"Every business wants to collect its money faster." So says Stephen Orfei, SVP of MasterCard's e-commerce center of excellence. By the year 2010, the reign of the paper check will be overtaken by electronic payments, predicts Orfei. But just as the number of electronic transactions continues to increase, so does the absolute number of transactions. Innovation is key—but products have to reflect the customer's needs and everyone has a different set of requirements. Read how MasterCard uses Oracle Internet Expenses and Oracle E-Business Suite to customize and manage its business processes, leading to improved control greater efficiency smoother integration of accounting systems.

As Published In November 2005

Driving Down Expenses
By Ann C. Logue

MasterCard's Oracle-related platform development provides innovative services for customers.

Millions of dollars are electronically transmitted around the world every day. As the manager of MasterCard's development relationship with Oracle, Stephen Orfei leads a team whose mission is to develop products and services that help businesses get their money faster. He joined MasterCard International in 1996 and is now senior vice president, e-Commerce Center of Excellence.

MasterCard uses Oracle to manage its own business processes. It also uses Oracle's technology as the foundation for products that carry information from card activities to its customer financial institutions. Using Oracle Internet Expenses and Oracle E-Business Suite, MasterCard's payment products give account holders more information to manage their travel, entertainment, and corporate purchasing. "One key opportunity that we have is to work with the Oracle developers and the Oracle marketing team, and come up with new solutions," Orfei says. "And then as an Oracle customer, we take that back and we try it out. We see what works and what doesn't and then refine it. Then we can together bring that to market. It has been a lot of fun, having the benefit of both aspects of the relationship."

The key to that innovation is a deep understanding of the needs of MasterCard's customer financial institutions and their corporate customers. "Our role at MasterCard is to help create innovative solutions that banks can take to market. With our solutions, we must address both the needs of our financial institutions and the needs of their corporate customers," Orfei says. "What they're all looking for is improved control, better efficiency, and smoother integration into their accounting systems. Plus, they want to take advantage of volume discounts and rebates to maximize discount capture across the entirety of their spend."

Like any development group, Orfei and his electronic payments team conduct regular user surveys and meet with customers to find out their needs. "We go into different environments, we understand their requirements, and we see their problems," he says. But MasterCard does one thing differently. The Oracle product development group uses its knowledge of MasterCard's own corporate payments challenges, develops products that solve them, perfects them internally, and then rolls them out.

Improving Payment Efficiency

Two such programs for corporate customers are MasterCard ExpenSys and MasterCard e-P3 for Oracle. Both use direct data feeds from MasterCard's Global Data Repository to the end user. MasterCard ExpenSys is an online system that automatically fills in travel and expense reports with data from the actual charges, including hotel folios and enhanced airline data within Oracle Internet Expenses. This allows for quick validation and approval, rapid flagging of unusual transactions, and quick capture of tax deductions. Then the data can be pulled into the general ledger system and integrated into the overall corporate budget.

"Internally at MasterCard, ExpenSys led to a 118 percent increase in labor productivity at expense-reporting centers, a 51 percent reduction in expense-reporting costs, and a 43 percent reduction in the IT issues related to expense report filing," Orfei explains. "We are amazed at the enormous impact the combination of MasterCard products, in concert with Oracle Financials and Oracle Internet Expenses, has had on our business."

The MasterCard e-P3 accounts payable system gives corporations more options for managing their finances. "Payments are an integral piece of the business," says Orfei. MasterCard e-P3 integrates purchasing cards, which are payment cards dedicated for corporate spending needs, and purchase order authorization into a firm's accounts payable function to help companies control spending, capture discounts, and reduce processing costs. "The MasterCard e-P3 program integrates into existing accounts payable business processes. We're inserting a new payment type, which is purchasing cards," Orfei explains.

"The Oracle partnership with MasterCard is unique. A key element of our solutions is the MasterCard Global Data Repository, a vast Oracle database, where we have integrated the e-P3 and ExpenSys programs into Oracle E-Business Suite," Orfei says. "We've created data feeds to support our corporate card, our purchasing card, and our Remote Payment and Presentment Service (RPPS), which is our electronic funds transfer capability. In so doing, we've relieved our customer financial institutions of the burden of having to develop this connectivity themselves."

Both programs allow MasterCard to add value by assigning data to the transaction. A payment carries with it information that can be stored in the corporate database, put into context of the business process, and accessed by managers who need that information. Suppliers get the remittance data needed to reconcile funds without phone calls or faxes. "What differentiates MasterCard is that we take a more holistic view of the environment, taking into account the entire financial supply chain," Orfei explains. "We recognize that in order to encourage electronic payments and the adoption of those payments, we really need to look at those business processes that surround them, both upstream and downstream from the payments."

Compliance and Simplicity

Many corporate customers want to improve financial controls to simplify Sarbanes-Oxley requirements. More detailed underlying data and less human intervention lead to fewer opportunities for error and fraud, allowing corporations to more easily comply with Section 404 of Sarbanes-Oxley. "I think what corporations are looking for is software that integrates payments into their accounting systems," Orfei says. "There's a need here for streamlined integration, as well as a standard data format for remittance."

