In Praise of the Simple, Mighty Spend Control

May 13, 2024
Jillian Smith

When setting up a card program, you may hear a term thrown around: spend controls. Their name seems obvious enough. They are mechanisms to control how, where, or when you spend money. But this simplicity obscures an enormously significant and transformative change that is happening in the world of cards.

In this blog, we highlight the power of spend controls and how businesses are using them to drive strategies and payment flows that were never previously possible.

The Evolution of Spend Controls

Spend controls have existed in some form for a very long time. After all, the need to move specific amounts of money for specific purposes to accomplish goals has been around for as long as there have been companies. Think of petty cash drawers in the 1980s. These boxes were quite literally controlled by an authorized custodian, and only they could approve or deny someone digging into the petty cash box to fish out a $20 to treat a prospect to lunch.

As technology progressed (and the world moved away from cash), corporate America embraced the expense report to control spending. Employees could only be reimbursed for expenses after paying for it with their personal card and faxed a copy of their receipt showing that the expense fell under an approved category. (I have a vivid memory of my father, a traveling salesman, bleary-eyed and cursing under his breath, searching his car for lost, crumpled receipts because the end of the month had arrived, and he was not the best at remembering to submit his expenses.)

This reimbursement process gradually became digitized, with early entrants like leading the way. However, while a step up, these earlier digital expense management systems still relied on employees using personal cards to pay for expenses and then receiving reimbursements for those expenses after approval and a reconciliation period. It was a manual process prone to errors and could leave the corporation with a severe lag in real-time finances.

To fix this problem, the closed-loop corporate card was pioneered, in particular by early movers in the fleet management space. These cards came pre-built to allow or deny certain transactions, often based on location or merchant category code (MCC.) But these cards were “dumb” because their controls were fixed and weren’t responding to real-time data. They usually could only be spent at one merchant for one purpose, like gas. If you were – for example – a truck driver on the road whose vehicle broke down, even if you had hundreds of dollars stored on your fuel card, trying to use that same fuel card to pay for repairs simply wouldn’t work, and you’d remain stranded unless you were willing to pay out of your own pocket.

The Mechanics of Spend Controls On the Highnote Platform

Instead of clunky reconciliations or inefficient single-purpose cards, Highnote’s spend controls allow businesses to automate decision-making on authorizations based on configurable logic like merchant category codes (MCC), dollar amount, authorization count, and more. These spend rules apply logic to authorizations and either permit or restrict transactions based on that logic. Our modern API makes the process of creating spend rules and customizing those spend rules incredibly easy. The following graphic shows how a spend rule is created at the organization level, applied to a card product, and in turn applied to payment cards under that card product:

Spend rules can be coupled with velocity controls for even more control. Velocity controls allow you to set time boundary constraints to establish spend rules. So, for example, you can dictate that a card be spent on truck repairs and that purchases for truck repairs don’t happen more than once a month.

Beyond regular spend controls and velocity controls, the hallmark of our modern approach to controlled spending is our collaborative authorization capability, which allows customers to control decision-making on their own platform.

More information on how exactly one can configure spend rules on our platform can be found here in our documentation.

Highnote’s Spend Controls: Creating The Stem Cells of Money

Luckily, we are coming a long way from the way spend controls were done in the past. One advantage of Highnote is that our team has been part of the world of digital payments essentially since the first B2B electronic transaction in 1981. As a result, we have seen the frustrations and frictions caused by how controlled corporate spending worked before.

We categorize ourselves as one of the leaders in a new category – embedded finance – but what we really mean when we say that is that we make money move the way businesses want, when they want, and how they want. Some have called us part of the third and newest generation of embedded finance because of the “insane level of customization that comes from being ultra-modern tech stacks.” What does this translate to? No more manual processes, no more error-prone reconciliations, and no more “dumb” cards. Highnote’s cards can instead be thought of as the stem cells of money. Our customers specialize in their specific function and form depending on their needs in real time.

This manifests in customers being able to issue cards with us with immense potential purpose. They could be applied to fueling up on the road, paying out an employee's salary early, or even a corporate executive booking a flight. Even more powerfully, the specific controls on the card can be turned on and off in real time to accomplish one purpose or another. With this approach, Highnote eliminates the false choice between control and flexibility.

How Do Our Customers Use Our Spend Controls?

Because our spend controls are so versatile, they can be used in dozens of different verticals. Want to run a corporate expense program and want to help companies issue cards for approved expenses? We have customers that do that. Want to build a program that allows you to gradually increase a cardholder’s spend over time after they reach certain financial milestones? We have customers that do that. We have customers who run massive social media ad campaigns on cards, deliver weekly payouts for clinical research trials, manage the fuel spend of nationwide fleets of delivery drivers, and power software financing for new startups. All these varied businesses are disrupting their space due to one key factor: Highnote’s modern tailored append controls.

Spend Controls: The Guard Rails Powering the Future Money Movement

The transformative power of spend controls extends beyond streamlining financial processes. Instead, it represents a paradigm shift, opening up new industries and approaches to money movement that couldn’t even exist before. Highnote’s mission is to empower those businesses that see where the next great disruption waits and empower them with our advanced toolset every step of the way.

To find out how Highnote can work with you using the power of spend controls to radically disrupt the industry you’ve chosen, talk to us today.

Share this post