European companies aren't using credit cards much for payments, which may give Wells Fargo a chance to establish a presence as a corporate issuer.
"Travel payments are the predominant usage of commercial credit cards in Europe; there hasn't been traction there yet for procurement or payables," says Mary Mazzochi, senior vice president and manager of the commerce card product suite at Wells Fargo, which launched a corporate credit card in Europe last week.
Wells Fargo plans to win corporate payments share in Europe by offering a single venue for a variety of categories such as travel, entertainment, and procurement. It allows users to add new categories and plans to add simplified tools for managing travel and entertainment expense.
"It's all defined by the merchant category code. We have the platform for the corporates to add new payment types when they are ready," Mazzochi says, adding that the bank is starting with travel because many companies already use cards to pay for that expense.
Corporate payment habits differ from one country to another, Mazzochi says. In the U.K., businesses mostly use checks or BACS, the U.K.'s version of ACH; while in Germany, non-travel corporate payments are largely electronic transfers, she says.
"The easiest way for us to lead with a company is to take about travel," she says. "We can build a relationship with them and get a sense of where the company is going, and we can add other payment types down the road."
Wells Fargo also plans to introduce single accounts to manage corporate travel payments. Payment companies in the U.S. are migrating from the lodge cardthe single credit card account used for all staff travel expensesto a system that uses a separate one-time-use account number for each payment. Wells Fargo works with MasterCard, which offers a single-account travel payments product designed to give companies improved visibility into travel expenses.
"European companies still mostly use lodge accounts, but we see an opportunity to bring a single account system to Europe," Mazzochi says, noting that lodge accounts can cause reconciliation challenges.
There is a market for corporate cards in Europe, but there are challenges for credit card issuers, according to Gareth Lodge, a senior analyst at Celent, who says the market doesn't have a lot of "low hanging fruit."
One challenge is overcoming the anti-debt culture, he says.
"[Credit] cards aren't as widespread in Europe as in the U.S.," Lodge says. "And in certain European countries, being in debt is culturally something that is frowned upon. As a result, debit card usage in some European countries outweighs credit cards 100 to one."
Very large companies with international operations will be a better target for credit cards, as well as companies in the U.K., Sweden, Spain and France, where debt is considered more acceptable, Lodge says.
The interbank payment systems in Europe are more sophisticated and more widely adopted than in the U.S. Ninety-eight percent of the U.K. population has been paid by direct deposit for the last 20 years for example, Lodge says. "Therefore, it's natural but also easier for corporates to make ACH payments, because they are already set up to generate those payment files."