The future of commercial cards looks bright: a Q&A with Kallan Hogan

Commercial cards are reshaping the way businesses manage their finances. From empowering large market enterprises with tight controls over expenses to providing efficient payment solutions for B2B transactions, commercial cards present an invaluable asset for businesses. Commercial cards include features like near real-time payments, controls and tracking, robust expense management and reversibility of transactions protected by global scheme rules. These cards can streamline finance processes and empower employees, but also enhance business cash flow, and can offer cash rebates or other incentives to corporations. 

But what lies ahead for commercial cards in the ever-evolving realm of finance, and how can banks prepare?  We sat down with Kallan Hogan, who spent two decades creating and implementing new payments with Mastercard and American Express, and is now  Head of Sales Excellence and Lending at Episode Six. We talked benefits, trends and the bright future of commercial cards. 

What do you see as the key benefits of commercial cards?  

It really depends on which segment you're looking at. For large market companies, it can be the ability to have their employees book travel, entertainment, and other expenses, while maintaining tight controls over those purchases. 

The main benefit of B2B commercial cards is that they’re efficient in so many ways. Businesses can make payments in near real-time, and the payments are protected and reversible. For example, if you send a check or an ACH payment to the wrong business, not only is it slower and more susceptible to fraud, but you cannot suck that transaction back down the pipes to easily reverse it. Checks, wires and traditional payments also come with limited reconciliation benefits or controls. Reconciliation and lower controls come at a high cost for businesses.  With modern commercial cards, both Mastercard and Visa have Level 2 and Level 3 data available, which can streamline reconciliation of finance departments and save the employee time with expense management tools. So there are many benefits to the corporation, from lower fraud, lower operating expense, higher employee retention, and even the ability to use data to update corporate travel and entertainment policy and budgets.   

There is also a cash flow benefit. If my employees are using corporate cards, I can settle all of that spend weeks after the event,  which  gives a corporation the financial benefit of leveraging their financial institutions’ cost of funds.  

Rebates are often available from the financial institution issuing the corporate card. These rebates can add up and can be used directly on the balance sheet or for employee retention.  

What is your view of the future of commercial cards, and where do you see them going?  

I think the future of commercial cards is very bright, for a number of reasons. The first one is that governments and regulators play a significant part in innovation. There is a lot of regulation coming down the pike around getting rid of paper-based payments such as checks and increasing security. In my home market in Australia, checks will be out of the system by 2030. This will lead to an acceleration in all B2B card payments, including commercial card payments.  

The second reason the future of commercial cards is bright is that acceptance is growing. Visa and Mastercard have been really concentrating on B2B payments via commercial cards, and focusing on increasing acceptance. And now, there’s also more understanding from suppliers that accepting cards is an efficient way of getting paid. If I'm buying lumber from a lumberyard, the yard typically wouldn't have accepted these cards in the past. But now they understand that it's a cost-effective way to get paid. It’s much quicker than accepting a check or wire-transfer, and it can be easier to reconcile in accounting software. 

Meanwhile, commercial cards also cut down on instances of fraud. Single-use virtual cards are excellent as a low-fraud B2B purchasing mechanism, because of the unique number for each transaction. These cards also have much higher reconciliation benefits, so they’re ideal for expense management.   

What are the key trends in commercial cards?  

Let’s focus on the control factor. Tens of billions of dollars in B2B commerce globally has occurred while you're reading this, either on card, check or other forms of payment.  

With this volume of payments, we have to consider fraud. Fraud is ever-changing, highly organized and occurs in the weak spots. To describe all fraud succinctly in a short conversation is impossible.  But let’s discuss two types of common fraud. One: cyber fraud that involves financial payments getting intercepted, and two: fraud involving fake invoices and fooling businesses into paying a fraudulent invoice. Single-use virtual cards are very effective at stopping both types of fraud and offering the protection of being able to charge back. The combination of single use VCNs that is tokenized either by the merchant service provider or through digital wallets is the most scalable way to eliminate fraud – and the most convenient way for employees to make transactions. Think back to Mission: Impossible, when Ethan Hunt’s message self-destructs 10 seconds after reading. That’s a good way to visualize what happens to the single use virtual card after the transaction. (The card number doesn’t self-combust, but it cannot be used for another transaction.) 

Commercial cards also enable controls against internal fraud. You can program them to block certain merchant categories and amounts of spend. We have developed programable single-use virtual card technology which can be configured for only a particular type of transaction.  

Most businesses accepting payments are working with their financial providers to accept tokenized or single use virtual cards. Airlines, for example, are preferencing tokenized transactions and do not want to receive 16-digit PANs, bank accounts or checks because if they suffer a cyber-attack that compromises this sensitive information, they’re subject to brand and regulatory impacts.  So, when an employee purchases travel with a tokenized payment or a single-use virtual commercial card (or combination), the airline is safer, the employee is safer and so is the issuing corporation.  

There’s a lot of innovation and security on commercial cards, and there are scheme rules that protect purchases. And unlike checks and other payment forms, these scheme rules are global, which is important in having consistency of rules.   

What can partners do to address these trends, and how is E6 technology different?  

When I speak to institutional/wholesale banks and financial services companies around the globe, all of them are investigating how they can modernize commercial cards (and all B2B flows) with urgency. There is a strong trend of large and mid-market clients demanding digital payments with controls, cybersecurity, expense management and more. These corporates are moving to modern commercial card offerings, and this makes attrition points available on high-revenue treasury services with the incumbent bank or provider.  On the flip side, banks and financial institutions are looking to use modern commercial cards as a beachhead to grow treasury services, business float, lending and other revenue streams.    

The main factor holding back a lot of banks from providing modern solutions that corporates are demanding is their existing technology.  They are using technology that was built for a different time for a different purpose, and they cannot innovate cost effectively. They cannot rip out and replace their core systems easily – so the institutional bank ends up without innovation, and with compliance gaps and resilience issues. It effectively just cross-subsidizes the retail bank’s card platform operating costs. E6 is a bank-grade, single-code, issuer processor with a dual entry ledger that can sit alongside and connect to existing bank architecture, and provide the innovation required with higher levels of compliance and lower operating expense. Only E6 can provide all the modernization to banks with a compliance-first approach in a timeframe that will prevent them from losing a sizable part of their treasury business to competitors. 

Choose the right commercial cards partner

E6 is a modern payment processing and ledger infrastructure provider that empowers companies to create payment products their customers love. Our TRITIUM® platform powers a wide range of use cases across cards, installments, virtual accounts, wallets, rewards, and credit. We power 50+ enterprise clients and operate globally with an expanding team in the U.S., Europe, India, Japan, Singapore, Hong Kong, and Australia. 

Learn more about commercial cards opportunities in our white paper. And if you want to speak with Kallan or another member of the E6 team, contact us to learn more.