Corporate Travel Automation & the Opportunity for Commercial Card Solutions

Prepared for:

November 7, 2012 CONFIDENTIAL: This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior approval by First Annapolis Consulting, Inc.

NVBTA Travel Automation & Cards Introductions 2

NVBTA Travel Automation & Cards Introductions 3

NVBTA Travel Automation & Cards Corporate Travel Automation Organizations are automating travel management to streamline processes.

Organizations are automating travel processes

100%

Automation costs less per trip

travel policy preferred supplier agreements travel agency corporate card reporting solution expense solution

80% 60% 40% €100 €90 €80 €70 €60 €50 €40 €30 €20 €10 €0

Lower performance Average Best performance online booking

20%

2001 2006 2011

Automation also improves visibility, traveler compliance to policy, and ability to negotiate discounts.

Source: “Globalization of Corporate Travel Programs,” AirPlus survey of ACTE buyers (2011).

“European Expense Management Study,” Amex & A.T. Kearney (2008).

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NVBTA Travel Automation & Cards TMCs & Travel Card Usage Almost everyone with >$1 mil in travel has a TMC. Walking card usage rises with spend.

Annual Travel Spend:

$50M+ $10M to <$50M $1M to <$10M

Required for Travel Booking

Single TMC Multiple TMCs Traveler Choice

76% 76% 78% 22% 2% 16% 7% 14% 8% 8%

<$1M

56% 36%

% Trips outside North America

24% 20% 57% 38%

Cards Used

Central Bill Walking Personal

38% 81% 7% 49% 65% 14% 56% 52% 18% 30% 28% 74%

Source: Corporate Travel Policy: Benchmarking and Insight, prepared by TRW Travel & Expense Management LLC, July 2010. n = 689 U.S. and Canadian organizations.

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NVBTA Travel Automation & Cards Individual vs. Corporate Liability Meanwhile, liability structures are drifting further towards corporate.

Liability Agreements for Travel Card Spending

Individual Corp

28% 2006 58% 25% 2009 63% 23% 2011 65% Legend:

Card Issuer Cardholder Client Individual liability

Approves Cardholder

Issuer must check credit

Sets Credit Line Bill Goes To Payment Made By Payment Guaranteed by

Issuer offsets rebate

Corp liability / individual pay

Client invoiced if cardholder goes 120 days past due

Corp liability / corp pay

when expense report approved

• • • CTA / travel agency lodged Purchasing ePayable / virtual Source: First Annapolis Consulting market observations; 2011 RPMG Corporate Travel Card Benchmark Survey Results.

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NVBTA Travel Automation & Cards Market averages can be used to benchmark your travel card program.

(note: bars indexed to 100% in each category) # of cards Annual Spend Fortune 500 5,623 $55 mil Large corp Mid market 755 178 $10 mil $2.8 mil Travel Card Benchmarking % of employees w/ card Annual transactions / card Average transaction size Annual spend / card Spend (% of revenue) Note: figures are rounded.

Source: 2011 RPMG Corporate Travel Card Benchmark Survey Results.

21% 20% 27% 60 73 75 $162 $188 $206 $9,756 $13,812 $15,480 0.50% 0.60% 0.80%

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NVBTA Travel Automation & Cards B2B Spend by Form of Payment A summer 2012 1 st Annapolis survey shows travel cards and CTAs lead for travel spend.

Q3/4/5: What is your best guess of the approximate $value breakdown by payment method for ...

B2B spend riding on commercial card network rails: Comm'l cards (plastics issued) CTAs / ePayables Personal Cards ACH Wire Checks Travel spend

58% 10%

Indirect spend

defined herein as spend not related to direct operations - office supplies, computers, telephones, etc

25% 10% 20% 5%

Direct spend

defined herein as spend related to direct operations - raw materials, delivery, etc, but explicitly excluding payroll

10% 7% 28% 8%

Notes: For Travel Spend, meeting cards were less than 2% and prepaid was less than 1%. Both payment methods were combined into commercial cards (plastics issued).

For Direct Spend, SEPA accounted for 1% and was combined with ACH.

Virtual / Ghost Cards includes travel agency lodged / central accounts as well as ePayables solutions that ride the p-card rails.

Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

48% 21% 2% 9% 41%

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NVBTA Travel Automation & Cards Travel Spend by Form of Payment Segmentation shows some remaining bastions of personal card and check usage for travel.

Q3: What is your best guess of the approximate $value breakdown by payment method for Travel

Checks

>$500 mil <$500 mil Healthcare Physical Products

manufacturing wholesale retail

Public Sector

gov / education non-profit utilities

Technology

Comm'l (Plastic)

46% 62% 60% 53% 53% 70%

CTAs Personal Cards ACH

10% 11% 20% 25% 6% 10% 12% 31% 9% 15% 11% 19% 2% 6% 16% 2% 20% 4% 2% 2% 20% 3%

Notes: Minor adjustments were made to Comm’l (Plastic) spend percentages to eliminate rounding errors.

For Travel Spend, meeting cards were less than 2% and prepaid was less than 1%. Both payment methods were combined into commercial cards (plastics issued).

Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

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NVBTA Travel Automation & Cards Drivers for Card Usage & Growth This survey also revealed key drivers for selection and use of commercial cards.

Reasons for Card Use

Working capital benefits 10% Rewards 3% Data & reporting 15% Control & compliance 17% Process savings 33% Revenue share 22%

Key for Increasing Card Use

Supplier enrollment 11% Rewards 3% Ability to grow program 15%

Selecting An Issuer

Rewards 5% Revenue share 24% Online solution 15% Issuer credentials 21% Integration 18% Improve online solution 14% Improve control & compliance 32% Lower cost of acceptance 17% More rev share 23% Q: What are the reasons for credit / payment card use in your organization?

