National City Corp. said it will use its merchant processing power to initiate a purchasing card program.
Vying for a slice of the $300 billion to $400 billion spent annually on corporate purchases, National City will try to attract customers to its Visa Purchasing Card for Business by offering a cheaper method of procurement than paper-based purchase orders.
The Cleveland-based bank's announcement that it is entering the purchasing arena this week follows a number of recent launches, including ones by PNC Corp., NationsBank Corp., Comerica Inc., and GE Capital Corp.
While momentum for the purchasing card picks up, one hold-up to a potential avalanche of announcements is that 40% to 50% of vendors don't accept credit cards.
The $33 billion-asset National City could use its merchant services group and subsidiary, National City Processing Co. - the second-largest credit card transaction processor in the country - to gain a competitive advantage in purchasing cards.
"When we take on a corporate customer, they'll give us list of trading partners and we will go to each merchant and help make them card-capable," through merchant services and the processing unit, said Mary Ann Francis, vice president and manager of corporate product management for National City.
"Issuing the plastic is one step - getting transactions on it is where the cost saving is," Ms. Francis said. "The key to the purchasing card is not just processing, but reporting information and accounting."
National City chose ProCard Inc. to design its program. The Golden, Colo.-based company has been servicing purchasing card portfolios since 1991.
Ms. Francis said the company picked ProCard because it offered the most automated service and had the most experience in the marketplace.
"We looked very seriously at EDS, but they have no current users," she said. "In the reengineering world people like success stories and proven products."
ProCard has 350 clients, including Amoco, AT&T, Westinghouse, and Chevron.
Customized software provides daily on-line reporting, reduces labor- intensive input data, and has an accounting subsystem for automatic electronic filing, said Philip Skarston, ProCard's vice president of marketing services.
"National City wants to compete against established providers in the marketplace, including American Express," said Mr. Skarston. "To do that they have to have the best technology."
Ms. Francis said the program will be tested internally this year, anticipating a 1996 launch.
Ms. Francis said 34 customers have expressed interest in the purchasing card program and she expects to have at least 25 to 30 clients in the first year.
Eliminating paper-based systems will save companies most of the costs of purchasing goods. "Instead of creating 1,000 purchase orders, receiving 1,000 invoices, and then creating 1,000 checks," she said, "there's no purchase orders, one statement, and then one check or an ACH (automated clearing house) debit or credit. That's why people use the card."
