Are U.S. Card Programs Focused on the Wrong Things?
Sometimes it is hard to know what we are missing unless we look beyond our own borders. In the United States, we often focus on just one or two benefits of Commercial Cards, such as revenue share, and lose sight of the valuable big picture. Not so in other countries, as described below in the article by Mark Silverman, PayTech Group, What the U.S. Commercial Card Market Can Learn from the Rest of the World. Recharged Education invited Mark to share some of his vast global insights, so we can all broaden our horizons and, in the process, strengthen our card programs.
What the U.S. Commercial Card Market Can Learn from the Rest of the World
by Mark Silverman, PayTech Group
U.S. commercial card usage, both for physical cards and virtual cards, continues to grow at a healthy pace year over year. The marketing of these product lines in the United States relies heavily on two factors:
The dominance of checks, which are perceived to have fewer advantages than card-based solutions, in the B2B payment space (roughly 50% of all U.S. business-related payments are still made by check)
The continued reliance on aggressive rebate/revenue share back to the end-user organization
What’s interesting is that these are two advantages that most other commercial markets in the world are not able to take advantage of. In many if not most European markets, the dominant B2B payment methods are already electronic, not check based. And the financial incentives that corporates receive in markets outside North America are nowhere near the 100+ basis point levels seen in the United States. The pillars for success in these global markets include:
A focus on capturing transactions versus volume ($)
Without the ability to look primarily at card programs as having a straight financial benefit, the value then shifts to other benefits that are more volume agnostic like compliance (e.g., travel/purchasing policy) and fraud mitigation, where the benefits of capturing a small transaction via card are equal to a big-ticket item.
More emphasis on T&E
Similarly, in the U.S. where rebates are king, there is often an emphasis—both from buyers and sellers of card programs—on big-ticket payables when it comes to implementing a card program. Conversely, in other markets like Europe, T&E card programs have not lost their prominence in relation to AP spend.
Marketing of card programs as a technology solution
This is also related to overseas providers’ inability to sell card programs purely as a rebate-centric solution to the end-user. For payables-based solutions, these companies have to rely on other benefits and, in most cases, especially among FinTechs, the way these offerings are marketed often revolve around their respective technology.
Similar to other industries, in commercial payments the U.S. is often seen as somewhat of a front runner. Yet as regulatory and market pressures here continue, the U.S. might be best served to look abroad to “future proof” the marketing and selling and buying, of commercial payment solutions.
About the Author
Mark Silverman is a Senior Consultant at PayTech Group, a payments advisory and consulting firm, specializing in helping both issuers and buyers of commercial payments via engagements ranging from sales effectiveness to research to vendor selection. He has shared his expertise in commercial payments while chairing and moderating panels at payments conferences sponsored by EuroFinance and NAPCP. Prior to consulting Mark spent several years at both American Express and U.S. Bank in a variety of leadership, business development and marketing roles. Mark can be reached at mark@paytech.no.
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Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all.