AirPlus CEO Patrick Diemer talks:
• Making the T&E
• Delays in bringing
Mobile A.I.D.A. to
• Book of business
after the EU
AirPlus lost 127,000 corporate cardholders and € 12
million in profit in 2016 and it will register a € 3 million loss in each of the next several years, all owing
to the European Union’s Interchange Fee Regulation.
But the payment provider is taking steps to recuperate those losses. CEO Patrick Diemer spoke with BTN
payment and expense editor JoAnn DeLuna about
new markets and revving up its application programming interface connections to make travel seamless.
AIRPLUS PARTNERS WITH BOOKING AND EXPENSE
PROVIDERS AND TRAVEL MANAGEMENT COMPANIES TO
PROVIDE A SEAMLESS BOOKING, PAYMENT AND EXPENSE
EXPERIENCE. WHAT’S LEFT NOW THAT YOU’VE DONE THIS
FOR AIR, RAIL, HOTEL AND CAR RENTAL, MOST RECENTLY
WITH FCM TRAVEL SOLUTIONS IN THE U.S.?
We are working on restaurants. We’d like [travelers]
to look at their smartphones and have it show what’s
on their tab for the table, press a button for the tip,
press another button to pay and then leave.
MASTERCARD IS DOING SIMILAR THINGS ON THE CON-
Yes, there are some developments. Open Table is experimenting with this in Los Angeles. There are also
a couple of apps in Europe. Business travel is on the
forefront of this because, at the end of the payment
process in a restaurant, the expense can be paper
free. That convenience demand from travelers [is so
high] that it will drive adoption in business travel.
WHAT ELSE IS AIRPLUS DOING TO IMPROVE BUSINESS
My hypothesis is that there will be a new layer of
service providers that will integrate booking, payment and expense. This is happening with or without
us, so we’re working on APIs for those programmers
so they can integrate our payment tools better than
[they can integrate] our competitors’ payment tools.
The other question is [whether] this development
means that we would need to become a booking or
expense provider ourselves. We haven’t answered
that question yet, but we’re looking into it this year.
AIRPLUS’ MOBILE A.I.D.A. VIRTUAL PAYMENT SOLUTION
IS SET TO LAUNCH THIS YEAR IN THE U.S. HOW IS THAT
COMING ALONG, AND WHY HAS IT TAKEN SO LONG?
[The delay] hasn’t been because of the product but
because of our status as a financial institution. In
Europe, we have a payment institution license that
[allows us to function] like a bank solely for payment
services but without [providing credit] to corporates.
This regulatory category doesn’t exist in the U.S.
[Here] you have to be a bank.
WILL AIRPLUS BECOME A BANK THEN?
We questioned whether we should become a Master-
Card issuer in our own right in the U.S. or [if we
should] partner with a MasterCard issuing bank. We
didn’t want to go through the capital and regulatory
regime to become a bank, so we chose the second
option, with Regions Bank in Birmingham, Alabama.
It’s taken a while for us to technically implement the
A.I.D.A. product in the U.S. It’s going to be the same
product we issue in all other countries, as that is what
our global customers require, one process.
HOW HAS THE U.S. MARKET PLAYED OUT FOR AIRPLUS,
CONSIDERING U.S. COMPANIES DON’T USE LODGE
CARDS AS MUCH AS EUROPEAN ONES DO?
Globally, AirPlus is probably No. 3 based on [payment
volume]. In the U.S., we’re at the end of the food chain
because of the regulatory environment. A.I.D.A. is a
key development that has taken some time to get going,
which meant we didn’t have the same product setup
that our competitors have in the U.S. We were not the
first in the market, and we therefore are a small player.
IS THE U.S. MARKET A PRIORITY?
The U.S. is a pretty developed market with a lot of
competitors, and rebates play an important role in
the U.S. market. Our priority for market development is really Asia/Pacific because there’s so much
more business there for us today. We have a number
of other Asia/Pacific countries like Indonesia and
Thailand to be launched later this year. We’re also
launching the Company Account product in Japan
and forming a subsidiary in Brazil.
DOES THAT MEAN YOU’RE GOING TO SCALE BACK ON
YOUR U.S. PRESENCE?
No, we’re not cutting back our U.S. presence. We’re
going to increase it, but the speed is going to be modest.
LAST YEAR WAS TOUGH. CAN YOU WALK ME THROUGH
THE LOSSES THAT RESULTED FROM THE EU INTER-
CHANGE FEE REGULATION?
The regulation had a one-time [loss] effect of € 9
million because we had to migrate the portfolio and
reissue all of our cards. Then there’s the ongoing
€ 3 million loss that will carry on. We had to give our
customers a choice between paying a significant price
increase for the type of corporate card they were
using or changing to corporate liability. Given that
choice, 22 percent [of clients] decided to no longer
use corporate cards, which were predominantly cards
that were not used frequently. That’s where we see
the permanent negative effect coming from.
IN THIS NEW REGULATORY ENVIRONMENT, I CAN SEE
THE OPPORTUNITY FOR ALTERNATIVE FORMS OF PAY-
MENT FOR INFREQUENT TRAVELERS.
Yes. We see a lot of customers pushing more onto the
lodge account. We were quite afraid that customers
were turning their backs on AirPlus or the product
category, but that’s not the case. Even customers who
don’t use a physical piece of plastic anymore continue
to use a lodge card or a virtual central bill account.
If travelers have to pay for something outside of car
rental, air or hotel, like a restaurant, then they’re
asked to use personal cards and be reimbursed
through the expense management systems.
HOW HAS 2017 BEEN FOR AIRPLUS SO FAR?
Business is doing very well this year. [Year over year for
the first five months of 2017, we saw] a 6 percent increase in global issuing volume, which is our key performance indicator. We [saw] more than 9 percent volume
growth for our lodge account [product] and 31 percent
growth for our A.I.D.A. virtual card product.
& Plans New Markets
On the Record
Chances in the
Credit Card Industry
“We saw blockchain as a potential threat, a new competitor
coming in and facilitating payment, but we also saw it as an
opportunity because we have
49,000 corporate customers” to
whom to sell, said AirPlus CEO
Patrick Diemer. The issue is:
There’s nothing to sell so far, no
blockchain-based product that
solves a payments problem, he
said. Diemer doubts whether
there’s sufficient payoff for the
credit card industry in switching
to blockchain, even considering
the technology’s ability to reduce fraud. The industry’s fraud
prevention system “is already a
very computerized and industrialized process,” he said. So
even though blockchain could
reduce fraud a bit, he doesn’t
see a cost advantage significant
enough to inspire the industry to
change its process.