The commercial card market is fast establishing itself as a new frontier for the bank card industry, and Total System Services Inc. wants bankers to know it got there first.
The Columbus, Ga.-based company, second in credit card processing to First Data Corp., claims a 50% share of the card accounts in this nascent market.
Although that adds up to only 1.37 million accounts at this early stage, Richard W. Ussery, chairman and chief executive, said Total System is gathering experience that other processors will find difficult to match.
While the vast majority of accounts are travel and entertainment - only 123,000 purchasing, or procurement, cards are on the system - "purchasing cards have become the hottest product," Mr. Ussery said in an interview last week.
Commercial cards give banks an opportunity to "hook corporate customers and keep them from going down the street," said Mr. Ussery, who was in New York to attend the Faulkner & Gray corporate card conference.
Total System, 80% owned by Synovus Financial Corp., is committed to growth, said Mr. Ussery. In the past six months it has added seven corporate card client banks, for a total of 31. They include First Bank System Inc. and First Chicago Corp., two of the industry leaders in corporate cards.
Other clients are Citicorp, GE Capital, Bank of America, Canadian Imperial Bank of Commerce, Mellon Bank Corp., NBD Bank, SunTrust Banks Inc., Wells Fargo Bank, Commerce Bank of Kansas City, and PNC Bank.
Notably, many of these institutions process their own consumer credit cards or use other processors like First Data. Corporate cards gave Total System a foot in those doors.
Total System began developing its corporate card program in 1990. In 1992 it introduced the Total Business Card Reporting System. A year later, Total System created commercial services as a separate business unit and in 1994 it formed a Commercial User Group in which clients help set product development priorities.
Speed is of the essence in a market that could account for as much as $400 billion of annual sales, and which is attracting numerous technologically savvy competitors.
Keith D. Pierce, vice president of commercial products, said Total System is building on its foundation in consumer card processing, serving 114 issuing institutions with 48 million accounts.
The account base is about half of First Data's, but the issuers include such giants as AT&T Universal Card Services, Bank of America, and NationsBank.
Mr. Pierce said his company developed sophisticated processing modules compatible with the core card processing system, offering a stable, proven program to commercial card issuers.
"We deliver the power of Total System plus what we consider state-of- the-art commercial card functionality," he said.
Even so, ProCard Inc., a developer of purchasing card software for small-dollar employee purchases, which has been using Total System as processor for five years, just announced a switch to Plano, Tex.-based EDS. (See article below.)
ProCard said it runs about 60,000 purchasing card accounts on the Total platform, which it will move to EDS. ProCard's clients include First Chicago, which means its purchasing card accounts will go to EDS.
Philip A. Skarston, vice president of ProCard, said EDS was a "better fit" for his company. He called Total System an "excellent bank card processor" but viewed EDS as especially committed to the commercial arena. He mentioned the leadership of Fred Gumbel, who moved to EDS after spearheading First Bank System's corporate card programs, and Donald Kilpatrick, who came from First Chicago.
Mr. Skarston said Total System's consumer card processing business brings in most of the company's revenues, implying that corporate programs will get less attention.
Mr. Pierce contended that Total System "is totally dedicated to the commercial card business." He has a staff of 75 concentrating on commercial cards and called it the second-most important core business, after consumer cards and ahead of merchant processing.
Still, Mr. Skarston said EDS commands a much smaller share of the consumer card market and can give its purchasing card program, and ProCard, greater attention.
He added that Total System designed its system with ProCard in 1989 while EDS just completed its system in April: "Logic tells you EDS's is more current than Total's."
Mr. Pierce, who joined the company in 1985 as a management trainee, said Total System's program is up and running and is updated at least three times a year with input from users, while EDS has yet to process an account.
"One thing a lot of folks miss," said Mr. Ussery, "is that the commercial card product uses Visa's and MasterCard's system like any traditional card. You've gotta have a strong system to be successful."
He pointed out that servicing millions of accounts each day "gives us a good track record. We've got the system down."
Mr. Pierce estimated the ProCard portfolio at 20,000 accounts and said that while Total System is disappointed, its loss will have little effect on business volume.
Total System was the first corporate card processor to be certified by both Visa and MasterCard. Other companies recently certified include EDS and Synapsys Inc., a CoreStates Financial Corp. company. Rocky Mountain BankCard, a First Bank System subsidiary that processes many government accounts, is Visa-certified, while First Data Corp. is launching its purchasing card and awaits certification.
Marc Altman, senior vice president of sales and marketing for First of America Bank Corp., said Total System and Synapsys are the two operational systems that can deliver "high-quality products clients are happy with."
He said First of America, a First Data client, is waiting for that company to help it launch commercial cards.
Total System, like EDS and other competitors, offers comprehensive spending reports and management support and lets companies set authorization and spending parameters for each card. Clients get daily data reports through a value-added-network such as IBM's Advantis.
Mr. Pierce said Total System "sees a lot of revenue potential."
"There's $200 million in annual processing revenue sitting out there for the taking," he said, pointing out that Total System's revenues last year were less than $200 million.
Out of 36 million potential corporate card users, only 10 million actually use some form of travel and entertainment card, Mr. Pierce said. And of the $140 billion being spent, only 26% of transactions are billed to a corporate card. The rest, he said, are on personal cards or cash advances and other payment forms.
Only 4% of the 10 million businesses in the United States have more than 100 employees, Mr. Pierce added. The majority fit into the small-business category, another underserved market.
"We're really just scratching the surface," he said.
