outsourcing of A/P functions to achieve SEPA compliance

Understanding Impacts Program Administrators (Contd)

Increase in offers from card issuers to provide multi-national or pan-European services Increased capabilities from card issuers, associations and third-party aggregators to provide enhanced data

Understanding Impacts Program Administrators (Contd)

Push usage of the corporate card as a way to take advantage of increased merchant acceptance Continue to push integration of card into ERP system as method of payment Push integrated booking and expense system to achieve EIPP-level automation

Understanding Impacts Card Issuers and Associations

Opportunity for innovation and expansion Greater ability to promote multi-national capabilities Increased short-term costs to achieve compliance Additional opportunities to engage clients

Understanding Impacts Suppliers

Potential to reduce costs through central billing and invoicing or alternative payment methods Potential for reduction in fees (removal of crossborder charges) More sophisticated negotiations with large corporates

Important Things to Remember

Adoption of new technologies still takes time Domestic rules and cultures can slow pace of change Current focus is on achieving compliance as opposed to development of new products and services Enhanced data and improved data quality has always been a holy grail

Summary
Widespread change and disruption to corporate payments may happen, but not as fast as we think

Questions?

Thank You!