The Green Sheet Online Edition
August 25, 2008 • Issue 08:08:02
Payments primed for new growth
Electronic payments of all types have experienced higher growth rates in recent years, according to Commercial Payments International (CPI), a payment consulting and analysis firm. CPI expects this trend to continue as more companies move away from inefficient paper-based systems.
The company conducted a survey in early 2008 to explore what drives growth in the use of commercial cards. The company found three key influences:
- A focus on integrated solutions across the entire procure-to-pay cycle
- Tremendous opportunity to expand financial solutions for the small business merchant
- Growth of commercial cards in markets outside the United States
Commercial card products include any type of card product a company uses for business-to-business (B2B) payments, including purchase cards (p-cards), travel and entertainment (T&E) cards, fleet cards, and prepaid and contactless cards.
"P-cards and T&E cards are issued to a company employee for purchase of specific items from a preapproved vendor," said CPI Principal Joanne Robinson. "The government is big on them, and the control mechanisms on them are wonderful."
She noted that the benefits are less paperwork and the ability to collect aggregate data. "This is not only cost-effective, but it gives you an opportunity to go back to your suppliers and negotiate better terms," she said. "However, the ability to control 100 percent of your employee expenses is the biggest benefit."
Key drivers to conversion
According to CPI, there is a remarkable opportunity for a full range of electronic payment products and services to give organizations extra advantages.
In its recently published white paper, Driver of Growth in Electronic Commercial Cards and Payments, the company noted some of the key growth drivers for the payments industry:
- Organizational goals for cost-conscious businesses that are focused on improved efficiency through automation of their procure-to-pay processes
- Electronic processing systems and platforms that provide more efficient and less expensive data processing
- An explosion in the range and sophistication of electronic payment products and services that are driving merchant adoption from paper remittance to electronic transactions
- Government organizations that drive growth and cut taxpayer costs with more efficient payment systems, as well as electronic conversion of all B2B payments
- Multinational companies that push their providers to develop products that can be used across their entire enterprise and across multiple geographic footprints
Lock down price controls
CPI predicts the prospects for both electronic commercial cards and the payments industry overall will remain strong as companies increase controls, negotiate discounts and reduce costs by switching from manual to electronic processing. Commercial payments, including paper and electronic transactions, topped $80 trillion in 2006. CPI expects this figure to exceed $110 trillion by 2012.
However, Robinson said that in 2006 commercial cards accounted for only 1.1 percent of total commercial payment volume and is still a huge, untapped potential revenue source for ISOs and merchant level salespeople.
Open doors for smaller merchants
"I think those smaller businesses, by definition, are slower to adapt technology, but that's just due to a lack of knowledge about the products and their benefits, or due to the lack of skills within the business to implement it," Robinson said.
"I really think it's just going to be the industry pushing it more and making the smaller merchants aware of the advantages to switching over to electronic processing" for their B2B transactions, she said. "Most of the larger organizations have been converted. Now it's time to go deeper in their efforts to reach the smaller merchants."
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