Combatting corporate credit card fraud

According to a study by Nilsen in 2013, credit card fraud in the U.S. alone rose to a staggering $5.33bn. Globally that figure was estimated to be more than double that amount at $11.27bn.

Recent cyber attacks on U.S. retail chains Target and Neiman Marcus are reported to have netted fraudsters around 110 million sets of customer data, including their credit card numbers. In 2012, about 40 million sets of payment card information were compromised when hackers attacked Adobe's customer databases, many of which belong not to individuals, but to large corporations.

Technological advances are leading to an ever growing global market place, with more and more of us trusting large organisations with our financial information.

However, problems arise for all parties involved once the security of these organisations is breached.

Here at Conferma, we have been working on creating a payment solution that eliminates the risk of large scale fraud, even when hackers are able to steal your corporate credit card information.

So how does our financial technology system work?

We have created a product called Virtual Card Numbers (VCNs), essentially a digital credit card. This means that for every individual purchase undertaken, a unique 16-digit credit card (or 15-digit in the case of American Express), plus three-digit security code, is generated. The VCN can then be accessed via one of Conferma's secure applications on your desktop, mobile or tablet devices.

Each unique VCN is valid for a specified amount of money and for a specified date range. Further controls ensure that a VCN can only be charged by a specified category of merchant. For instance a VCN designated for a hotel transaction can only be charged by a hotel. Only if all these criteria are met is the payment able to be processed.

So, in the event that a merchant from whom you have purchased falls victim to a security breach in the future, a VCN will be useless in the hands of a hacker due to the controls imposed on the VCN.

Our financial technology is available for most major banking and credit card providers, including AirPlus, American Express, Barclaycard, HSBC, MasterCard, U.S. Bank and WEX. And whilst we are best known for our integration of VCNs into the corporate travel sector, we are able to offer a wide range of payment solutions across many industries.

At Conferma, we are committed to eliminating corporate credit card fraud.

A company credit card you can't lose

You know that heart-sinking when you realise you can't find your credit card?

Even worse when it's your company credit card and you are miles away from home and about to pay your hotel bill. You know life is about to get a whole lot more complicated.

Telephone calls to cancel the card and let your company know are difficult to manage, especially if you're in a different time zone. To say nothing of how this loss affects your employer.

As well as dealing with all the practical aspects of your missing credit card, you also have to cope with the extra stress that this creates for the remainder of your business trip. Hardly an ideal set of circumstances if you're about to go into a key meeting with a customer, where you need to be completely focused and at the top of your game.

So wouldn't it be wonderful if your company could give you a credit card that simply couldn't be lost or stolen?

Magical as this sounds, here at Conferma, a FinTech company, we have created such a card, aimed at the corporate travel market.

In partnership with the major banks and credit card schemes we have created Virtual Card Number (VCN) technology, details of which can be stored securely on apps available on your desktop, smart phone or tablet.

Not only does this free up valauable space in your wallet, you will never again experience that sense of dread when you discover your credit card has vanished.

However, the advantages of using VCNs whilst you are working away from home extend far beyond their 'unloseability'. For each individual expense, a unique single-use card number is generated, which can only be used by you to settle a single, pre-authorised expense, eliminating the risk of third party fraud on your card in an instant.

For example, if your company have booked you into a hotel in New York for three nights whilst you attend a conference, a VCN will be generated which is only valid for use by yourself, on those exact dates and at the specified hotel. Should your plans change, the VCN can be updated to reflect these changes via an authorisation process within your company.

So VCNs are easy to use, secure and flexible.

But there is more. The final benefit of using a VCN is that it removes the need to complete a manual expenses sheet. Because each VCN acts as both a unique booking reference and a unique means of identifying a payment, all purchases made using a VCN are posted automatically to your company's purchase ledger and are automatically matched to the booking or purchase data. The quality and amount of data captured on the VCN vastly improves your overview of corporate expenditure, whilst enhancing process efficiencies by streamlining accounts payable processes.

