Commercial Card Online Solutions: A Key Issuer Battleground

Navigator Editions: Commercial Payments: Special Edition Navigator, June 2012
By: Daniel O’Neill

The conventional view of a commercial card program often brings to mind images of the plastic company cards that employees carry when they travel or buy office supplies. However, this mindset is overly simplistic as card programs have become more complex and integrated with technology. Thanks to online card management systems, the cards themselves are becoming less important while more of a card program’s value is delivered behind the scenes in the online medium. What was once a product offering centered on the plastic card is rapidly becoming characterized by web browsers, analytics dashboards, and data access via mobile phones. The online capabilities offered to clients will be at the core of commercial card issuers’ success moving forward.

Online card management solutions are meant to streamline every piece of the corporate payment and reconciliation process except the payment itself (though in some cases, through virtual card accounts and integration with booking and payment tools, these solutions can serve the payment function as well). We can think of online solutions in the context of the value chain shown below. They serve a variety of roles that may include program set-up and control, cardholder expense reporting, and program analytics and compliance monitoring, among others.

Figure 1: Commercial Card Online Solution Value Chain
Note: Not a comprehensive list of features / functionality.
Source: First Annapolis Consulting market observations.

The solution providers that fulfill all of the broad functions shown here are considered end-to-end players. However, within this competitive market there is a great degree of variation in the specific capabilities offered from one provider to the next. The effectiveness of a solution is often relative to the needs of the client. If a client uses their program mostly for travel, then they will seek excellent expense management capabilities (and likely even mobile expense reporting to make life easier for busy travelers). On the other hand, if the majority of spend is indirect purchasing from B2B suppliers, then accounts payable integration might become a priority when judging a solution’s value. A multinational corporation with operations around the globe will value a tool with numerous language and currency options, while a smaller, domestic organization may be indifferent to those capabilities.

For these and other reasons, commercial card issuers and end-user organizations often face a choice when selecting their online solution provider (or providers). It is common for issuers looking to provide their clients with an end-to-end solution to choose between the tool offered by their card network or their data processor. Some issuers also look to independent technology companies to be their main provider, a strategy that several of the more purchasing card-focused issuers in the U.S. have adopted. The largest commercial card issuers (in fact, each of the top-six issuers by combined corporate and purchasing card volume) have also adapted, acquired or internally developed proprietary online solutions.

The choice of a primary solution provider should take into account the needs of the issuer’s client base and seek to be as effective as possible for the largest number of clients. This mindset will go a long way towards creating a solution that can be quickly and easily implemented for the majority of clients on an ongoing basis. Once the primary offering has been selected, the question remains how to serve those end-user clients that have varying needs. Neither an issuer nor an online tool can be all things to all organizations, especially when dealing with a diverse client portfolio. Issuers must recognize this problem and seek to overcome it by offering options to their different client segments.

When thinking about client segmentation, issuers may take two approaches. One approach is to implement an online solution that is modular. With a modular solution, clients with complex needs get a “full” end-to-end version of the solution with robust capabilities. However, clients with more basic needs would interface with a “lite” version of the same platform; some functionality would be turned off to make the tool more streamlined and user-friendly. Allowing clients to choose from a range of functionality levels, including “add-ons” like accounts payable integration, makes the solution flexible and customizable based on client size and requirements, while maintaining the solution on one unified platform and increasing potential for fee revenue associated with turning on certain add-ons by request for smaller clients who may not otherwise be offered the full solution.

The second segmentation approach for an issuer is to offer multiple, distinct solutions based on criteria such as client size, card program type, or geographic scope of the program.  This type of approach often requires considerable scale to be worth the extra investment dollars, as evidenced by the fact that it is generally the largest issuers that complement their primary in-house or outsourced solutions with other third-party tools.  Issuers may lead with their default primary solution and use a third-party option for international data consolidation or smaller clients, or simply offer all clients a menu of options.

Some of the more niche solutions in the market focus only on certain areas of the value chain, such as expense management. These types of tools may be offered through issuer partnerships or implemented directly by end-users themselves. This approach is also seen among the specialist compliance monitoring solutions. These niche solutions fill a role in situations where streamlining all functionality into one solution is difficult with current platforms.

Of course, combining solutions can be costly to both issuers and end-users. The ease and expense with which an effective end-to-end platform can be offered will be a key determinant to the approach taken by any issuer. There will certainly be economies of scale in utilizing common platforms across end-user clients, but providing options to enhance or upgrade the tool (even at an additional cost to the end-user) may justify an issuer offering multiple solutions or partnering with a specialist to enhance a primary solution.

Given the broad range of important functions offered through card management systems, the online space is one area in which issuers have a significant opportunity to differentiate themselves beyond the card product itself. The value that end-users place on online solutions is ever increasing, suggesting that this will be a key battleground for commercial card issuers for the foreseeable future.

For more information, please contact Daniel O’Neill, Associate specializing in Commercial Payments,

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