Purchasing Cards - Help Reengineer Your Customers Business

By Ken Sebastian, Vitex

Most banks are missing a significant revenue opportunity from the sales of purchasing cards to larger commercial and government customers. If you already have a credit card operation and a cash management sales team, then the purchasing card is a logical product to add to your suite of cash management services. It provides a recurring fee income source that you can expect to consistently grow over time. It also leverages your existing credit card expertise. And it solidifies relationships with your largest deposit and loan customers.

So what is a purchasing card? It is simply a specialized Visa credit card, similar to a corporate travel and entertainment card, but designed to handle small purchases of supplies and small equipment. It works just like a normal credit card, but a corporation or government agency is able to define how it can be used and what can be purchased. The cards are distributed to staff members who must make frequent but small purchases of supplies and equipment. You will find that government agencies and larger corporations manually process a huge volume of these transactions.

Why should a business or government customer use a purchasing card? It offers a way to reengineer your customer’s (and the bank’s) account payable process by eliminating the costly manual process of paying thousands of small invoices. It also provides a more centralized method of reporting and controlling purchasing activity. Instead of the customer processing checks for thousands of small invoices, it receives a single credit card billing with a detailed breakdown of all purchases by vendor and who made the purchase. One bill and payment replaces a time-consuming process involving thousands of checks and a high chance for errors. In a large operation there can be significant staff savings as well as improved internal controls for your customer. The bank effectively becomes an outside consultant in helping a customer improve its internal efficiency. Now that is a real value added service.

Why should a bank offer purchasing cards? First, the card is a rare product that is not widely available from your competitors. Second, it is a great fit with your other cash management products. And we all know that the more products a commercial customer uses, the less likely they are to leave, even for a better deal on a loan. Most importantly, it generates a steady source of fee income through the interchange fees paid to the bank. As your customer grows and expands, its use of the purchasing cards will inevitably increase as well with a resulting growth in fee income. Let’s face it; the market pays a premium for banks with strong recurring revenue streams.

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