It’s no secret that issuing corporate cards to those who frequently travel for business opens a company to fraud – both internal and external. Just last year, a woman in Connecticut pleaded guilty to embezzling $1.1 MILLION from her company by regularly charging personal expenses to and wiring/withdrawing funds from the account attached to her company-issued T&E credit card.
And while the dollar amounts were extreme in this case, employees charging personal items to a company credit card is actually pretty commonplace. A study found that 66% of business travelers admit to having charged “risky purchases” (such as overly expensive dinners and out-of-policy airlines upgrades) to their company card at one time or another. In fact, 33% of those surveyed admitted to knowingly defrauding their company through their company-card expenditures.
The logical solution, then, would be for companies to simply not issue corporate cards, right? No corporate cards, no fraud. Case closed.
But it is not that simple.
Asking employees who travel frequently to place all business-related expenses on their own card and submit receipts for reimbursement can open up a whole different host of challenges. Like, does the employee have a credit card (or good enough credit to get one)? If they don’t, do they have the funds available for the charges (especially when many travel-related businesses place additional deposit holds on the account for those using debit cards).
According to recent studies:
- Two-thirds of millennials do not own a credit card.
- 22% of all Americans do not own a single credit card for one reason or another.
- 58% of people in the US have less than $1000 in their bank account.
For these and many other reasons, companies that have employees that travel without an issued company card often utilize other methods of footing the bill themselves. Flights are paid for with a central credit card that the employee never possesses. Rental Car reservations are generally paid through a direct-bill solution. But with hotel reservations, it can get a bit tricky as most require a credit card at check-in. And while companies can always risk losing the full value of a cancelled reservation by choosing prepaid rates, even those often require a credit or debit card on file for incidentals and a damage deposit. This is where the third-party billing process comes into play.
With standard third-party billing in place, companies are required to fax an authorization form along with a copy of their actual company card to the hotel property allowing the employee to charge their room (and charge things to their room) without a physical card on hand. Seems handy, but putting your corporate card number out into the world adds the chance for fraudulent charges right back into the equation.
While credit card fraud as a whole is on the decline, thanks in large part to the additional security provided by chip-enabled cards, card-not-present fraud (instances where the merchant only needs a card’s details because the transaction is being completed offsite generally by phone or internet) is on the rise. A 2018 study from the Federal Reserve shows that card-not-present fraud accounted for $4.57 billion in 2016 and another 2018 study completed by Javelin Strategy & Research found card-not-present fraud was 81% more likely to occur than fraud involving a physical card.
Enter GSP. Protection against internal and card-not-present fraud is one of the key benefits of VCNs, and, outside of the simplification and automation of the outdated third-party billing process, one of the main reasons clients are choosing Gant Travel and our GSP offering. In addition to securing the corporate credit account by allowing the traveler and hotel access to randomly-generated, single-use card numbers only, VCNs offer additional fraud protection through available restrictions. Organizations can limit purchases by merchant category (hotel only), total spend, spend type (room, tax, parking, breakfast), and expiration date.
The Concur platform is powerful. A well-run virtual card program is just one example of how we make it work better for our clients. Contact us to hear how we can help you maximize its capabilities and your ROI.