Craig Fruhan, manager of Intel Corp.'s purchasing card program, has a bone to pick with bankers.
Although his 2,600-employee program saves Intel $70 to $80 per transaction, or $6 million annually, Mr. Fruhan said in an interview that the banking industry is slow to respond to the specific needs of global corporations and makes "promises it can't keep."
Mr. Fruhan, materials manager, special projects for the computer chip manufacturer, "can't imagine circumstances that would cause us to eliminate" the card program. But he can imagine switching providers to get his needs met.
Intel's Visa purchasing cards are issued by First Bank System Inc., the leading bank in the commercial card market. Among its clients are 125 of the Fortune 500.
In 1992, when Intel launched its program, it had few choices. Today, Mr. Fruhan could consider American Express, Citicorp and its Diners Club unit, Chase Manhattan Corp., Wells Fargo & Co., and others.
Industry growth has been slow. Of a potential $400 billion in annual corporate procurements, only $3.9 billion was charged on purchasing cards in 1995, according to Philadelphia-based WEFA Group.
Though many programs have been introduced, the majority are in pilot phase, and banks find them a tough sell.
Mr. Fruhan, whose program generated $25 million of charges on 81,000 transactions last year, stressed that he is not knocking his issuer, First Bank, or Visa. He aims his messages at the industry at large.
Now that purchasing cards are becoming somewhat more widespread, what can banks do to improve the process?
FRUHAN: The time for sales pitches is over. Banks have (corporations) convinced that doing procurement cards is the way to go. We're sold on it. We want (banks) to roll their up sleeves and set up a plan to resolve the multinational issues and data-reporting issues with a time line - hard and fast milestones - and have someone be able to execute it.
We continually hear talk about things they're going to do, but when we press them on it, its not available. The schedule keeps slipping. If competitive companies took as long to bring to the market some of the (features) the associations (Visa, MasterCard, and American Express) have promised (on purchasing cards), they'd be out of business.
What would speed up the process and create the kind of programs corporations like Intel need?
FRUHAN: Banks should act more like consultants. They've got visibility into other programs they issue. They know what Siemens or American Airlines is doing (to improve their programs). They should be sharing that information with other clients. They'd rather sell me a canned product.
There are many complicated issues, such as data capture for tax purposes and accounting. What are the problems you've encountered?
FRUHAN: Banks are good about getting all the ones and zeros into the right columns. They're good at data transmission and accounting. But until the associations make it mandatory for someone to key in tax information, we'll never get 100% capture. Beyond that, various state boards of revenue will not accept electronic data for auditing purposes. They still want hard-copy receipts.
The associations were trying to lobby the 50 state boards of revenue to get them to change, but have been unsuccessful. We hung our hopes on getting rid of the paper. Wrong. They shouldn't promise what they can't deliver.
Sophisticated software is being developed to capture what is called "level 3" data, including tax information and line-item detail. Will that additional information help?
FRUHAN: They tell us, "We'll get variable data capture," including tax and valued-added tax data. They're blowing smoke. They're relying on clerks to punch in correct tax data, which can never be foolproof.
What problems does a multinational like Intel face in terms of getting divisions in all countries on the system.
FRUHAN: Creating a worldwide product has been slow in coming. It has slowed me down getting this implemented around the globe.
I use First Bank System here, but elsewhere I use other banks and other cards, not necessarily Visa. At this point there is no synergy other than internally saying the concept works.
What would solve the problem?
FRUHAN: I want First Bank to be international or to be allowed the flexibility to help us in these other countries. Banks are handcuffed by Visa bylaws and international regulations.
Are there other issues around international implementation?
FRUHAN: Even if I was successful getting the company on a Visa product all over the globe, I can't get a worldwide accounting of annual spending. I have to go to each country and get a diskette or request spending history over E-mail. There's no way to roll it all up. International implementation and reporting is something we talked about several years ago, and we're still waiting.
Banks are choosing different processors - such as First Data, Total System Services, or Electronic Data Systems - with different types of reporting software and varying levels of service. Visa and MasterCard are offering purchasing software as well, and American Express has a program. Are there significant differences?
FRUHAN: It's all smoke and mirrors. They're all flavors of vanilla. They all take point-of-sale data, transmit it electronically, capture it in some summary billing, and transmit it with some data included.
The desktop systems I've seen can't handle the volumes that we see. On the way to 120,000 transactions this year and $40 million in purchases, if I try to run my information through the desktop reporting system available through Visa and First Bank, my system will slow down, cough, and gag.
What are your options?
FRUHAN: Banks are becoming commodities. Four years ago there were very few choices; today there's a multitude. I could be on a procurement system with any major bank in the country within a month. The winner is the one that can change its program to meet our needs.