In a move to strengthen relationships with its multinational customers, U.S. Bancorp's subsidiary Elavon Financial Services Ltd. soon will begin issuing commercial cards in Europe through a new processing agreement with Total System Services Inc.
U.S. Bank's initial overseas commercial card-issuing program is confined to Europe, where it will compete with several major players offering robust global commercial card services, including American Express Co., Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., observers said.
The arrangement will enable U.S. Bank for the first time to issue cards in British pounds in the U.K. and in euros in Ireland, France, Germany, Spain and Italy, the bank said in a press release Tuesday.
U.S. Bank said it plans to begin issuing commercial cards in Europe "this summer" and will soon extend its card-issuing capabilities to other European countries. A bank representative did not say when expansion to other countries would begin.
Providing direct commercial card issuance in local currency is becoming increasingly important as corporations operating abroad seek the advantages of local exchange rates and the ability to streamline data.
"Our North American multinational customers increasingly are saying they want their card programs to fall under a single global contract with a single point of approval and a single service contact" for consolidated worldwide reporting and rapid analysis of commercial card data, the U.S. Bank representative said in an interview.
It is unlikely U.S. Bank will attempt to compete head to head with the biggest direct commercial card issuers around the world, an analyst said.
"I see U.S. Bank's move into commercial card issuing in Europe as primarily defensive in that they want to prevent some of the bigger global card operators from taking away their multinational customers that have operations overseas," Patricia McGinnis, a director with Mercator Advisory Group, said in an interview. "Setting up global commercial card operations is very complicated, and U.S. Bank is probably not trying to take on the world yet."
Its partnership with TSYS could give U.S. Bank access to other global regions. TSYS provides international commercial card-processing services for JPMorgan Chase and Bank of America, among others, and offers commercial card-issuing services in other regions, including Latin America, a TSYS representative said in an email.
"We definitely see a trend among U.S.-based commercial card issuers to provide consistent commercial card products to their U.S.-based multinational clients … replacing disjoined international partnerships with direct service, and leveraging the expertise they've built in the U.S. … to enter new markets," the representative said.
It is no surprise that more card issuers are looking to Europe for growth, McGinnis said.
"Commercial cards are probably the single largest sector of card industry growth right now, as everything you hear about consumer cards is that people are spending less, while corporations are recovering from the recession and business travel is picking up again," she said.
Citi also sees "growth coming from all directions," Paul Horn, Citi's global director for commercial cards said in an interview.
"Certainly U.S.-based multinational corporations are driving the lion's share of business abroad, but over the last 18 months or so we have seen a lot of large [commercial card] deals coming out of Europe and some from Asia," he said.
Citi provides direct issuing of commercial cards in 65 countries, including 25 nations in Europe, the Middle East and Africa.