Electronic payments have increased in the market. The U.S. Federal Reserve Bank reported that there were 44.5 billion electronic payments made in 2003, the last year for which information is available and the first time that electronic payments made through credit cards, debit cards, and Automated Clearing House (ACH) transactions outnumbered checks. But with 36.7 billion checks processed that year, there is still plenty of room to grow. "Adoption of electronic payments in the B2B space will probably break out in the next three to five years. The driving forces are technology, regulations like Sarbanes-Oxley, and banking initiatives that will propel the adoption of e-payments," Orfei says. "By 2010, the reign of the paper check will be overtaken by electronic payments."

MasterCard's Oracle programs were often incubated in-house. The product development team worked with management to identify ways to improve the business through payment efficiencies. "We tested all of the solutions to see how they behaved. We then watched how the departments worked and what the barriers are," Orfei says. "There's nothing better than being able to walk down the hall, talk to the controller, the CFO, or the employees that are actually working on the Oracle system, understand their issues, and then develop solutions."

For example, when ExpenSys was rolled out through MasterCard's own accounts payable department, the department was excited about the program because it allowed them to add value to the business. They were able to train the staff in six weeks and then roll the program out globally. Business travelers at MasterCard, in turn, were happy that their expense forms were handled faster, with a minimum of effort.

MasterCard doesn't need to send out beta versions. Products are fine-tuned before they affect customer businesses, giving MasterCard critical reliability. But the products still have to reflect each customer's needs. "We have so many constituencies that we have to satisfy, from the buyer and the supplier to the banks that are behind the buyer and the supplier, and our partners as well," Orfei says. "Everybody has a different set of requirements." His team works closely with the Corporate Payment Solutions team, which manages and develops MasterCard's business-to- business payment card products and services, to offer the most-robust solutions possible.

Ready to Roll

Off The Job Hometown: West Harrison, New York Education: Harrison High School, Harrison, New York; Iona College, BBA, New Rochelle, New York; U.S. Marine Corp Officer Candidate School, Quantico, Virginia Family: Teenage daughter and son; also a British bulldog named Maximus Favorite music: Smooth R&B Favorite food: Italian and BBQ Book on the nightstand: A book by W.E.B. Griffin, part of the Corps series, called Under Fire; and The Big Bad Wolf, by James Patterson Favorite vacation spot: La Casa Que Canta, in Zihuatanejo, Mexico; El Conquistador, in Puerto Rico Best advice you've ever received: "My mom always said, 'Confidence—it's what looks best on a man; walk into the room like you own it.' And, 'Family comes first and above all!'" What you'd be doing if you weren't doing this: "My dream job would be to own and manage a Napa Valley winery—I have become well acquainted with the red grape."

The in-house approach doesn't ignore customer concerns. Research is crucial. "Working with the Corporate Payment Solutions team, we talk to corporate users, we do research, and we're out there validating the approach that we're taking. We aren't developing solutions in a vacuum," Orfei says.

Not every issue has a neat electronic solution. Orfei has found that many corporations have entrenched ways of doing business that affect product introductions. "We all know that change can be difficult. So that's one of the big challenges," he says, but he also thinks that it's fun to coordinate disparate parties to create a cohesive approach. It helps that MasterCard is one of its own references, reporting on its processes and calculating its own savings to show banks and bank customers just how the system works.

The exact rollout process varies, as each of MasterCard's customer financial institutions has its own philosophy. Given that corporations face a wide range of great banks that compete for their business, they can choose the one they trust to work within their own culture. MasterCard complements each financial institution's style. "We work with all of our customers in a very personal way. We see them as partners," Orfei says. "Some want us to train their salespeople, and then step out of the way so that they are the face to their customer. But if they want more support, then we can provide that as well."

Working with Oracle

Oracle technology is at the foundation of MasterCard's electronic payment solutions. "When I went to my first Oracle event in New York City, I was introduced to some folks who said, 'MasterCard, what are you doing here?'" Orfei says. "We're a payment company. We have a vision with Oracle, and we've already demonstrated the savings with MasterCard ExpenSys for Oracle. Being both an Oracle customer and a partner has opened our eyes to the synergies, allowing us to develop turnkey data integration solutions that provide superior data management, things like analysis reporting and processing capabilities. So it's a very good partnership and it helps our banks. That's what MasterCard wants to do, innovate and bring solutions to the banks in a turnkey manner that will help their corporate clients."

Promoting Payments

The Federal Reserve Bank reports a compound annual growth rate in noncash payments of 3.8 percent between 2000 and 2003. That creates a growing market for the MasterCard electronic payments group as they work toward the Holy Grail of straight-through processing. "The opportunity is so vast because there are still so many paper checks out there. So that's exciting for us here," Orfei observes.

Orfei firmly believes that demonstrated success will be the key to increased penetration. "We can go in and we can address payables very effectively, and automate that process with MasterCard e-P3. Everyone sees the value in that," Orfei comments. "We can circle back and look at automating invoicing after that." With proof that managing payables generates value, customers are more prepared to address invoicing.

Financial institutions and corporate customers can look forward to a long stream of new products from MasterCard to help them do their jobs better. "At MasterCard, we believe that understanding customers' needs and providing innovation and leadership are the keys to success. The Oracle relationship fits perfectly within that framework."