Chase Manhattan Corp.'s announcement this week of its corporate purchasing card indicates not only that this new segment of the credit card market is heating up, but that Chase intends to be a major factor in it.
Chase, one of the top five bank credit card issuers, said Monday that it would offer its corporate customers a Visa purchasing, or procurement, card designed for use in small-ticket transactions averaging less than $250.
Twelve large corporations are conducting pilot programs with the card, which Chase's card operation in Delaware, Chase Manhattan Bank (U.S.A.), expects to be issuing nationwide by yearend.
Fortune 500 Targeted
"The total transaction volume for this [type of] product is $300 billion, and we expect to take a substantial piece of that market," said Anna Mickiewicz, vice president of the business unit responsible for new-product development within Chase's global and payment services group.
That group, which is responsible for the New York bank's sizable corporate cash-management and wholesale-services business, joined forces with Chase's credit card bank to develop the corporate product.
Chase's procurement program targets Fortune 500 companies, said Deborah Talbot, senior vice president of the global payment and services group. "This is not for the small user," she added.
Convenience a Plus
Purchasing cards, which streamline business-to-business transactions delegated to employees, are touted for their convenience and lower paperwork costs. Chase said a corporation with 1,500 cardholders who use the card on 50,000 purchases annually could save between $850,000 and $1.7 million per year.
Corporations using small-ticket procurement can reduce or eliminate invoices, paper order forms and purchase orders, and the need to produce and process checks. Companies receive a single monthly bill from their bank, just as in the consumer-payment system.
Chase estimates that the typical purchase order requires 12 steps, which can be reduced to four with its purchasing card.
In addition, Chase claims that vendors respond more quickly to corporations using a purchasing card, because they expect to receive payment earlier.
"Merchants are screaming for this product," said a Visa spokesman.
Visa U.S.A. has signed five other major credit card issuers, including Citicorp and Core-States Financial Corp., to the procurement program, one of three components of a business card strategy that includes cards for travel and entertainment and for small-business needs.
The San Francisco-based card association, which is aggressively promoting the procurement card as an adjunct to banks' business-deposit relationships, said 150,000 of its purchasing cards have been issued, and they are acceptable at 11 million merchants worldwide.
Chase officials said they hope to distinguish their card from others by offering greater flexibility and customizing the program for specific users' needs.
"It's unique because we are able to fit our product into our customers' payment systems," tying the product to a specific vendor, said Ms. Talbot.
Selling Points
Ms. Talbot is also selling the card as an entree to Chase's cash and treasury management capabilities, and as an opportunity for companies to "reengineer."
"The purchasing card is the latest example of Chase's unmatched ability to help corporate customers minimize cumbersome paperwork and dramatically reduce operating expenses," Ms. Talbot said. "It will equip corporations with the data to help them radically rethink the way they handle their purchasing decisions."
The product also gives business managers control over how the cards are utilized.
Employers can determine how much each cardholder is allowed to spend per transaction. They can also restrict card usage to specific merchants or types of merchandise.
Also, purchasing managers can request up to six customized reports on how and where the cards were used.
