CHICAGO -- U.S. Bank of Portland, Ore., and SunTrust Banks Inc.'s SunTrust BankCard subsidiary in Orlando have joined the Visa purchasing-card program.
Visa announced the signings this week to coincide with a conference sponsored by Faulkner & Gray, the newsletter publisher, on corporate credit cards. The superregional banks join five others in the program, including Chase Manhattan Corp., which announced last week that it would issue the card for small transactions by company employees.
As MasterCard and Visa set their sights on a market of business-related purchases estimated at $300 billion a year, banks are trickling in. Only 1% of all such purchases up to $10,000 are captured on cards.
"I think what we're seeing is just the beginning," said Robert Levaro, vice president of commercial card products at Visa U.S.A.
Survey Results
He cited results of a survey commissioned by Visa, showing that 58% of purchasing executives said their companies are considering a purchasing card-program.
About 90% said their firms were spending too much time and money administering the small transactions.
Unlike other products driven by the bank card associations and individual financial institutions, card-based purchasing systems have been pushed by corporations looking for ways to control costs and improve employee accountability.
The programs allow businesses to set spending parameters by employee, vendor, and transaction type.
"Companies are coming to banks where they already have relationships," asking for this product, Mr. Levaro pointed out. "That has been the big source of issuers' interest."
'Client Sensitive'
The fact that U.S. Bank and SunTrust are responding to this demand, Mr. Levaro said, "really speaks to the fact that both of these institutions are client sensitive."
For U.S. Bank, the subsidiary of U.S. Bancorp, the addition of the purchasing program rounds out its package of Visa commercial products. The others are a corporate travel and entertainment card and a small business-oriented card, said Gary Barth, vice president of commercial card products.
U.S. Bank began issuing a corporate travel and entertainment card in 1988, he said, and added the small-business card in 1993.
In both segments, banks have a long way to go to challenge American Express Co.'s dominance. Visa and MasterCard are working hard to persuade bankers to make card products an integral part of their business relationships, and thereby reclaim some revenue from that non-bank giant.
Covering All the Bases
"If you are serving a business customer right, there is no reason for it to be using American Express cards," Visa U.S.A. president Carl Pascarella said in a recent interview.
"We consider the Visa purchasing card to be a value enhancer that adds breadth and depth to our existing customer relationships," Mr. Barth said.
Like U.S. Bank, SunTrust said it wants to capitalize on its existing corporate relationships to market the purchasing card.
"Based on the positive response we've received from the corporate market, we believe that it's a smart business move to offer the purchasing card as a whole new area of cash management service for our customers," said John Delappa, vice president of SunTrust BankCard.
Cutting Administrative Costs
Although the vast potential for procurement cards has been hyped by the card associations and other experts, Mr. Barth said U.S. Bank will ease into that part of the market by developing business with existing customers. With that as a foundation, it may then begin seeking other clients.
Meanwhile, the purchasing card market will continue to grow as Visa, MasterCard, and American Express continue to tout the ability to save money for businesses, and make money for the issuer.
By replacing and streamlining paper-based purchases, corporations can cut relevant administrative costs by up to 50%, the card advocates maintain.
Visa has issued more than 150,000 purchasing cards.
The San Francisco-based association said its commercial card products as a whole have enjoyed substantial growth this year. Visa estimates that its second-quarter U.S. sales volume will be more than double the 1993 total.