At Conferma, we believe that Virtual Card Numbers are set to revolutionise the life of you, the corporate traveller, leaving you free to get on with doing your job.

Financial Technology UK

A recent article in the Sunday times (1 December 2013) shone a light on the UK Government's desire to grow the Financial Technology industry. When launched in early 2014, FinTech UK will bring together start-ups, small firms and large companies from the financial and technology sectors to share ideas and promote the UK as a centre of excellence.

Following six years of strife in what was one of the star sectors of UK PLC (Banking), it will be interesting to see if FinTech UK can help repair reputations.

Conferma is already at the forefont of FinTech UK innovation and our payments ecosystem is being embraced by world class institutions from San Francisco to Singapore. We are living proof that British finance innovation and technology is highly regarded around the world and we look forward to seeing our sector receiving the help and recognition it deserves.

Combatting Fraud with VCNs

Conferma Virtual Card Numbers (VCNs) provide not only provide better control, process efficiencies and data to corporates, Travel Management Companies and technology partners, but also tanglible benefits to our financial partners - the banks and card schemes. You often hear that VCNs or Single Use Accounts (SUAs) can optimise payment processes thanks to automated reconciliation and tighter controls, however that's only one side of the story.

In travel and expense (T&E), the norm is to lodge a single credit card against a company where the card is passed around the office and used for hundreds, if not thousands of bookings every month. The card numbers is circulated and stored everywhere: websites; faxes; memorised by individuals; they are even on Post-it notes stuck to travel agents' computer screens. Often the card has a high credit limit and can be charged by anyone. Sound susceptible to fraud? That's because it is.

According to the Nilsen Report, card fraud in the US rose last year to a whopping $5.33bn. The US also acccounted for 47% of global card fraud. This is obviously of grave concern to US-based card issuers who are committed to working together to implement EMV (Chip and PIN) in the not too distant future. EMV has been an unboubted success in parts of Europe, where some countries boast a merchant adoption rate of greater than 95%, according to EMVCo. The European Central Bank has seen a reduction in card fraud by 7.6% in the Eurozone, whislt overall card usage continues to climb.

Security and control is integral to reducing card fraud and we fully support the rollout of EMV, ensuring a reduction in the cost of banking. However, the downside is the upfront investment required to implement EMV, which is neither simple nor cheap. Before you even reach market, consider the cost of card issuer scoping, nationwide card rollout schemes, merchant adoption, consumer education and PDQ equipment. There is no quick fix. Moreover, EMV is irrelevant in a Cardholder Not Present (CNP) environment such as e-commerce. In the United Kingdom, 63% of card fraud occcurs in a CNP environment according to Financial Fraud Action (http://www.financialfraudaction.org.uk/Publications/#/20/zoomed)

In B2B spend, VCNs or SUAs are a strong player in the reduction your fraud risk profile and do not require merchants to change their existing e-commerce practices. VCNs are generated for a specific purchase, allowing restrictions to be applied to the VCN such as the total amount, merchant category, validity dates when the card can be billed and the number of times the card can be charged. Access audit logs are also associated with VCNs to provide full transparency of who has spent what. Valid merchants can simply bill VCNs as a cardholder not present transaction using their standard POS terminal.

The reduction in card fraud enabled through the adoption of VCNs isn't simply calculated by the transaction amount. It's calculated through efficiencies gained thanks to fewer calls to the card issuer which saves time and money for both the corporate customer and the card issuer. A UK-based issuer that we work with has estimated their process efficiency to have improved by 90% since operating a virtual travel card program rather than a traditional single card payment.

Next time you think virtual cards, think beyond automated reconciliation and reduction of maverick corporate spend. Conferma's VCNs also provide reduced fraud risk profile and operational efficiencies for major financial institutions. 

