More NewsProcurement Cards: A Dormant Opportunity

Procurement Cards: A Dormant Opportunity

Although procurement cards (p-cards) represent a very small portion of business-to-business (B2B) payments, changes in fee structure and card policies could double issuers’ p-card revenues, according to a report by the Aite Group. The report evaluates B2B electronic payment vehicles and discusses how p-cards are best positioned to come out on top, assuming some modifications to the current treatment of B2B cards were adopted. The report makes specific recommendations for card networks, issuing banks, merchant processors and merchant acquirers looking to increase the competitive positioning of the p-card product.

Aite Group believes that p-cards’ limited penetration is driven by the structuring of the product rather than a limited market demand. Because p-card transactions are priced as a percentage of the transaction’s dollar amount, fixed-fee electronic payment vehicles such as automated clearing house (ACH) and Fedwire are more competitively positioned for larger-dollar transactions. By taking the actions Aite Group recommends in the report, card networks and issuers can make card payments for higher-ticket items more palatable to suppliers, awakening the dormant p-card opportunity. As a result, Aite Group conservatively forecasts that incremental revenue to card issuers from new supplier acceptance of large-ticket items could reach US$1bn per year.

“This opportunity to expand revenues from p-cards is well within the control of card issuers and card networks,” said Judson Murchie, analyst with Aite Group and co-author of this report. “By modifying a few practices and strategies to better position cards for B2B suppliers, p-cards can greatly increase market share.”

“Because increased p-card adoption is relative to structural changes,” said Nancy Atkinson, senior analyst with Aite Group and co-author of this report, “Aite Group recommends that issuing banks, card networks, merchant processors and merchant acquirers make increasing B2B supplier acceptance a top priority – by changing the high-ticket pricing model, for example – or risk limiting the potential of the product.”

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