Card companies play for General Payables spend

Card Companies are attempting to extend their value proposition beyond the traditional P-card market.  And why not, estimates range that pcards only touch 3% to 5% of total spend for a corporation (eg. T&E Spend, small dollar purchases).  So moving up to large dollar invoices and general payables can have significant impact on their bottom line.

Purchasing Card programs are a form of a company charge card that allows goods and services to be procured without utilizing a traditional purchasing process.   They are used to buy operating supplies, office purchases, and lower-dollar, non-strategic goods and services typically under $10K.  The use of Pcards is similar to outsourcing some of the purchase-to-pay process.

Key drivers of increased P-Card usage are rebates earned for high volume card use and the convenience of swiping a card over carrying cash and processing a receipt.

Pcard Market Characteristics

    • According to RPMG Research Corporation. annual purchasing card spending is expected to increase to $290 billion by 2016 with an expected 8% to 10% CAGR
    • Virtual Cards are being used to penetrate  A/P payments – with a 33% CAGR from 2009-2011 (in the USA)
    • The number of companies using virtual cards is expected to increase from 34% today to 55% by 2014 (in the USA)

What’s driving growth?

Purchasing card spending increases are driven primarily by a few factors:

  1. Increased card distribution throughout the organization
  2. Increase in card spending limits
  3. New product introductions from both the banks and card companies.   Products focused on single use, larger transactions, or for a specific vendor for a specific/recurring transaction with higher spending limits (e.g. utilities such as electricity bills, limo services, etc.) are now common.
  4. Increase in card acceptance by vendors.


The challenge pcards have is the business model is not able to deal with B2B transactions that can involve disputes and chargebacks, and also just the economics of cards.  Suppliers do not want to pay 2% to 3% of invoice value when transactions start getting larger to justify the interchange model.

Major card companies are not sitting idle.  Mastercard has placed a bet with Basware that it can tap into its network with the use of pcards and private exchange.  Mastercard has also started a site for small business, MasterCard Biz, which provides advice on topics like how to improve your business’ credit, how to raise capital and how to attract and retain employees.

Discover is working with Ariba on AribaPay to take over the message routing and handling between the buyer and Ariba, specifically handling the crediting of supplier/merchant accounts via ACH.  Leading banks with commercial card programs such as JPMorgan, Citibank, US Bank, and PNC financial are also responding.  For example, Citi® Commercial Cards, has issuance capabilities in over 100 countries and an extensive proprietary local currency network of 67 countries.

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