With more than 700 000 fleet cards in circulation, the South African fleet management industry is already a major force in offering fleet management solutions. The use of pioneering technology is also seeing the industry evolve to being better able to better control risk for customers, says Standard Bank. For more information visit: http://3d-car-shows.com/2013/standard-bank-south-africa-risk-mitigation-in-focus-for-fleet-industry-standard-bank/

1. Fleet Management: Risky Business
Risk mitigation and technology in the fleet industry
25th April 2013

2. Contents
Page
1. Relevance and positioning of fleet management
2. Fleet market trends
3. Challenges and risks
4. Fleet solutions
5. Conclusion

3. Relevance of fleet management
3

4. Relevance of fleet management
Definition and purpose of fleet management
 Definition:
– Fleet management can be defined as the process whereby the operation of and costs
relating to a fleet of vehicles are controlled. It is a specific management discipline with
recognised theory and techniques.
 Purpose:
– Organisations face many challenges in managing their fleet expenses and risks effectively.
Such challenges can be serious and require immediate action or they may distract from
business related tasks and activities. Fleet management techniques applied correctly will
take care of challenges and mitigate risks.
 Applying fleet management:
– Companies are focussed on cost management to prevent revenue leakage. The fleet owner
needs convenience, sophistication and quick access to information. Fleet management must
provide a full range of custom-made fleet management services that will assist
companies in managing and controlling costs.
– Various categories of fleet expenses must be managed and invoiced through a single Fleet
Management account. Fleet expense records need to be up-to-date, accurate and easy to
access. For reporting needs, fleet management service providers must provide the
convenience of a range of sophisticated, but easy-to-use tools to manage fleet expenses.

5. Relevance of fleet management
Positioning of fleet management by fleet card issuers
 The four main fleet card issuers Absa, Firstrand (Wesbank), Nedbank and
Standard Bank together have approximately 700 000 fleet cards on issue. A
fleet card can be issued for a variety of services ranging from fuel purchases,
oil, tolls, maintenance and tyres
 The fleet card issuers also offer managed maintenance (MM) and Full
Maintenance Leasing (FML)

6. Challenges and risks
 The impact of rising fuel price on fuel costs
 Managing vehicle maintenance costs
 Changing technology
 Fleet ownership versus leasing

7. Fleet market trends
7

8. Fleet market trends – Fleet card
 Transaction authorisations:
– When Chip and Pin was introduced during 2008 and 2009 in the credit and debit card space,
the fleet card issuers experienced migration of cloned cards from debit and credit cards to
fleet cards where Standard Bank Fleet Management’s risk suspense account which averaged
around R1 million at any given time escalated to in excess of R8 million at the end of the first
quarter of 2009
– Standard Bank Fleet Management pioneered the transaction online authorisation project by
submitting a request to the Payments Association of South Africa (PASA) who in return required
it to be an industry project
– The fleet card issuers agreed to a project resulting in each developing negative card files
hosting for example lost, hot or inactive cards. Transactions for such cards will be declined
– Standard Bank Fleet Management took the project one step further, and in addition to a
negative card file also decline transactions for irregularities, ranging from tank capacity exceeds
to use of card in rapid succession
– By doing both the irregularity monitoring and the negative card file monitoring, Standard Bank
Fleet Management declined R228 million in 2011, R257 million in 2012 and YTD declined R54
million.

9. Fleet market trends – Fleet card
 Chip and Pin Cards:
– Chip and Pin technology is currently being explored in the fleet industry
– Currently, with 95% of all transactions dialing up for authorisation, a Chip
and Pin roll out is not considered a threat to transaction authorisation as
the transaction will still be routed online for authorisation
– Chip and Pin could benefit the fleet card industry especially in multi-
national and corporate customers who require to refuel cross-border in
non-common monetary areas
– Fleet Management will explore the feasibility of Chip and Pin card as an
option

10. Fleet market trends - Leasing
South Africa
 Byron Corcoran, Head Finance and
Leasing at Bidvest: “...there is a healthy
demand for vehicle finance and leasing”
 Murray Price, MD of Eqstra Fleet
Management: “...many fleet owners and
operators are questioning their traditional
funding models, which are often driven
more by habit than reason”
Global
 Customers utilise multiple funding
options based on the asset type, usage,
lifecycle and capital constraints
 More focus on whole-life cost of the
fleet, coupled with strategic cost-saving
initiatives and productivity benefits that
is the true measure of value for money

11. Fleet market trends – Carbon tax
South Africa
 The tax on motor vehicle CO2 emissions
increased on April 1 – from R75 to R90 for
every gram of emission per kilometre above
120g of CO2 per kilometre and in the case of
double cabs from R100 to R125 for every gram
per kilometre in excess of 175g per CO2 per
kilometre. This will contribute approximately
1.0% to increased car prices
 Vehicle sales of hybrid vehicles is less than 1%
of total car sales (much slower growth than
Europe)
Global
 The introduction of new EU-backed carbon
emissions limits of 130g/km by 2015 and
95g/km by 2020, mean that governments will
lower the CO2 emission thresholds within their
national car tax regimes
 A steady increase in the number of
companies reporting their emissions
internationally
 Vehicle sales of hybrid vehicles is
approximately 4% of total car sales

