Expanding its business card program, Visa U.S.A. said Tuesday that it will launch a procurement card this fall designed for purchases that typically fall under $5,000.
By doing so, Visa says, it is nudging ahead of its chief competitors in the $300 billion procurement card market: MasterCard International and American Express Co.
At the same time, Visa will introduce a travel and entertainment card providing more comprehensive billing, reporting, and authorization controls. And it will reposition the existing Visa Business Card for small companies.
"One size [of business card] does not fit all any more," said Richard H. Hagadorn, senior vice president of credit products at Visa. "What we're doing is saying there are three separate, very distinct cards here. We're the first card company to do that."
Termed Profitable
Cost studies from Pilot Programs have shown procurement cards will be profitable for bank issuers, Mr. Hagadorn said, with returns on equity exceeding 20%.
Meanwhile, the cards are said to help companies centralize purchasing decisions, reduce billing expenses, and pin flexibility in negotiating with suppliers.
Visa will target its marketing at Fortune 1,000 companies and the 300,000 middle-market companies. "We think we'll do $20 billion [in sales] over the next several years," Mr. Hagadorn said. "We think it will spread very quickly."
Procurement card issuers say businesses can save 25% to 40% in processing costs by switching from traditional purchase-order systems.
Visa says its more than 10 million acceptance locations worldwide give it a competitive edge. "It's going to be pretty tough to beat this thing," said Mr. Hagadorn.
Visa's procurement card will allow companies to control the type, size, and amount of employee purchases. For example, purchasing managers can restrict which merchants employees can buy from and how much money employees can spend.
We're automating all this power and control that a purchasing manager had with the old, cranky purchasing system," Mr. Hagadorn said.
