The corporate card market is wide open, with vast untapped opportunities and lower losses than the highly competitive and mature consumer card business, a researcher said last week.
Payment Systems Inc. research director Warren Emerson said many companies are not aware of the availability of commercial card services. "You have to ask in order to get the business," he said.
The Tampa, Fla.-based research firm presented the findings at its spring conference in New York.
"This can be an exciting time," Mr. Emerson said of the emerging commercial opportunities. "You will set the course on how cards are marketed to businesses."
PSI's first study on business card products addressed current payment methods and patterns, perceived benefits, barriers to acceptance, and marketing tips for successful programs.
Procurement cards, designed for purchases of office supplies and other business needs, have been generating more attention of late, with numerous new programs announced in the past several months. The card issuers include Comerica Inc., National City Corp., Mellon Bank Corp., Canadian Imperial Bank of Commerce, Wells Fargo Bank, and PNC Bank Corp.
From surveying 1,180 companies, ranging in annual sales from $250,000 to more than $250 million, PSI estimated that they all spend more than $160 billion a year on travel and entertainment.
But Mr. Emerson said only 25% of the companies surveyed think those costs are significant. "They're not as excited about this $160 billion as we are," he said.
Mr. Emerson pointed out that while American Express dominates this market, there is room for bank competition.
He said 50% of respondents said they would switch brands for wider merchant acceptance. "If you're a bank," he said, "this is something you can offer. If you're American Express, you'll have a little trouble."
While he said the marketplace is well seeded with travel and entertainment cards, a low penetration of potential dollar volume "leaves significant ground" for growth.
He also said there is room for increasing marketing activity. Fewer than 20% of respondents said they were solicited by a Visa or MasterCard program in the six months before the survey, which was conducted in February and March.
The purchasing card market, on the other hand, is even more accessible, said Mr. Emerson.
While smaller firms have the most transactions, larger firms generate greater dollar volumes.
The study extrapolated that more than four million companies make supply purchases, compared with about two million that spend on travel and entertainment.
PSI did not give a dollar volume estimate for those transactions, but industry observers have said $300 billion to $400 billion is spent annually on corporate supplies.
Processing of some 384 million purchase orders costs companies $55 billion annually, PSI said.
Even so, Mr. Emerson said most companies surveyed "don't recognize they have a problem."
He said that to attract customers, "you've got to make them dissatisfied with the way things are working.
"If you can design a service to address this need, you are providing value."
He said less than half of those surveyed had heard of the purchasing card concept, and only 27% could name a brand.
"The concept has not begun to be sold," he said. "You have to work hard to raise the interest level."
