Commercial cards have bankers excited.
It's a burgeoning market, with dollar volume for small purchases totaling more than $400 billion per year, and $162 billion spent on travel and entertainment. Opportunities abound, and stealing customers isn't the only way to grow a portfolio ... not yet, anyway.
Corporate, purchasing, and small-business cards are capturing bankers' imaginations as ways to establish and solidify cash management relationships, said speakers at the recent Faulkner & Gray Corporate Card Conference in New York.
"As the world becomes a smaller place," said keynote speaker Joseph Saunders, "corporate cards can take a larger role in serving global companies." Mr. Saunders is president and chief executive of Household International.
David Hillman, a travel industry consultant with Deloitte & Touche, said overall interest in the corporate card market is high, with purchasing cards provoking the most excitement.
Though such cards have been in existence for several years, there wasn't a driving force in the market place to spur acceptance until "a champion surfaced in business reengineering," he said.
"The purchasing card fit perfectly into the vision of a paperless process" for one of corporate America's most archaic procedures - the purchasing department, he said. "Corporate eyes are now on you to introduce wide use of this product."
David Kurrasch, senior vice president of Wells Fargo Bank, reminded the 200 conference participants not to "ignore the requirements of the supplier."
He told bankers to partner with acquirers to get merchants signed up and on a satisfactory purchasing card program. "If it doesn't work," he said, "they're not going to play the game."
The three main players in the third-party processing business presented their visions of the corporate card back office.
Fred Gumbel, president of electronic commerce for Electronic Data Systems Corp., described a paperless world in which companies buy goods out of an electronic catalogue, sending orders from computer to computer, all set up through EDS' electronic data interchange.
Some observers pointed out that such a system could eliminate the need for credit cards. The sophisticated system might be impractical for smaller concerns where many employees would do the shopping, observers added.
Mr. Gumbel said, "Seemlessly integrated supply chain management would create a competitive advantage." In the same vein, he said third-party processors that don't deliver "full supply chain management will put companies at a disadvantage."
Kathryn V. Marinello, president of debit and commercial cards for First Data Resources, a unit of top processor First Data Corp., said First Data would soon be unveiling its own purchasing card product.
Ms. Marinello, who was recently president of the leading purchasing card issuer, First Bank System, said companies need to get as much data as possible at the point of sale. She said the data must be presented in a reliable format so clients can analyze and control spending.
First Data's partnership with Nabanco, the largest merchant processor, will help get merchants signed up to accept purchasing cards, she said.
Her message was simple: "Get the data, deliver it, and make sure it's well orchestrated." But she added, "Simple is not always simple to deliver."
Richard W. Ussery, chairman and chief executive of Total System Services Inc., First Data's closest competitor, said his company was the only one of the three with a purchasing program up and running.
Total System has been processing corporate cards since 1990, with 31 banks on its platform.
"Processors must provide new capabilities of data capture and transmission," he said. The demand for more detailed transaction data is just beginning. "Merchants are the most critical link in how successful a program will be," he said.
He added that Visa and MasterCard would play important roles in the success of purchasing cards.
Star Banc Corp.'s senior vice president and manager of card services, Collin McKenny, presented preliminary results of a frequent-flier program available through Star Banc's corporate cards.
The program offers a ticket worth up to $500 anywhere in the United States after charges of $25,000. It imposes a $25 fee.
Interchange in 1994 for the travel program was higher, 14.7%, than the 9.9% on nonrebate cards, she said, and delinquencies and chargeoffs were significantly lower, which she attributed to the value customers assigned to the account.
Average balances in 1994 were $1,899 on the travel accounts, she said, compared to $934 on regular business cards, with 91% carrying a balance, compared to 44% of regular accounts.
"I think Star Banc's frequent-flier program may become an industry standard," said conference participant Alan M. Welch, senior vice president of Wachovia Bank Card Services, which just announced its own program.