Comdata has been processing corporate payments for almost 50 years, with specialized tools for trucking and other fleets to buy fuel and pay drivers through a proprietary fuel card acceptance network. But its next chapter could be its toughest.
Four years ago Brentwood, Tenn.-based Comdata was absorbed by FleetCor, a holding company that has been rapidly expanding over the last 18 years by snapping up other payments companies, beginning with single regional fleet card operation called Fuelman in 2000.
A giant now from the $3.45 billion Comdata acquisition and others, FleetCor is driving aggressive international growth by leveraging payments technology in new markets like Brazil, where it's expanding the contactless payments technology fleets use to pay highway tolls to gas and diesel purchases.
At home, FleetCor is pushing Comdata to increase revenues by modernizing and expanding the payments services of its North American Trucking operation—leaping from paper-based legacy tools to sleek digital solutions—as competition intensifies from fleet card sector rivals WEX and U.S. Bank Voyager.
This story is the second in a four-part series on innovation stemming from the fleet card market. Click here to view the first article.
Changing users' payment habits is never easy, but trucking is a particularly fragmented industry with high personnel turnover, where "gig" workers have been the norm for decades. Today, with debit push payments and other digital innovations making it easier to deliver instant payments to workers, Comdata needed to improve its offerings or risk attrition.
“Like other workers in the gig economy, truckers are often independent in terms of who they work for and how they get paid, and these people are always moving—they’re often not home for two weeks at a time,” said Greg Secord, president of the North American trucking arm of Comdata.
Like many established payment processors, Comdata's struggle is a familiar one: How do you radically modernize legacy systems in a world of nimble digital startups, without losing customers or momentum?
A first step was finding a way to break the grip of Comdata's long-standing paper-based Comchek system. The arrangement allows freight brokers to pay contract drivers and reimburse them for fuel along their routes at banks or truck stops, using a private code to generate a check for a predetermined amount.
Trademarked in 1974 and still used by many trucking firms to pay geographically scattered work crews, Comcheks require payees to get an authorization number from Comdata in addition to an Express Code from their employer. Comdata charges a processing fee of about $4 per check, and many participating truck stops will cash Comcheks for free with a fuel purchase.
Comchek didn't age well. In an era when checks are eschewed and mobile apps are the norm, it wasn't keeing up in an ecosystem fraught with fluctuating costs, uncertain credit risks and high worker turnover.
"Trucking has some unique demands for paying contractors so they can advance enough money to a driver to pick up a load, and settle the rest after delivery," Secord said. In addition to drivers, crews called "lumpers" who load and unload trucks also need immediate payment, sometimes as contractors.
Last year Comdata introduced Comchek Mobile, shifting many functions to a mobile platform accessible with an app. For the first time, users could electronically move funds to the Comdata Card, a PIN-debit card accepted at truck stops within Comdata's proprietary network.
Fleet cards meet payroll cards
The next big step toward phasing out Comcheks came in April when Comdata debuted the dual-purpose OnRoad card, which works as a credit card accepted through Comdata's proprietary network and a Mastercard signature debit card enabling drivers to directly spend funds advanced by employers.
OnRoad streamlines functions to a single card, and unlike the 15-year-old Comdata Card it replaces, OnRoad's signature debit feature significantly expanding retail acceptance beyond Walmart and a narrower number of stores that support the more restrictive—and often lower-cost—PIN-debit card configuration.
Expanding the Comdata Card's acceptance to all retail outlets is a major change for drivers, according to Terrence McCrossan, senior vice president of Comdata’s North American trucking business.
"Truck drivers spend their lives within a couple of hundred yards of the freeway, and their options for shopping are limited, so having a card that's accepted at all stores and online instead of just at truck stops and a limited number of supermarkets is big," McCrossan said.
Issued by Regions Bank with Comdata as program manager, the OnRoad card is FDIC-insured and supports employers making payments to both salaried workers and contractors, McCrossan said.
Comdata plans further upgrades to its mobile platform this year so Comchek Mobile users may migrate to using the OnRoad card for driver payouts, bypassing the need to print out a check or transfer funds to a bank account. Comdata cardholders will also be able to send P2P payments to one another via OnRoad when the upgrade is complete, McCrossan said.
"We've created a strategy supporting all kinds of uses—getting paid, reimbursed and buying fuel—into a single card, which is a bit unusual in this industry," he said.
But the decision of which account to use within the OnRoad card isn't up to the driver. Comdata’s network can automatically route the transaction as an authorized credit purchase for fuel or related trucking expenses or for personal use.
FleetCor also sees an opportunity with OnRoad to expand Comdata's market share in fuel cards by extending services beyond the core audience of firms with about 100 trucks to smaller fleets with closer to 20 drivers, McCrossan said.
Fleet card operators compete on the technology that controls and manages fuel card spending, and increasingly this relies on mobile devices, with apps showing drivers the nearest fuel station at the best negotiated price. Comdata has also been steadily improving those services to all sizes of trucking firms, including expanding perks previously reserved for larger fleets such as discounts on hotel stays.
“Fuel is one of those niche markets where a closed environment is needed for the development of more specializes services, particularly around data and data analysis,” said Sarah Grotta, director of debit and alternative products at Mercator Advisory Group.
Comdata hopes that the combination of controls its network provides plus the versatility of the OnRoad card will help trucking companies reduce worker turnover, McCrossan said.
Though Comdata is only one of 70-plus companies FleetCor has purchased during its acquisition binge over the past 18 years, it remains FleetCor’s largest acquisition to date.
The merger has had its moments of uncertainty and surprise.
A Delaware court this year ordered Comdata to pay $10.7 million to TravelCenters of America in a lawsuit where the truck-stop chain alleged Comdata charged excessive fees for processing Comdata’s fuel cards following a contract dispute. Truckers use Comdata cards for more than 40% of fuel purchases at TravelCenters’ 200 stores, according to documents filed in the case.
Secord said that in its fourth year under FleetCor ownership, Comdata is finding new ways to expand its reach. “The resources of a company the size of FleetCor allow us to invest in features for our cards that provide much more utility,” Secord said. But not all of FleetCor's ideas have achieved fruition.
Back in March 2017, FleetCor and First Data Corp. proposed to merge their gift card operations through a joint venture aimed at streamlining distribution and sharing technology, an idea the companies scuttled five months later.
First Data's core gift card business, plus its Gyft and Transactions Wireless units, would have shared platforms with FleetCor's Stored Value Solutions unit to reach new corporate customers through digital channels.
The companies terminated the joint venture agreement in August 2017, citing concerns about getting regulatory approval for the plan.
In April, FleetCor said hackers attacked its gift card operation, exposing data from its closed-loop gift cards. FleetCor CEO Ron Clarke said it appeared hackers gained entry to affected systems through a client-access portal, but no fuel cards or processing systems were involved and no personally identifiable consumer information was compromised.