To mark the 50th anniversary of the first corporate credit card in the UK, Barclaycard has released the results of a survey that highlights shifts in business payments. Briony Richter speaks to Marc Pettican, managing director of Barclaycard commercial payments, about the most significant changes

The survey quizzed over 2,000 workers aged between 25 and 65 who incurred expenses. Employee corporate spending has evolved rapidly, and now the days of the petty cash drawer are long gone.

The 1960s, 70s and 80s were the peak of employee expenses. According to Barclaycard, UK employees are now far less likely to spend company money on entertaining clients. Just 10% of those surveyed said they often claim dinner at a restaurant with a client on expenses – less than half than in the 1960s (34%), 70s (27%) and 80s (28%), continuing a steady decline over the decades. A number of factors have driven these changes.

The introduction of company cards and businesses doing away with petty cash has changed the language of business payments.

Speaking to CI, Marc Pettican details the changes in the industry over the last five decades. “Barclaycard introduced the UK’s first corporate credit card in 1968,” he says. “Since then, we have helped thousands of businesses to grow. Our first card was created in a former shoe factory in Northampton, so we’ve certainly come a long way.

“We have enabled small businesses and corporates to better manage cash flow and build a credit history. We did this with the nation’s first card that was in a company’s name rather than an individual’s.

“From cash to cheque to chip-and-PIN card payments, over the past 50 years we’ve seen many changes in how consumers are able to make a purchase. Naturally, these quickly translate into business payments too.

“However, while we introduced the first physical corporate cards 50 years ago, we’re now helping to take them away with virtual cards. The rise of this technology is probably the biggest change I see, alongside the demand from businesses to have payment solutions integrated into the platforms they already use.”

Pettican continues: “Although we’ve seen payment methods change over the decades, our core objectives remain the same: to ensure that businesses gain greater control of expenditure and increase efficiency in the payments they make.”

Shift to digital

The development of digital and virtual technology, such as virtual cards and electronic payments, has significantly shifted the way employees and businesses conduct expenses.

Since Barclaycard introduced the first corporate credit card in 1968, businesses have become more diverse and intertwined with technological solutions in order to accelerate growth and innovation. Rapidly moving into a digital environment, the range of expenses – and the methods of claiming them – changed almost overnight.

Over one in 10 (11%) of the retired workers surveyed by Barclaycard said that over the course of their career, the expense process became more digital.

Pettican explains: “Business spending has changed dramatically since Barclaycard introduced the first corporate credit card. This was a major moment in the development of UK companies and how they were managed, because suddenly an entire generation of workers gained more flexibility in their day-today working lives.”

Employees today will continue to be part of an ever-expanding digital shift. Three in 10 workers stated that their preferred expense system would include an app. Online or on mobile, it would both support them in paying for business purchases, and automatically go through the relevant forms and information needed to claim those expenses back.

Closely behind in popularity (26%) was the use of an expense scanner. The machine would take a picture of the employees’ receipts and complete the relevant paperwork.

Referring back to Barclaycard’s findings, Pettican comments on the digital shift witnessed within the business travel space. “We see trends in consumer payments quickly seep into the commercial payments arena because, at the end of the day, commercial cardholders are consumers too.

“A few examples have already emerged in the business travel space. According to Barclaycard research, three in 10 travel managers say requests to pay via mobile wallets have increased over the last year, and a quarter have noted a rise in the number of travellers who want to book their trips on a supplier mobile app.”

Virtual cards

Virtual cards are one of the hottest trends in the retail banking sector. Stronger at tackling fraud and more convenient, their popularity is on the rise and set to continue to do so.

It is not just millennials snapping up this technology. Virtual cards appeal to employees and businesses by reducing friction within the payments process.

“Over the last decade, many companies have started to use virtual cards – in other words, a single-use commercial card that is issued digitally – to facilitate payments between buyers and suppliers,” notes Pettican.

“Virtual cards first became popular in the travel space, when big bundles of trips – from air fares to hotel rooms – were bought and sold, and it’s still being used today. When a travel agency books travel on behalf of their customer they can generate a virtual card and pay the travel provider in real time, and simply reconcile the booking to the billed transaction.”

He continues: “This is a game-changer. When you think about the traditional procurement process, by the time an invoice reaches the finance team, the transaction has already taken place; they can’t do anything about it. However, with virtual cards, the business can now pre-approve the transaction before it happens. What’s more, because it’s a single-use card, the chances of fraud decrease dramatically.”

The technology allows greater transparency and flexibility, and can cover a wide range of business costs with enhanced security to protect companies from fraud.

