Despite consumer card offerings grabbing
much of the spotlight in the payment industry, it is commercial
cards that are drawing an increasing amount of attention from
issuers, networks and businesses globally. Truong

As both large and small businesses attempt to better manage and
track their outlay, the use of corporate cards has risen in recent
times. The financial case for the corporate card sector is evident
– it gives employers greater control over employee spend, and the
consolidation of company expenditure through improved transaction
reporting can further drive financial efficiency. The main
challenges for corporate cards often lie within an organisation’s
infrastructure, where the detailed reporting and monitoring of
financial spend can prove to be beyond its technological

Public sector use

In the UK, the government is attempting to streamline payments as
much as possible within the public sector. The most important
element for the successful implementation of such schemes in the
public sector is a robust processing capability, both for financial
information and line item detailing. For many EU countries, this
processing of additional information alongside the financial data
remains a challenge.

Visa’s Government Procurement Card (GPC) programme, designed
specifically for the UK public sector, is now in its tenth year.
Growth in GPC Visa transactions was most marked in 2006, when there
were 1 million transactions more than in the previous year. The
scheme has grown each year and now more than 850 programmes and
over 100,000 cards are in use.

A similar scheme was launched several years ago by the French
government, using the GPC programme as a template.

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“Governments typically have a very similar fundamental role in
delivering systems services, and saving the public purse as well as
achieving efficiency and control. Those tend to be the phrases that
governments are interested in, and those are the things that GPC
tends to address,” says David Harrison, vice-president of market
development at Visa Commercial.

Steve Abrams, global group executive of commercial products at
MasterCard Worldwide, says: “Within this market, we are
increasingly seeing a need for better control and compliance, as
well as detection of inappropriate spending.”

New and existing users of Visa’s GPC programme are now being
offered GPC eSolutions, an online management information software
service that will enable them to manage their purchasing and travel
card information more effectively. Users log on to a secure website
and upload the GPC Visa data file they receive from their bank, and
can then review and manage their GPC Visa scheme.

Further technological development is another factor helping to
drive growth in the commercial card sector. MasterCard recently
introduced a platform called inControl in conjunction with patented
technology from Orbiscom, a US-based payment provider. This
solution offers enhanced authorisation controls as well as solid
transaction routing and alert capabilities. Brian Lang,
vice-president of global commercial payments at MasterCard Europe,
admits that the government sector played a large part in the
development of this platform. He says the enhanced spending
controls can be set by numerous variables including geography as
well as daily or monthly limits.

“The flexibility on what you can put as controls around card usage
is almost as much as you could consider. If you want to make sure
that there’s no weird maverick spending going on, you get these
kinds of controls in place,” Lang says.

What is critical within the corporate sector now is the ability of
card platforms to respond to the various reporting needs of
different businesses. According to Lang, a vital innovation for
MasterCard has been the overhaul of its global Smart Data platform.
The migration of issuers to the new platform has begun in the US
already, and will spread to Europe in early 2008. Whereas the
previous platform offered little scope for customisation, this new
update aims to be more flexible in its reporting functionalities,
which Lang sees as crucial for what he terms the middle market in
the business sector. “It allows much more flexibility to build a
reporting engine that is specific to the needs of that target
audience,” he explains.

While the use of corporate cards within the public sector may be
increasing, it is nevertheless a difficult market in terms of
profits, according to Carl Clump, CEO of payment card issuer Retail
Decisions. “They [the public sector] negotiate hard to get very low
prices, so there’s not much margin to be made at the end of the
day, and they still end up multi-sourcing so you don’t get all the
volume that you might expect to,” he says.

Rewards and discounts

One of the crucial differences between the approach of smaller and
larger businesses to card payments is their attitude to loyalty and
rewards schemes related to a card programme. While larger
businesses would generally be averse to anything that would
encourage further spending, a rewards scheme rates very highly on
the list of priorities for smaller companies, where the cardholder
and the proprietor are often the same person.

To this end, MasterCard has launched several initiatives intended
to provide rewards as well as automatic discounts at the point of
sale. The World MasterCard for Business is a premium payment card
targeted chiefly at high-spending small businesses that consider
rewards to be one of the key benefits of a business payment card.
Lang refers to a rewards scheme as the “price of entry” into the US
market particularly, which is very much geared towards consumer
loyalty and cashback programmes. A study commissioned by the
company found that, industry-wide, this segment makes up only 20
percent of the small business sector, yet accounts for a massive 80
percent of spend.

However, Visa Europe has a much different approach, especially
within its public sector propositions. “What you do see sometimes
is suppliers themselves wanting to encourage spending,” says
Harrison. “The public sector likes to report any savings, and some
of those are suppliers saying that they’ll do discounts for the GPC
issuers. That’s more the angle they will come at, rather than
rewards points.”

Visa has negotiated exclusive offers and discounts with a wide
array of suppliers across Europe, including car rental agency Avis
and delivery company DHL, as well as preferential terms on a range
of professional services. A similar scheme is MasterCard’s Easy
Savings, an automatic rebate programme that offers discounts for
businesses with specific merchants at the point of sale. These
rebates are detailed both online and on the monthly statements for
the account.

