Current Strategies Have Expiration DatesThe commercial card market has become increasingly competitive as large issuers have bought up market share through volume rebates. While the interchange fees for commercial card products represent a significant money maker for issuers, volume rebates – often ranging from about 100-150 basis points (BPS) – result in compressed margins. Issuers also compete by offering extended grace periods, typically from 25 to 40 days, which helps customers with their cash flow, but at the issuer’s expense. Concurrently, issuers are expanding their target market pool down to small businesses – defined as between four and nine employees – to help these customers reduce their back-office responsibilities. Expanding the market, extending friendly terms and offering rebates represent short-term strategies. At the point when the viable market becomes saturated, issuers that compete solely on price will find themselves at a competitive disadvantage and plagued by increasingly thinning margins.
Innovation Extends the Expiration DateThe remedy to reversing a downward trend requires innovation and messaging that speaks to solving pain points for users. A common pain point for travelers surfaced in a recent survey of corporate card users conducted by Capital One. The survey found that fewer than one-half of users have a traveler-friendly mobile application to enable transaction management and remote expense submission. Meeting the needs of companies and their employees, and then basing messaging on those benefits fortify and differentiate current price-based value propositions. Examples include:
• Innovative card tools for self-managing purchases are critical for corporate travelers to track their transactions. They also can set controls with mobile apps that enable them to turn cards off, if misplaced or stolen, and turn cards back on when found.
• Administrators have 24/7 ability to raise a credit limit or lift restrictions on a card in real time if an employee’s card is declined. With real-time, always-available responses, travelers won’t find themselves stranded until the bank opens.
• Commercial cards allow companies a transparent view of where, what and how their employees are spending. Companies can determine if enough employees are frequenting the same hotel and restaurants chains to quality for vendor discounts. And, they can easily weed out rogue spenders.
• Reporting tools break spending into categories that enable accounting to apply different allowable deduction percentages to expenses and gain efficiency at tax time.