“Virtual cards offer many of the features of traditional plastic cards plus other benefits, including simplified reconciliation. Purchases on a virtual card come with a greater amount of transaction detail in comparison to legacy payment solutions. For instance, instead of a single reference number there is the ability to capture as many reference fields as the business needs,” he adds.

“They not only simplify reconciliation; they can help companies unlock wider process efficiencies. Increasingly, virtual cards integrate into a business’s existing finance and procurement systems. Therefore, this payment option is readily available in the purchasing process.

Practically, this means the buyer can deploy a commercial card whilst in their finance system, without the need to exit the workflow and login elsewhere. “Thanks to this integration, finance systems can seamlessly collect, store, manage and interpret the increased amount of data provided.”

Consumers also benefit from using virtual cards, especially when it comes to payment security. With virtual cards, there is an extra security buffer between bank accounts and vendors around the world. A maximum spend limit can be placed on virtual cards, blocking any further payments or charges once the limit has been reached.

Moreover, the card details are destroyed after every transaction and new ones automatically regenerated, adding an extra layer of security. This means it is virtually impossible to replicate the randomly issued virtual card number for other purchases.

These parameters drown all possibility of draining a consumers’ bank account. For those who no longer want to carry cash, it is reasonable to expect that eventually they will no longer want to carry physical cards.

Biometric solutions are also gaining traction, with biometric technology becoming increasingly accepted in sectors including government agencies, multinational organisations and banks. In April 2018, UK biometric firm iProov was selected by the US Department of Homeland Security to tighten the security of cross-border passenger travel.

Invisible payments

There is no denying that the vast majority of consumers enjoy and benefit from a range of digital payment methods.

The simplicity of conducting banking tasks online is the biggest motivator for going digital. However, Pettican does not envisage a fully cashless society in the UK.

Although there is a clear shift towards digital methods, cash and cards won’t completely be replaced.

He claims: “We know that people are using credit and debit cards more and more, but we don’t necessarily think contactless, mobiles, wearables and other innovations will replace cash or chip and PIN; it’s more about payment choice.

“Whether they’re a consumer or a business, in the future we predict everyone will want the ability to pay when they want, how they want. Financial institutions, including payment providers, will need to work ever-more closely to have platforms and systems that can speak to one another – it’s what their customers will expect,” he says.

Barclaycard is currently driving another form of innovation: ‘invisible’ payments. Speaking about their impact on consumers’ lives, Pettican states: “At Barclaycard we’re focused on making payment as frictionless as possible, and this involves exploring many types of innovation. Right now we’re largely focused on invisible payments.

“Invisible payments have made consumers’ lives easier for several years in specific industries. Think of how Uber has revolutionised the taxi experience. The company effectively removed the need for passengers to physically engage in a payment transaction. This has increased consumer expectations and challenged payment providers to come up with new technologies that can incorporate this convenience elsewhere.”

Five decades on from the first corporate credit card, Barclaycard still has the same focus. Its priority is embracing customer focused innovations and technologies.

Keeping up with customer trends, Barclaycard brings those innovations into the corporate sphere in order to stay ahead of what a card holder desires.

Looking forward

The rapid pace of innovation, new competitors, and increasing regulation has transformed the landscape of the financial industry over the past 50 years. There has been a significant shift to self-service.

According to Barclaycard’s findings, 63% of employees now file their own expense claims, compared to 38% in the 1960s.

Asking about the future for the card industry, Pettican lays out some predictions that will impact the sector. “We see a couple of big trends coming down the pipeline. Given their rising popularity in the consumer payment space, we expect to see increased appetite for e-wallets. More specifically, we expect consumers will want the option to house corporate cards alongside personal cards. They also want the ability to toggle between payment options.

“The second is an expanded use case for virtual cards. Over the past few years, we’ve witnessed an increase in businesses that have incorporated virtual cards into their payment strategy to manage wider business costs. So, whether they’re buying their everyday stationery or large-ticket items for their supply chain, virtual cards are coming into their own in the B2B space.”

He concludes: “As businesses increasingly want to pay in a way that suits them, we’ll continue to offer products that help to maximise choice. In 2012, we launched Barclaycard Precisionpay, a platform that offers three different payment methods: debit, credit and prepaid.

“A few months ago we also added the ability to push payments directly into a supplier’s bank or merchant acquiring account. This will help in instances where suppliers do not accept card payments.

“The value-add on top of traditional bank transfers, however, is that Barclaycard will send the money immediately to the supplier. Then the business can pay us at the end of their billing cycle. Not only does this help the business to extend their working capital, it could also allow them to negotiate better rates with suppliers, thanks to their ability to always pay on time or early.”