Two credit card giants are gearing up to capture more of the commercial market.
MasterCard International says its new commercial payments group plans to beat out American Express Co. as the leader in business cards. Meanwhile, MBNA Corp. has bolstered its small-business card line with a deal to provide a cobranded card through CIT Group’s small-business lending unit.
MasterCard wants “to take a leadership position in this industry,” said Steve Abrams, a senior vice president and the head of the new group. On Wednesday the Purchase, N.Y., company announced that it had shored up its commercial payments unit by hiring three executives. All of them worked at Amex earlier in their careers.
“I have a whole new front line,” Mr. Abrams said of his new staff. “We’re going to be much more successful and aggressive.”
With 80% of business-to-business payments still being made with paper checks, according to MasterCard, commercial payments represent a large untapped market for cards.
Though American Express has traditionally had the lion’s share of business in the commercial space, MasterCard has “won a lot of business from Amex,” Mr. Abrams said.
In addition to “equal or better management information systems,” he said, MasterCard offers a MultiCard, which can act as a purchasing, travel and expense, or fleet card. (American Express recommends that larger companies keep those accounts separate.)
MasterCard also says its Smart Data OnLine program, a Web-based application that allows companies to manage and analyze corporate-card financial data, is a major advantage. The program records transaction data such as passenger names, room rates, restaurant charges, car rental information, and fuel brands, helping businesses negotiate better terms with vendors and monitor cardholder spending.
“Getting information is core,” Mr. Abrams said. “You need to understand where the volume is.”
Amex says its Global Data Repository is more comprehensive than MasterCard’s Smart Data. “We knew years ago that we needed to have a single point with consistent data,” said Yvonne Schneider, a vice president at Amex. “A lot of people are in catch up mode.”
Last month Amex launched a service to help companies control out-of-policy travel and expense expenditures by employees. The new “variance reports” highlight the differential between the travel and entertainment expenses that employees book versus what they actually pay for with their Amex corporate cards.
Amex and MasterCard both tout hotel “folio” programs, in which hotels report data on corporate cardholders to their employers, as important growth opportunities. Both companies have signed Marriott International Inc., Hilton Hotels Corp., Carlson Cos. Inc., and Choice Hotels International Inc. MasterCard plans to replicate the program for car rentals.
MBNA, of Wilmington, Del., will manage the card program for the CIT unit, which said it has been the nation’s top Small Business Administration lender for the past five years.
Under the deal announced Wednesday, MBNA will offer two cards with CIT. One will require no annual fee and carry a fixed interest rate. The other will charge a $35 annual fee and offer travel and merchandise rewards.
At yearend MBNA’s domestic commercial loan receivables totaled $2.7 billion. These include business card debts and other commercial loans. Last year MBNA acquired the voting stock of Sky Financial Solutions Inc., which had $893 million of commercial loan receivables.
MBNA has struggled to expand its portfolio recently and is under pressure to diversify. On Wednesday, Fox-Pitt Kelton downgraded the company to “in line” from “outperform,” citing expectations that more cardholders will pay off their loans and that MBNA will book more accounts using teaser-rate products, both of which would hurt income.