Q: What would be the key factors in increasing usage of credit cards?

Q: What weighting / importance do you assign to the following factors in selecting card issuers?

Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

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NVBTA Travel Automation & Cards Drivers for Card Usage & Growth Organizations who put more travel spend on cards / CTAs realize more value-add.

% of travel on a travel card or CTA

80% 70% 60% 50% 40% 30% 20% 10% 0%

<70% >=70%

for respondents that place 70% or more of travel spend on travel cards or CTAs, one-third would say data & reporting capabilities drives 20-39% of the reasons why they use cards.

0-19% 20-39% 40-59% 60+

Data & Reporting Capabilities Factor Weighting for Card Usage % of travel on a travel card or CTA

80% 70% 60% 50% 40% 30% 20% 10% 0%

<70% >=70%

for 70%+ respondents, one-third would weight improving control & compliance as 40-59% of the rationale for increasing usage 0-19% 20-39% 40-59% 60+

Improving Control / Compliance Factor Weighting for Growth

Q: What are the reasons for credit / payment card use in your organization? (all responses must sum to 100%) Q: What would be the key factors in increasing usage of credit cards? (all responses must sum to 100%) Source: First Annapolis Consulting B2B payments survey, June / July 2012, n=44 mid-market and large end-user organizations based in North America.

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NVBTA Travel Automation & Cards Mobile Transaction Authorization Mobile authentication for corporate travel payments is quite limited, but likely to grow.

Are travelers currently using mobile for payment?

Yes, majority of travelers 1% Don't know 7% Yes, some travelers 10% Yes, a few travelers 11%

Services for which mobile used to pay (for 22% of travelers paying via mobile)

41% 33% 25% 17% 8% No 71%

Source: "Mobile Payment - How It Will Transform Corporate Travel and Expense Management," AirPlus, April 2012. Based on global 2012 survey of ACTE buyers.

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NVBTA Travel Automation & Cards Mobile Applications for Travel Mobile apps are also niche; but fundamental to further enhancing traveler productivity.

Using Mobile Expense Apps

No; 93%

Utility of Mobile Expense Mgmt Apps

Review / approve expense reports

81%

Enter new expenses

81%

Submit expenses

69%

Import data from corp card Expense type categorization View itineraries

63% 63% 56% Yes; 7%

Key Benefits

Faster Expense Approvals

44%

Greater Visibility Convenience for work / life balance Faster Reimbursement

38% 31% 31%

Source: “Expense Management for a New Decade,” Aberdeen Group survey of respondents from EMEA (23%), N.A. (67%), AsiaPacific (6%), and South/Central America (4%) (March 2011). 13

NVBTA Travel Automation & Cards About First Annapolis First Annapolis is a specialized consulting firm focused exclusively on payments.

Background:

 Founded in 1991; privately held  Headquartered in the Baltimore area

Professional Staff:

 75+ professionals  Balanced combination of industry, functional, and consulting experience

Service Offerings:

 Management consulting and M&A advisory services  Practice areas aligned with all payment products and services

Clients:

 Card partners (retailers, autos, airlines, hotels, affinity groups, etc.)  Banks and specialty finance companies  Payment networks  Processors and service providers  Trade and government organizations  Emerging payment providers Card Issuing

Client Payment Strategy

Debit / Prepaid

Commercial Payments

Merchant Acceptance Strategy Development / Support (strategic planning, benchmarking, diagnostics, business casing) Partnership Finance (retail, travel, entertainment, oil, auto, affinity, agent) Loyalty Program Support (platform/delivery, integration, implementation) Strategic Sourcing (insource vs. outsource, feature / functionality, vendor selection) 14

NVBTA Travel Automation & Cards

First Annapolis Consulting | M&A Advisory Services

900 Elkridge Landing Road, Suite 400 Linthicum, Maryland 21090 USA Lauriergracht 138 1016RT Amsterdam The Netherlands

www.firstannapolis.com

Frank Martien Partner

[email protected]

(410) 855-8513

First Annapolis Contact 15

NVBTA Travel Automation & Cards Moderator Script & Questions Now that we’ve caught a glimpse of some current trends in corporate travel automation, let’s ask the experts. Bill, if I could start with you, (1) could you describe some of the ways TMCs are facilitating more automated or sophisticated use of CTAs or walking cards? [allow Bill and other panelists to address question]. Now, Robin (2) what are some best practices you’re seeing with regards to travel spend data consolidation, reporting, and analysis - and - how are organizations creatively using this data to their benefit? [all panelists address question]. Terry, (3) what trends are you seeing relative to TMC and travel card mandates; and what are some best practice examples that come to mind? [all address question]. Bill, as you reflect on the panelists’ input, (4) what advice would you give to a client regarding how to identify and position an internal executive champion to push an organization towards further corporate travel automation? [all address question]. Robin, (5) over the next five years, what tangible benefits will mobile deliver for corporate travel automation / how will the business case be made? [all address question]. And Terry, do you see banks, card networks, TMCs, or all three types of providers, leading the charge in mobile - or - will mobile be driven mostly by players outside of corporate travel?

[all address question]. Finally, Bill, what form of corporate travel automation have we NOT discussed that we’ll start reading about within five to 10-years’ time? [all address question]. And, Robin, what’s in store for us regarding future convergence of corporate travel management and payment practices across geographic markets? [all address question]. Terry, should M&A be on the radar; and what sort of business combinations up and down the value chain could impact corporate travel automation and payments?

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