Embracing New Technology

You could argue that being averse to change is a stereotypically British trait. There is always going to be reluctance, reticence and even resistance when embracing not only a new supplier but also a change of culture, especially amongst larger organisations, where existing practices are so heavily embedded in that culture.

Well, organisations don’t come much bigger or British than the Government. Yet when HMRC appointed Redfern to manage their UK-based travel with a clear mandate to progress the volume of online bookings from 50% to 95%, here was no better indication of an organisation willing to embrace new technologies to render processes more cost-efficient.

Indeed, with the ink on the contract barely dry, Redfern had already increased the number of online bookings from 50% to 95% within a month, 11 months ahead of schedule. In some departments this figure was over 98%. All equating to an estimated saving of £140,000 per year for HMRC and consequently the taxpayer. Current projections suggest that HMRC will achieve an estimated £3 million in savings across accommodation spend this year, and savings of over £20 million over the length of the four year contract. This is an improvement of 70% compared to previous costs.*

So how exactly did Redfern effect this saving? ‘Integrating technology from multiple suppliers’ was cited as one of, if not the main catalyst. Conferma was one such supplier, providing the comprehensive hotel inventory at Redfern’s disposal in tRIPS via our Booking API, which has been integral to HMRC maximising savings across their accommodation requirements. However it is our Virtual Card Number (VCN) technology, available through our Payment API that has delivered tangible savings for the settlement of hotel transactions.

At Conferma we pride ourselves on being revolutionary. We have set the new standard in payments technology without compromising on the usual benefits that people have come to expect from us, not least the highest standard of payment security.

Our automated solutions mean that the payment process not only becomes touchless for the TMCs but also has minimal impact on their existing workflows and procedures, negating any effect felt by the change of culture I mentioned earlier.

This increased efficiency has allowed Redfern to quadruple their turnover and manage eight times more transactions than others in the sector. Yet the number of staff has only increased twofold to cope with this increased volume.

At Conferma, it’s not the change to working cultures that is revolutionary or radical, it’s the end result. The savings made by the British Government are testament to this. So if you’re hesitating over embracing new payments technology, look no further than the new standard:  Conferma.

*Figures taken from the article How Redfern Travel smashed targets by making online booking simple from Travolution, 17 April 2013

Corporate Travel: 2013 in figures

I would like to begin this blog by wishing all our partners, customers and blog readers a Happy New Year on behalf of everyone at Conferma.

The turn of the year marks an opportunity to reflect on another successful year for Conferma and in particular the trends emerging in corporate travel. 2012 saw us extend our virtual card technology into the US for the first time, and it is a study from the other side of the Atlantic that I’ve chosen to look at, in the form of PhoCusWright’s U.S. Corporate Travel Report.

In 2012 there was over $100bn of corporate travel booked in the US. That’s a mere £62.1bn. Or €76.3bn.

Since gross bookings fell 26% during the recession in 2009, the corporate travel industry has been revitalised; figures have now surpassed pre-recession levels. That’s in stark contrast to other sectors who continue to suffer from the economic downturn. Business travel now represents 33% of the total travel market share, with the remainder accounted for by leisure travel and unmanaged business travel; a ratio that is edging gradually closer to 50:50.

Respondents to the survey cited ‘increased cost savings, enhanced spend under management and increased use of online corporate booking tools’ as their top three strategic priorities for 2013, whilst the top technology priority was the ‘automated capture of travel expense.' At Conferma, our innovative settlement and reconciliation products are fully automated to ensure our TMC and banking partners can reduce their administrative and operational costs significantly. Similarly, our state of the art virtual card technology enhances spend visibility and provides corporate clients greater control of variables such as credit limits, payment card validity dates and even the merchant category code.

