U.S. General Services Administration. Alternative Payment Solutions Jeff George Vice President Citi Product Market Management

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1 U.S. General Services Administration Alternative Payment Solutions Jeff George Vice President Citi Product Market Management July 2012

2 This material is intended for use by the GSA only 2012 GSA SmartPay Conference Fine Tune Your Payments Program with GSA SmartPay

3 House Rules (agency name) To ensure the best possible learning experience for participants, please adhere to the following house rules: Turn electronic devices to vibrate No video-taping or audio recording is allowed Hold questions to end of session Ensure your participant badge is scanned to receive CLP credits For each course Take advantage of opportunities to provide feedback Please select the Citi Q&A icon on any Citi PC at the conference Answers to be ed after the conference within 60 days 3

4 Schedules Available at the Welcome Center 4

5 Reminders Visit the Citibank Welcome Center Governor s Lobby Visit the Citibank One-on-One Lab Governor s Chambers D&E Citi Q&A Link Tell us your thoughts

6 Interactive Training Events DoD Citi offers on-site training at no cost for agencies meeting the required minimum participant level of 20 or more as set forth in the GSA SmartPay2 Master Contract. Regional Citi Training Locations Norfolk, VA Washington, DC Visit to view and register for these sessions Upcoming Training Visit to view and register for these sessions On-site at your base or installation 20-participant minimum Visit under Resources to download the On-site Training Request Form Distance Learning Video Conferences Please us at and a Citi training coordinator will work with you directly for on-site or Distance Learning sessions.

7 Interactive Training Events GSA Citi offers Computer-Based Training (CBT) via the Citi Commercial Card Learning and System Support (CLASS) in CitiManager. Visit home.cards.citidirect.com and from the Web Tools tab select the CLASS link Please contact your Account or Client Manager if you are interested in setting up a training session. Training can be conducted at a Citi Training Location, on-site at your office or via the web. Regional Citi Training Locations Norfolk, VA Washington, DC

8 Goals & Objectives Department of Defense This course is designed to assist you in achieving the following objectives: Learn Citi s nontraditional SmartPay2 Solutions Learn how to drive efficiencies and compliance Learn how to expand your program to gain increased rebates 8

9 Agenda Industry Trends & Challenges Why Alternative solutions? Citi Alternative Payment Solutions Ghost Cards Virtual Card Overview Virtual Card for Accounts Payable Paylink for Cards Comparisons of these products Declining Balance Cards Stored Value Cards How Citi can help 9

10 Industry Trends & Challenges Trends AFP 57% of B2B payments are still made by check 43% are by either cards, ACH, or wire Clients are looking for Decreased costs, increased cash forecasting, increased fraud controls, ease to monitor payments and perform audits Challenges include Lack of a single payment file standard across payment types IT integration and competition for IT resources Storing payment information to ensure proper disbursement Supplier reluctance to change processes (see above) Cross-border payments (different formats) Contracting with a payments portal for multiple payment methods 10

11 Why Alternative Solutions Exist Commercial Cards have evolved over the last 20 years Many clients have asked Citi for enhanced features Clients have asked for more control and flexibility during a purchase Clients have asked for the product to do more while spending time on things that matter Doing more with less? Tending to your mission vs managing the card? Let s touch on these now! 11

12 Ghost Card Features: Noncard account for preferred supplier relationship Account number held by vendor A Seller Initiated Payment Allows many employees to purchase without issuing multiple cards Integrates with ERP systems or Electronic Purchasing Systems Allows for MCC-specific controls Can have temporary credit limits for added controls Applications and Uses: Central travel airline accounts Purchases made via Internet or intranet Elimination of low-value invoices (e.g. UPS, FedEx, etc.) 12

13 Virtual Cards Overview Virtual Card Accounts (VCA) is an electronic global payment solution that offers unparalleled control and flexibility without the need to issue plastic cards What is a Virtual Card Account (VCA)? Nonplastic account number for purchases The real billing account/card is never shared with merchants Unique virtual card numbers (VCNs), linked to real card, are created for secure purchasing Transparent to merchant at point-of-sale Standard 16-digit account number, expiration date, three-digit security code created for seamless transacting by the merchant The Banker Technology Awards Citi s Virtual Card Account wins 2010 Innovation in Payments Technology Award Virtual Card Numbers can be requested by authorized users or a system interface Web interface, batch file, real-time XML API 13

14 Virtual Cards Overview Security Clients real card number is never shared with suppliers VCA users can only access specific purchase types and have individual spend limits Single-use virtual card numbers lock-down potential misuse Efficiency Real-time VCN requests and management Automated processes using the batch or XML API interfaces Secure delivery of VCNs by encrypted available Streamlined record keeping with one-to-one VCN transaction mapping Able to assign custom data fields per VCN for simple reconciliation and reporting Control Internal Controls Web user interface: Create user groups for different access types Multi-level approval flows Policy Compliance Controls: Issue VCNs with amount, MCC, supplier and date controls Merchant Controls Set VCN with appropriate authorizations / controls: Single or multi-use Maximum amount Validity Period MCC Groups Supplier 14

