Issuers are sweetening their rewards programs for corporate credit cards in an effort to attract new employer clients and encourage employees to actually use them.
Corporate credit cards are more common at large companies, and observers say small and midsize businesses offer a largely untapped market. To reach it, issuers are using a two-pronged strategy to encourage corporate clients to shift their purchases to plastic — touting to employers the ability to gather and analyze valuable spending data for card transactions, and offering individual cardholders rewards programs that can be comparable to those on their personal cards.
"It's one thing to have a company agree to use your cards. It's another thing to have actual transactions go through the card," said Nancy Atkinson, a senior analyst who follows wholesale banking at Aite Group LLC.
Rewards programs for corporate cards often come with a variety of restrictions, such as limiting the types of purchases that earn points or imposing expiration dates or other hurdles for redeeming them.
Lisa Steury, the executive director of commercial card product at JPMorgan Chase & Co., said that such programs are "not very relevant, especially to a frequent business traveler."
The company last week sweetened the pot for its midmarket commercial card customers by eliminating several restrictions. Cardholders in this category, which JPMorgan Chase defines as businesses that generate up to $500 million in annual revenue, previously only earned rewards points on travel and entertainment purchases. Individual cardholders could earn up to 50,000 points annually, and the points expired after three years.
These cardholders now can earn points for any purchase, and JPMorgan Chase eliminated both the cap and the expiration date.
"We wanted to make sure we were matching what our competitors were doing from a rewards perspective," Steury said. In this case, the competition is mainly American Express Co., which has long dominated the corporate card market.
In many ways, the move brings JPMorgan Chase more "in line with American Express, which is sort of the gold standard in the corporate card arena," said Aaron McPherson, a practice director with IDC Financial Insights.
(Amex spokeswoman Molly Faust said its Membership Rewards program has neither a cap nor expiration date on points.)
Capital One Financial Corp. unveiled a small-business card last week that lets users earn two airline miles for every dollar spent with no expiration date, mirroring some of its consumer cards.
Customer data shows that rewards are as important to small-business owners as they are to consumer cardholders, said Jimmy Lee, a managing vice president and head of national small-business cards for Capital One.
The small-business market is one of Capital One's "key strategic segments," he said.
Corporate card rewards have historically been limited mainly to travel and entertainment expenses; letting people earn points for other purchases is "relatively rare," Red Gillen, a senior analyst for the banking research firm Celent, wrote in an e-mail.
As a result, many employees use their own cards to earn points for business expenses. Gillen said that with beefed-up corporate rewards, "if the point program is rich enough, it could be a shrewd way to steal payment volume" from employees' personal credit cards.
To move these purchases on to corporate cards, issuers "have to counter rewards offered by such personal cards."
Suppliers and vendors are becoming more open to accepting cards for other types of business-to-business payments, McPherson said, which is prompting issuers to expand rewards programs.
"It's not just for T&E anymore," he said.
Many businesses are eager to see purchases move not to personal cards, but to corporate accounts that they can monitor. Companies can keep track of employees spending, and leverage the data to negotiate discounts with vendors.
"Really, the cornerstone of a commercial card program is the data," Steury said. "The more the company uses the card or the more the cardholder uses the card, the more data can go back to the company." And those savings can help businesses justify the fees they must pay to offer corporate cards to employees.
Paying by card can also be cheaper for a business than making payments via wire or automated clearing house services, an important value proposition in light of the pressure to cut costs, said Ken Paterson, the director of Mercator Advisory Group Inc.'s credit advisory service.
"In today's economic environment, cost controls are just such an important element for larger companies," he said. "I think that's where the main value of these types of programs comes, both in getting employees to use those cards to transact as much corporate business on those as makes sense economically and, by the same token, the company realizing the benefit of the purchase data that comes with that. The more transactions go through the official corporate card, the better controls they potentially have over that spending."
And there's plenty of room for growth. Only about 15% to 20% of "middle-market and large corporations" use commercial cards, representing a "huge untapped market," Mercator estimates.
"There is still room based on our analysis to actually grow new corporate card programs or expand corporate card programs to a broader employee base," Paterson said.