The study hints at an ‘online penetration.’ Not something you’d want to Google. No, it refers to the increasing tendency to book travel online. This was one of the few metrics that did not decrease during the recession, instead hovering at around 50%. By 2013, 56% of gross travel bookings are now booked online. Early indications in January suggest Conferma is on course to record unprecedented levels of bookings made via Hotel Booker, our corporate hotel booking tool, whilst our virtual payment solutions are embedded in some of the world’s largest online booking platforms. Our virtual cards cover hotel, air and car rental, which were voted as the three largest areas of corporate travel expense. Indeed, air and hotel bookings account for more than 70% of corporate travel dollars spent.

96% of travel buyers indicated that their companies now use one or more online booking tools. The primary reason? You guessed it; cost. Corporates cited online booking platforms as the least expensive booking method, whilst also ‘facilitating integration with automated expense processing.’

I’ve already mentioned the corporate desire to automate capture and visibility of spend. The report revealed that miscellaneous expense now represents 21% of all corporate travel expense. Hotel extras, meals, excess baggage. In our experience, this significant chunk of ancillary spend is often unaccounted for, ultimately costing money and leaving companies’ spend policies susceptible to employee initiated fraud and misuse. Our fully automated solutions allow travel managers to rein in ‘rogue’ purchases, whilst rendering the data reconciliation process far more time and cost-efficient than chasing invoices from hoteliers and manually collating receipts.  

A quick word on our TMC partners. We continue to value our partnership with some of the industry leaders in travel management, especially in light of the fact that intermediaries now handle more than 75% of all corporate travel bookings. The dominance of intermediaries is particularly pronounced in the online corporate arena, where TMCs rely increasingly on the use of online booking tools and payment methods to further reduce costs.

Your list of New Year’s resolutions may be populated by the usual suspects. However if 2012 is anything to go by, make sure you place automated, virtual card technology for settling and reconciling travel expense at the top of your list.

*All figures from PhoCusWright’s U.S. Corporate Travel Report: Market Size and Technology Trends 

Next Generation Lodge

Lodge or ghost card programs have been synonymous with corporate T and E settlement for over 30 years. With the IATA number serving as a unique identifier for ease of reconciliation, the lodge cards are especially well established and embedded in the settlement of scheduled airline tickets.

However it is a product that has also been static for many years, with limitations that inhibit its use across the full spectrum of corporate travel.

Heavily dependent on exterior data flows, the transportation of files is a process that is highly susceptible to error. It is difficult to standardise file deliveries across geographies as different organisations have different file creation capabilities and processes.

Lodge cards inherently lack rigid controls on manually collating disparate sources of information to produce a reconciled view. Therefore the industry standard matching rates hover around approximately 95-98% accuracy. You may think that this sounds a satisfactory matching rate. However, the outstanding 2-5% of unmatched data is highly costly and inefficient for the corporate. Consequently banks don’t value it and therefore don’t search for innovative resolutions.

Corporate travel settlement is changing. Using a virtual card, with its PAN serving as a unique reference number, guarantees 100% matching rates to eradicate the cost and time lost to the unmatched data that we mentioned earlier. With nearly real time data flows, virtual card data is managed within the booking process in the GDS, and can be processed in monthly or periodic batch processes.

Not reliant on the creation and transmission of exterior data, the systematic reconciliation means human intervention is not required, eradicating the risk of human error involved with lodge cards.

However the virtual card’s most valuable attribute is its applications across all areas of travel spend. Not just air, but also hotels, rail, car hire and all other areas of online spend.

·         Commercial benefit:

o    Applies lodge card controls across areas of incremental spend

o    Enables significant increase in billings without additional operational costs

·         Enhanced security:

o    Order and authorisation data captured prior to secure payment is deployed

o    Creates a secure PCI-DSS compliant Passenger Financial Record (PFR) for each transaction

·         Increased controls:

o    Control of variables such as amount, validity and merchant category

o    Enhances workflow and enables real time refunds and amendments

·         Flexibility:

o    Single process applicable to multiple content sources, not just IATA air

o    Allows secure deployment of CVV2 number

·         Reconciliation:

o    Unique PFR applied to each transaction

o    Need for manual/additional reconciliation process eliminated