15 Virtual Cards Overview VCA is a powerful, flexible product that is used in a variety ways. There are four major categories of use which address different needs: Centralized Payments VCA Controlled Spend Third-Party Programs & Internal Workflows Uses Use of the VCA website to generate card numbers by a limited group of users Utilize VCA controls to reduce risk for highervalue payments and nonkey suppliers Sample Use Cases High-Value Payments Advertising Expenses Legal and Court Fees Telecom Expenses Meeting and Event Spend Out-of-Policy (High - Dollar/Infrequent Vendor) Payments Overseas Vendors Utilize the VCA controls to define how, when and where a virtual card can be used Separate certain categories of spend to track separately from main card program Sample Use Cases Distressed Employees Project Spend Relocation/Repatriation Recruiting Programs Enable third-party programs to make virtual card payments on your behalf Utilize the groups on the VCA website to provide limited, controlled access to third parties and internal requestors Sample Use Cases Third-Party Property Management Third-Party Event Planning Third-Party Central Travel Booking Internal Approval Workflows and Controls (PreApproval to Spend) Integrate VCA into your back-end systems to automatically generate single-use card numbers for every payment Sample Use Cases High-Volume Payments/ Disbursements Purchase Orders & Enhanced Reconciliation A/P Integration Catalog Integration 15

16 Virtual Cards For Accounts Payable What is Virtual Cards for Accounts Payable? A card-based settlement method Pay invoices using Citi Virtual Card Accounts Single-use electronic commercial card numbers Set exact transaction amount controls and set expiration date Simplified reconciliation Enhance card transaction data with client-supplied data e.g. invoice numbers or payment reference numbers Automated payment processing Request by file & deliver card numbers and payment information to suppliers via secure No new process for suppliers Process transactions as standard card transactions; no additional setup or training required for card-accepting suppliers Global, consistent solution Available in over 30 local currency markets 16

17 Virtual Cards For Accounts Payable Due to agency requirements for controls, policies or approval processes, not all spend can be shifted to a traditional purchasing card process. Traditional Procure-to-Pay Transaction Traditional P-Card/Ghost Card Transaction Procure-to-Pay Transaction with VCA Generate requisition Purchase Generate requisition Approval Reconcile Approval Purchase Order Shipping Receipt Payment to bank &Opportunity to expand cards to: Purchase Order Shipping Receipt Invoice 80% transactions, 20% spend volume Invoice Approval Approval Payment to Supplier Check, ACH Payment to Supplier 17 20% transactions, 80% spend volume

18 Virtual Cards For Accounts Payable Citi Virtual Card Accounts enables clients to seamlessly use card payments for Accounts Payable spend, helping to remove process inefficiencies and generate key financial benefits. Benefits 18 Controlled Payments, educed Fraud Streamlined Processing Eligible for Commercial Cards Rebate Budget Optimization Benefits VCA Enablers Exact Amount Control Pay invoices to the penny, avoiding short payments and reducing exception processing Set Validity Period Defined start and end dates to track and manage outstanding, unprocessed card payments Single-Use Reduced fraud and supplier misuse Improved transaction risk management Batch File Interface Automated method to generate card numbers from an ERP or AP system Secure Delivery of Card Numbers Encrypted delivery from Citi to suppliers Enhanced Reconciliation Capture invoice numbers, payment reference numbers, etc., to streamline reconciliation and reduce reliance on merchantprovided data Standard 16-digit account numbers No additional enablement or training is required for card-accepting suppliers

19 Paylink for Cards Overview Citi Paylink for Card automates end-to-end payment processing on a commercial card platform while increasing security, control and efficiency. What is a Citi Paylink for Cards? File-based payment process Buyer initiates payment via file submission (modified EDI 820) to Citi & the Payment Gateway Payments settle on a master purchase card account(s) Payment is straight through to the vendor s bank account Payment Gateway Central infrastructure where suppliers must securely register to receive straight-through payment Matches payment detail in buyer s file to registered vendors without the need for transmission of sensitive bank account details Online portal that provides remittance and houses payment status and details for use by buyer or vendor in reconciliation process 19

20 Paylink for Cards Overview Security Card number(s) is never shared outside of Buyer organization Control Reduce risk of wrongful use/fraud Sensitive bank account details are never transmitted Buyer initiates payment to vendor at their discretion Eliminates uncertainty of check-clearing timeline Efficiency Offers consistency across electronic payment processes Similar to ACH processing Streamlines payment processing directly from ERP Provides rich remittance detail via and download from online portal for buyer or vendor Reduces payment processing and handling time Check creation, cutting, mailing Manual keying of card account number Removes paper (and associated costs) from payment process Eliminates uncertainty of vendor card payment initiation 20

