By Aaron Bills
3Delta Systems Inc.
Purchase cards, also known as p-cards and corporate credit cards, are used by buying organizations to streamline purchasing and payment procedures for low-value transactions. They often entail guidelines and spending limits for employees who use them.
The p-card market has seen tremendous growth in recent years. According to a study by Aberdeen Group, a key reason is that p-cards lower corporate costs by about $20 per transaction. This amounts to a 75% reduction compared to the traditional procurement process, which typically involves purchase orders and multiple levels of bureaucratic approvals.
However, for p-cards to be used by more businesses, they must be accepted and processed by more merchant suppliers. That's where you come in, as ISOs and merchant level salespeople. This article answers basic questions about the use of p-cards to help you better understand the p-card context, as well as provide strategies for building a base of business-to-business (B2B) merchants who accept p-cards.
Who is using p-cards?
P-card use is widespread, even if it is not highly visible. Most midsize and larger corporations have p-card programs in place. Universities and utility groups also use them. P-card systems are offered by many commercial banks and other financial institutions.
Annual U.S. p-card spending grew from $80 billion to $110 billion between 2003 and 2005. Recent studies suggest this volume would increase eightfold if all B2B transactions below $2,500 were paid with p-cards. This is a vibrant, growing arena, and p-card users need a strong, capable merchant base.
How do p-cards work?
P-cards may be used in a variety of ways. But for routine purchases, they are issued to authorized cardholders, enabling them to place orders and make payments directly and efficiently on behalf of a buying organization. In other cases, p-cards are used in conjunction with purchase orders and e-procurement systems to make large payments. As transaction values increase, so does the need to have accurate and detailed information about purchases.
Because of this and the need for financial accountability, p-card users often require that merchants provide them with level 3 data, the highest level of transaction detail. Per the National Association of Purchasing Card Professionals (www.napcp.org) the levels include:
What about p-cards and interchange?
P-card transactions have tiered interchange rates and are priced differently than standard consumer and business card transactions. MasterCard Worldwide and Visa U.S.A. have created special interchange rates to encourage supplier participation in p-card programs. This reduces merchant transaction costs if level 3 line-item detail information accompanies financial settlements.
This is the key to obtaining the best interchange rates. You can bring substantial value to merchants by helping them qualify for lower-cost level 3 rates. This is even more important if the transaction sizes are large. Why should merchants care about p-cards? Merchants who accept p-cards benefit in the following ways:
Proposing the right processing solution begins with determining what a given merchant's requirements are. Merchant processing parameters may be influenced by:
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