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

 

Why Single Use Accounts are revolutionising Accounts Payable

For businesses seeking to reduce costs and improve operational efficiencies (i.e. all businesses), one of the simplest routes is to move away from cheques and cash towards electronic payments. Progressive organisations attracted by additional rebates have sought to further extend their electronic payments program by using Lodge (ghost) cards and PCards.  For these businesses there is now another tool in the box – Single Use Accounts (SUAs), otherwise known as Virtual Card Accounts.

Single Use Accounts are the latest advancements in payables technology; they enable organisations to migrate traditional Travel and B2B payments, even those to strategic suppliers, onto virtual cards. Using SUAs, organisations get closer to the promised land of accounts payable departments operating as revenue generators, as opposed to cost centres.

While PCards and Lodge cards have driven benefits, they have not been without their challenges. First and foremost is consistency and acceptance, or rather lack thereof. Getting all suppliers to participate in a PCard program or feed aggregated data back to a lodge card has proven difficult. Some suppliers embrace the program. Some don’t. Furthermore, anxieties surrounding spend controls and reconciliation accuracy have resulted in these initiatives not delivering the widespread adoption that all parties had been promised.

Conferma’s SUA solutions have overcome the challenges that have proven intractable for Lodge cards and PCard programs.

Acceptance.  This is one of the real strengths for SUA programmes; essentially there is no change in acceptance processes for suppliers.  For the supplier the SUA is just a credit card number like any other. They treat it as a card holder not present transaction – business as usual! Not to mention ideal for online procurement.

Control. SUA technology allows you to apply controls to the virtual card, including a fixed credit limit, merchant category code restrictions and even the payment card validity dates. In stark contrast to physical Lodge or PCards, SUAs provide complete control over how, where, when and in what quantities your employees are using company expenditure in line with corporate policy.

Flexibility. Despite offering control, SUAs can also provide flexibility through approval processes. SUA numbers are generated ‘on the fly’ and can therefore be tailor made to the required purchase. For example, if an employee wishes to purchase a product that is over their credit limit, yet is deemed to be of benefit to the company, they can request approval from a line manager to exceed their spend limit. The virtual card then captures the reason for approval (or rejection), providing accounts departments with complete visibility of the surplus spend.

Security. Lodge cards and PCards are susceptible to fraudulent transactions through loss or theft, by virtue of their physicality. SUAs, whose unique PANs are applicable to one time only transactions, are virtually (pun not intended) impervious to fraud or employee misuse.

Reconciliation. The Conferma SUA process will not generate the virtual card until the procurement data, in the form of a booking or purchase reference, has been received and quality controlled; therefore reconciliation is entirely automated upfront, as opposed to post transaction like Lodge cards.

Card-holder not present. Controls. Security. Time and cost efficiency. Data accuracy. These are just some of the reasons why paying suppliers with Single Use Accounts is revolutionising the accounts payable process.

60 years of payment evolution

Last month, as a British nation we gathered along the banks of the Thames, at Buckingham Palace or even in our own streets to celebrate the 60 year reign of Her Majesty The Queen. Revelling in Union Jack bunting, the Pageant and Gary Barlow, the furthest thought from our minds was probably how we were spending our money at our respective events. Chip and PINs. ‘Wave-and-Pay’ debit cards. Contactless, smart phone payments. As we paid tribute to the Queen, we also subconsciously saluted the latest developments in payment technology.  However it is the image of Queen Elizabeth herself on traditional bank notes that reminds us of how much payment mechanisms have evolved since her accession to the throne.

Since the Queen became the first monarch to feature on British banknotes in 1960, payments worldwide have changed beyond recognition. Banknotes featuring the wording “I promise to pay the bearer the sum of the note on demand” are still in circulation of course. However, whereas one once sent cash or a cheque in the post for someone’s birthday, a parent will now send money to a child at university using online banking or even a smart phone app, such as Barclays Pingit.

Visa, in collaboration with Samsung, both official London 2012 partners, have pioneered PoS contactless mobile payments, with the launch of payWave. To buy a round of beers at an Olympic venue, users simply hold their phone in front of a contactless reader at the point of purchase. As an added layer of security, transactions over £15 require a passcode.

Merely checking your balance or recent transactions used to involve a trip to the bank to print off a receipt. Now it’s attainable at the touch of a button.

1966 is synonymous with a unique sporting success in this country. However it also marked a first of a different kind – the credit card. By 2008, 30.8 million people in the UK were credit card holders and used them to make 1.9 billion purchases that year. It is amazing to think that the first debit card was introduced as recently as 1987, the year in which construction of the Channel Tunnel began.

In today’s Britain, that payments are contactless, instant and effortless is a given. That’s nothing new or innovative any more. So where are the new trends and evolutions coming from?

In the same way that banks have made payment mechanisms touch-free, the next evolution involves transforming methods from the physical to the virtual domain. Virtual card technology enables closed-loop payments, which in turn offer greater security and control for corporates.

At Conferma, we implement single use virtual cards into procurement processes. Single use payment systems are, by their very nature, scalable and customisable, allowing multiple cards to be used and multiple transactions to be processed. Conferma’s unique accounts ensure that, no matter how great the volume of transactions, the process of reconciling transactions with the procurement order is accurate and efficient.

With the advent of smart phones, tablets and now virtual card technology, as payment technology and innovation accelerates we will only have to wait 60 months for cardless payments, rather than another 60 years.

Payment security. We do the hard work so you don't have to.

It may be a cheesy advertising slogan for a kitchen detergent, however the sentiment remains exactly the same at Conferma. We take payment security extremely seriously so that our partners and customers worry less. But what exactly does ‘payment security’ entail?

PCI and DSS. POS and SSC. PANs and PINs. The PCI, or Payment Card Industry, is filled with acronyms and abbreviations.

The Payment Card Industry is also filled with several DSS, or Data Security Standards, with which all serious participants in the financial service sector must comply. Being PCI Level 1 compliant involves satisfying several stringent system and network security requirements, continuous monitoring and a rigorous security policy.

All sensitive payment card details are encrypted and secured by Conferma to eliminate the handling, processing and storage of credit card data for customers. Essentially, PCI compliance ensures that all Conferma transactions are inherently secure and ensures peace of mind for all our partners and customers.

This week’s news that millions of LinkedIn passwords had been compromised merely serves as a reminder of the importance of security, vigilance and good practice.

Payment security has always been greatly prized and standard practice here at Conferma. It is inherent in everything we do – security training is conducted for all staff and all hardware is encrypted. The highest level of payment security commercially available merely serves as official recognition of our continuous commitment to security for all our virtual payment solutions.

PCI accreditation is also representative of the ROI in terms of the significant time and finance devoted to the project, the single biggest project undertaken at Conferma. OMG, as you might say in an SMS…