A recent commercial card product launched by Barclays could perhaps
be an indication of the type of differential benefits that issuers
will use to entice businesses aside from POS discounts. The
Barclaycard Business Sustain is a carbon-offset corporate charge
card that will help clients reduce their carbon footprint by
tracking a company’s spend on air travel and giving commission-free
access to the Certified Emission Reduction (CER) carbon allowance
trading market via investment bank Barclays Capital’s emissions
trading desk. Barclays Capital then purchases CERs for the client –
which enables the maximum amount of carbon to be offset – and then
arranges for the CERs to be cancelled.

One other factor in the issuance of corporate cards is the
financial risk. In the consumer world, numerous bureaus and credit
scoring agencies can determine how good a candidate is for certain
types of products. For small businesses, this presents a challenge
as they are often fairly new and, in many cases the relevant
financial data is not available. MasterCard has published a series
of instructional guides to help small businesses manage cash flow
and save money; the guides also contain surveys and quantitative

In terms of spend control and monitoring, nothing could be more
effective than a prepaid system, so it is perhaps no surprise that
MasterCard has recently launched a comprehensive prepaid business
programme that covers both general and travel-related spend. The
use of prepaid cards within the business sector is growing;
MasterCard estimates that it will total €14 billion ($20.1 billion)
by 2010 in Europe alone, accounting for 8.6 percent of total
prepaid spending. The company’s experience within the public sector
dates back to 1985, and it also developed the initial public sector
purchasing card programmes for the Australian, Canadian and US

According to MasterCard, the use of prepaid cards for the payment
of government benefits and allowances is expected to account for
€36 billion, almost 30 percent of total European prepaid spending,
by 2010. In the UK, MasterCard has active commercial card
programmes with numerous local authorities that have been using
procurement cards to manage the large majority of their

Fuel and fleet cards

Corporate fuel and fleet cards have become increasingly prominent
within the commercial card sector. Retail Decisions, which began
life as a card fraud specialist, has evolved into a payment card
issuer that is highly focused on fuel and fleet cards. A big market
for the company is Australia, where the company’s fuel card
business has grown by double digits since its inception. While the
fuel card sector in Europe and the US is relatively static, Retail
Decision’s Australian business has grown tenfold in six years.
According to Clump, the company has resisted the temptation to
enter the US market as it is currently dominated by several large
players that make it difficult to achieve the type of growth
figures that are conducive to its business model.

In most countries, fuel card providers – often the oil companies
themselves – provide these products in what is essentially a
closed-loop system. “They own their own infrastructure,” says
MasterCard’s Lang. “They have control of the pumps and the data at
the pumps, it’s a fairly tough market for folks like ourselves as
well as Amex and Visa to get into.”

Nevertheless, MasterCard Worldwide offers the MasterCard Corporate
Fleet Card programme, which features enhanced data and
authorisation controls. “Our ability to integrate card and spend
data with existing programmes, and offer the most advanced
informational and reporting tools – such as MasterCard Smart Data
and the Global Data Repository – ensure enhanced compliance,
greater spend control and improved detection of unauthorised
spending,” says Abrams.

Visa’s Harrison views the fuel and fleet sector as a “segment
within a segment”. “People are paying for fuel on their Visa
corporate cards,” he says. “They’re wandering into the fuel station
and paying for their petrol but they’re also buying their lunch and
putting it through to their T&E [travel and entertainment] card.”

According to Lang, the perceived growth in the fuel and fleet card
sector may be due more to the rising price of petrol than grown in
the number of fleet providers or cards within the industry. “It’s a
strong market,” he says. “It’s definitely got positive growth, but
it isn’t growing at the pace of T&E, which is growing at the
rate of 10 percent year over year.”

Multi cards

The adoption of ‘multi cards’ that incorporate various sectors of
corporate card payments such as T&E, purchasing and fuel/fleet
indicates that at some point in the future, issuers are expecting
the commercial cards market to open up a little more and clients to
want all these options on one card. The MasterCard Corporate Multi
Card integrates purchasing, travel and fleet spend management and
control, allowing large corporations to integrate payment card
programmes and consolidate data and global reports. The client can
set variable spending controls on purchase amount, number of
transactions, types of suppliers or other criteria for any spending
category. Such a solution allows for greater controls over spending
as well as improved purchasing power.

“Historically, fleet and T&E have been seen as different
products, but I think that’s going to change over time.
Organisations will just want those to be the same piece of
plastic,” says Lang.

According to Harrison, however, the desire for integrating
different segments of corporate spending onto one solution varies
between the types of organisations involved. “Different segments of
the private sector and the public sector have different needs,
therefore you can’t say ‘one size fits all’. In terms of added
value, some people like to talk about a card that can do
everything,” he says. “The Visa Business card (designed for sole
proprietors and small businesses) has traditionally been that multi
card since it was established many years ago. Further up the
hierarchy – into mid, large and government – is where you typically
see the requirement for specific purchasing and corporate cards to
be deployed rather than a multi card.”