12. Fleet market trends – Real time
information
Global
 “The fleet market is moving at such a pace that fleet decision-makers and their
drivers increasingly require access to leasing and fleet management information
whilst away from the office. They require on-demand functionality delivered
through mobile internet channels to devices such as smart phones and
tablets,” said Jan Bouckaert, Head of Business Development at Sofico.
 “The rise in mobile internet access and usage through hand held devices, like smart
phones and tablet PCs, is causing a paradigm shift in working practices.”
 The latest forecasts estimate that mobile internet users worldwide will overtake
those who rely on a traditional desktop internet connection by 2014. Many
company employees now regularly use web-enabled smart phones and other hand-
held devices to access daily workflows and receive important business
information, often out of the office.

13. Challenges and risks
13

14. Challenges and risks
Fuel costs
 Fuel is the largest fleet expense and critical to manage and control
 Fuel price increases have a major impact on fleet cost – indicated in fuel price versus fleet
card fuel transaction values since 2010
 Fuel price increases resulted in average fuel cost per transaction of Standard Bank Fleet
customers to increase from R515 in January 2010 to R833 in December 2012 (62%)
 Vehicle condition and driver behavior are contributing factors that impact on fuel costs and
must be managed (ultimately also impacts the value of the vehicle at replacement)
 Costs can be controlled and managed by exception with fleet reporting that indicate fuel
efficiency against national averages

15. Challenges and risks
Maintenance costs
 Vehicle maintenance costs are challenging to control
 Fleet owners have to ensure that vehicles are routinely serviced, tyres replaced on
time and deal with technical issues
 Well maintained vehicles positively impacts resale values
 Maintenance costs on average increased by approximately 17% from 2010 to
2012
 Average value per invoice increased from approximately R2 500 to R3 300 per
month

16. Challenges and risks
Changing technology
Pre 1990’s
Paper
reporting
Early 1990’s
Reporting via
software
packages
Early 2000’s
Electronic
reporting
Mid 2000’s
Web reporting
Current
decade
Online
transaction
authorisations
Carbon
footprint
reporting
Potential
future
development:
Apps, access
to real time
data, etc.,
possibly via
handheld
devices

17. Challenges and risks
Fleet ownership versus leasing
 European fleet operations have evolved in that almost everything is based on
external suppliers – vehicle sourcing, finance, servicing, fleet management.
Supplier management becomes critical
 In contrast with European countries, majority of South African companies own
their vehicle fleet and thus take full responsibility and cost for acquiring, running,
maintaining and disposing of fleet vehicles
 In addition, vehicles are purchased cash by many companies, thereby impacting
on cash flow
 Any unexpected vehicle maintenance and repairs are for the company’s account
 At the end of its economic life, most vehicles are sold at market price or below,
therefore the full loss in value is borne by the company

18. Fleet solutions
18

19. Fleet solutions
Transaction authorisations
 Fleet card industry changed the
acceptance of fleet cards from an offline
to an online environment
 Invalid and hot listed card transactions
are declined
 Transactions can be declined based on:
– Tank capacity exceeded;
– Time limitations;
– Cancelled cards;
– Wrong card type used
 Daily reporting on declined transactions
 Online access to real-time
transactions of fleet vehicles
Carbon footprint reporting
 Developed ECO2Fleet, a web-based fleet
management data collection and reporting
service that measures the carbon emissions of
vehicles and is aligned to the principles of the
Greenhouse Gas (GHG) Protocol, a globally
recognised accounting tool used to measure
carbon emissions
 Companies need tools to manage, track and
report their carbon footprint that can also
facilitate the implementation and management of
a strategy to reduce their carbon footprint.

20. Fleet solutions
Predictive modelling
 Using their own fleet transactional and operational data, companies can view
the impact of variables on fleet expenses, including fuel price changes,
interest rate changes, tyre price increases, more fleet vehicles
 Variables that can be adjusted:
 Example of fuel price change (Petrol price was R12.00 and Diesel R12.50):
Petrol Price: R11.50
Diesel Price: R12.00
Type Average - last 3 months New monthly averages
Value of fuel transactions 31704.51 30393.2
Value of petrol transactions 26434.34 25318.4
Value of diesel transactions 5270.57 5074.8

21. Conclusion

22. Conclusion
 A well-run and properly managed vehicle fleet is only possible if fleet
owners considered and implemented the fleet solution that is best for their
specific operational conditions and financial mandates
 A fleet solution and the fleet management principles that are applied must
address risk mitigation in order to stay within the financial mandate that
was set for the fleet
 Many new and sophisticated technologies and tools are available that
were developed to assist fleet owners in managing and controlling fleet
expenses and risks
 Vehicle fleets should assist businesses in delivering compelling results
and this is possible when utilising the appropriate fleet management tools.

23. Thank you