21 Paylink for Cards Overview Purchase Order 1 Invoice 2 Buyer 4 3 Bank Bank Supplier A Supplier B 5 5 Bank Supplier C Buyer sends purchase order to supplier and subsequently receives/approves invoice 2. Buyer sends transaction instruction file to Citi 3. Citi validates file, matches supplier data and sends to Boost for authorization and settlement 4. Vendor receives payment directly into its acquiring bank account 5. Buyer and vendor receive remittance detail

22 Comparison of These Products Traditional Ghost Cards Card number used with traditional transaction and reconciliation processes Citi Virtual Card Accounts Dynamically generated single-or multiple-use virtual cards with robust controls Citi Paylink for Cards File-based, buyerinitiated, straightthrough payments settled via card 22 Card/account number communicated to vendor with each transaction, or specific card maintained by vendor Standard transaction process limited ability to set transaction controls Traditional card transaction posting, payment, allocation and reconciliation (potentially manual) Enhanced controls versus traditional ghost card approaches Ease of integration realtime, batch file or web user interface Capture strategic, one-off and large ticket purchases within card program Buyer-initiated and control of payments Module of Citi s P2P electronic payments platform Consistent processing/integration Capture recurring payments to core suppliers

23 Low Transaction Size High Alternative Payment Solutions Comparison of These Products Virtual Card Ghost Pcard Pcard Paylink for Cards Very High Control High Citi s Extensive Product Range Traditional Plastic Pcard Traditional Plastic Card Account with credit line. Ideal for low-to-medium value purchases needed to support business flexibility Ghost Card Card Account is held in trust by a key supplier, charged at buyer s instructions Ideal for recurring purchases and Catalog buy Virtual Card Account (VCA) Non plastic Card Account setup for a specific amount and timeframe, with customized control fields for automatic reconciliation Paylink for Cards (BIPC) Low Spend per Supplier High File-based solution to make payments by effectively pushing (straight-through processing) the transaction to the supplier. Perfect to pay for large strategic purchases without showing account info while still delivering remittance information to the merchant 23

24 Declining Balance Cards Features Centrally Billed Accounts Specific purposes and/or time periods Accounts have a set credit limit and do not refresh Once the balance is used, the card becomes inactive Merchant Category Code restrictions can be placed on the card Unique data available for amount available on statements Targeted for reimbursable business expenses that need additional controls Such as Project Spend Meeting and Events Contract Spend Is not good for employee benefits See Stored Value cards

25 Stored Value Cards Prepaid Cards are a standalone product The accounts are paid in advance and the value of the payment is loaded onto the card Cards can be single or reloadable Generally, there is a one-to-one relationship between each card and the corresponding account that holds the funds, but other configurations are available Moderate controls are available for this product Prepaid cards have a separate electronic access system to support the product (e.g. to load value, to view transaction activity, etc.)

26 Stored Value Cards-Usage Prepaid cards can be used as cash or check replacement One of the key elements of the applicability of a prepaid card is whether or not the funds placed on the card can be used in their entirety and are truly the property of the cardholder These cards are often used for benefit payments or as a substitute for cash rebates

27 Citi Working Capital Analytics Budget Optimize Background As described by the OMB, Strategic Sourcing is the driving force in business-tobusiness purchasing & payment Enterprise spend analysis is critical to the success of Strategic Sourcing Purchase-to-payment optimization is a Strategic Sourcing, Treasury & Accounts Payable subobjective Spend analysis is a key activity for best-of-breed purchase-to-payment optimization

28 Citi Working Capital Analytics What can Citi Working Capital Analytics do for you? Citi will mine your agency s payables data to make specific payment recommendations on how to improve your budget and supply chain processes Data will be selectively enriched to provide more targeted and realistic results Once the analysis is completed, Citi will provide a step-by-step action plan for unlocking opportunities within our Commercial Cards and Procure-to-Pay Solutions sets Your agency's data will also be analyzed and compared to the best-in-class organizations in your industry for increased visibility into your working capital standing

29 Citi Working Capital Analytics Citi performs an analysis to determine which areas need improvement, and provides recommendations Evaluate Opportunity Analyze Accounts Payable Data Best Practice Assessment Deliver Results Implement Implement Results & Results & Track Track Progress Progress Citi Payment Solutions ACH conversion campaigns Citi Commercial Cards Purchase card expansion Buyer Initiated Purchasing card Virtual card Citi Supplier Finance Existing discount capture Dynamic discounting

30 Final Thoughts Some questions you may want to think about Am I not able to pay supplier invoices via a card due to an approval process requirement? Are there reconciliation issues currently with certain types of payments? Implement Results & Track Progress Does my agency have a large amount of one-off ad hoc spend that is paid via checks? Am I spending a great deal of time with offline processes and manual reconciliation? Would I like to put more controls on card usage and spend categories? Would additional information help reconcile my agency s accounts payables better? Is there a spend category my agency could put on a non traditional card product?

31 Jeff George Department o Defense 31

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