The Green Sheet Online Edition
August 13, 2007 • Issue 07:08:01
P-cards: The payoff is palpable
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
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
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:
- Level 1 data: Presents basic credit card information
similar to the information you would find on your
personal credit card statement. This information
includes date, supplier and dollar amount.
- Level 2 data: Includes the first level of data plus sales
tax information and a variable data field. Merchants
at this level can pass through the p-card system sales
tax information, as well as a unique, customer-identified
transaction data field. Some issuers include
such information in cardholder statements.
- Level 3 data: Provides line-item detail. It includes
the information provided in levels 1 and 2 plus the
item product code, description, quantity, unit of
measure, price and other applicable taxes.
Payment detail is delivered electronically to the buying
organization's p-card reporting system, where it can be
reviewed daily and automatically entered into the company's
accounting and finance systems.
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
What's the best way to approach p-card sales?
- Faster payment cycle: Merchants receive payment
in two to three days, as opposed to the 30-, 60-, or
90-day wait commonplace with many corporate
- Lower interchange rates: Interchange savings of 30
basis points or more are possible for providing level
3 data. Greater savings are also possible, depending
on transaction size.
- Better documentation: Level 3 data can help a
merchant with transaction documentation, which
is especially handy for responding to chargeback
requests (all the transaction detail is in one place).
- Preferred status with customers: Some buying
organizations have mandated use of level 3 data
with some or all of their transactions; they tend to
stick with merchants who provide it.
- Lower processing costs: Ensuring proper interchange
qualification is the best way to lower transaction
- Ease of use and deployment: P-card systems are
intuitive and flexible. For example, in addition to
processing transactions from a back-office, merchants
are able to process manually at a field
sales office or electronically from an e-commerce
- Better data integration: P-card systems can integrate
data into a company's internal systems or offer
management reports and inquiry capability.
- Future expansion: P-card systems offer a migration
path for future development.
Proposing the right processing solution begins with
determining what a given merchant's requirements are.
Merchant processing parameters may be influenced by:
- Business size: Is the prospect's organization large,
small or midsize?
- Typical customers: Are the merchant's clients consumers,
corporations or government agencies? Are
customers repeat or random?
- Product type: What is being sold: goods, services
- Sales channels: Are sales MO/TO, Web site, e-commerce
or card present?
- Timing of sales: Are sales made with or without
- Monthly transaction volumes: How many transactions
are made? What is the dollar volume?
- Number of locations: Single or multiple?
Understanding merchant needs and recommending solid
solutions are the hallmark of the solution-oriented sales
executive. Using a consultative approach when discussing
p-cards with B2B merchant prospects will differentiate
you from the pack.
Aaron Bills is Chief Operating Officer and co-founder of 3Delta
Systems Inc. E-mail him at email@example.com or visit ,www.3dsi.com
for more information on secure data storage solutions.
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