Mellon Bank Corp. has weighed in with its version of a purchasing card for business customers.

The Pittsburgh-based bank's MasterCard procurement product already has three customers in rollout stages, and commitments from 27 of its corporate clients, typically Fortune 1,500 companies.

Mellon, which ranks 27th among credit card issuers, also offers a travel and entertainment card geared for corporate expenses. While the business- travel card is managed by Mellon's consumer credit card business, the purchasing card was developed by the global cash management business and spearheaded by Edward Valenzuela, vice president and director of marketing for that corporate services unit.

Purchasing or procurement cards are generally used for lower-value, business-to-business purchases such as office supplies, and they are designed to help companies control and lower their requisition costs.

Mr. Valenzuela pointed out that an item priced at $10 could cost a company as much as $80 in administrative functions associated with purchasing and accounting for the transaction.

"In a typical procurement cycle, the administrative costs for companies can add between $50 and $250 to each small purchase," said Robert Stasik, executive vice president of global cash management. Mellon's product will reduce time and paperwork while increasing companies' control.

The key to Mellon's program, said Mr. Valenzuela, is its flexibility and ability to control how the card is used by a company's employees.

Companies may limit the number of merchants who accept their card, and employers can restrict how often the card is used by employees.

For example, some customized programs may limit the number of times an employee uses the card by the day, week, or month, or how much money the employee spends in those periods.

Also, the terms of each program, like the interest rate and other pricing variables, will differ, said Mr. Valenzuela, depending on how each program is structured.

The corporate card market, which is dominated by American Express with six million such cards, is fairly new to banks. But the estimated size of the market is $300 billion, which the MasterCard and Visa networks see as a natural growth opportunity.

One of the bank-owned associations' big selling points is the ability to use their cards at some 12 million merchant locations worldwide.

MasterCard said 18 of its members have signed up for its purchasing card program representing tk cards. And Visa said it has signed up 20 financial institutions representing 200,000 cards.

A Visa bylaw prohibits financial institutions from issuing both associations' brands, but Visa members in both programs have until March 1996 to make their final choices.

However, Citibank has been issuing both Visa and MasterCard purchasing cards, and Mr. Valenzuela predicted that Visa will not enforce its bylaw.

"I don't foresee Visa asking Citibank to withdraw from the (Visa program)," said the Mellon bank executive.

Bank of America, a bank with historically close ties to Visa, also recently decided to join the MasterCard purchasing program, hoping the anti-duality rule will be dropped.

Mr. Valenzuela believes the most important differentiator between purchasing products is the initial discussion that each company has with its card issuer about how the program will be developed.

"The real difference will be on the front-end consulting rather than the actual products," he said.

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