Since the first commercial travel and entertainment (T&E) cards appeared in the US back in the 1950s courtesy of Diners Club and American Express (Amex), much has happened to the sector. Debit cards, prepaid cards and what banks call purchase cards (which are basically every day credit cards for corporations with some limits that companies control) have joined the fray. All of these cards are branding opportunities that can be personalised for individuals and firms. And now there is a card that suits the needs of the mightiest multinational to the humblest local player.
The commercial card sector in Asia-Pacific is booming. Singapore-based DBS reported more than 40% increase in its commercial cards billings in 2010 versus 2009, with the trend expected to continue this year.
“The average spend on commercial cards can be up to three times that of consumer cards,” said Ooi Huey Tyng, senior vice-president and head of cards and unsecured loans at DBS. “While T&E continues to account for key card spend, we do see an increasing usage of cards in other areas for SMEs [small and medium-sized enterprises], such as operational expenses like phone bills, courier fees or government services. This is due to an increasing acceptance of cards as an efficient payment and cash management tool for businesses.”
Jason Tiede, Citi’s director and wholesale cards head for Asia-Pacific global transaction services, also says that T&E cards’ traditional dominance of the sector in Asia-Pacific is changing. “T&E has traditionally been the lion’s share of our business here in Asia Pacific, but the tide is certainly turning towards a more even balance. If you look at some of our largest recent wins, I’d say roughly 20% are purchase cards deals. In addition, many of our T&E clients are now expanding their programmes to utilise purchase cards as well.”
In other words, they are using their T&E cards in the way you and I use our credit cards, to buy things rather than just to travel and dine. Data from a T&E card can be invaluable, and can help firms negotiate lower prices at hotels and airlines, saving as much as 20% in expenses say bankers. But purchase cards (also called procurement cards) enable companies to exercise much greater discretion over how much, where and on what money is spent.
This attractive combination is of particular appeal to the region’s big budget public-sector programmes, whose interest is helping drive the market, according to Tiede.
“Interestingly enough, government clients are some of the most innovative in the card space, and they value the control and visibility available with a commercial card programme,” he said. “When a government migrates to a purchase card programme, it can be a catalyst for all government suppliers and local merchants to begin accepting credit cards.”
Catalyst or not, many markets in the region remain under-penetrated, despite much wider acceptance of cards by merchants and suppliers.
“Consumer awareness of the availability and the benefits of commercial card products is still relatively low in the region and education is key to making businesses aware of the advantages of switching to an electronic payments solution,” said Pradeep Roy, Visa’s head of commercial products for Asia Pacific, Central Europe, Middle East and Africa.
But banks are rising to the task. In Malaysia, CIMB is eying expanding its T&E card service from its 400 SME card clients to larger companies, according to Jean Yap, head of group cards and personal financing.
“The opportunity to grow the corporate card business in Malaysia is significant given the relatively low penetration of corporate cards especially in the large corporate segment,” said Yap. “This is primarily due to the lack of products that offer features that are attractive to our corporate clients.”
CIMB is therefore developing a new range of cards, including prepaid and purchase cards, for large corporations and government bodies that have significantly more sophisticated requirements. “The current generation of corporate cards should have features that should enable the CFO to not just track spending on corporate cards, but to directly manage spending behaviour as well as detect spending anomalies,” said Yap. “In addition, with the need for corporations to identify savings, corporate cards can be used to reduce procurement costs through automation. This system will enable greater transparency in the procurement process which is fast becoming a key concern for many companies, not only in Malaysia but across the region.”
Innovation always prevails
And it is to flexible commercial prepaid and consumer prepaid cards that banks are turning. “In terms of regional deals spanning multiple countries with centralised management, I think commercial cards [T&E and purchase cards] will continue to be the larger business. On the other hand, I anticipate the largest in-country card programmes to be prepaid card deals. This is especially true when you look at prepaid card opportunities within the public sector,” said Tiede.
Unlike commercial cards, which are a credit product funded by corporations and where cardholders are all employees making purchases on behalf of the company, the prepaid model delivers payments directly to individuals. “For instance, every Toyota salesperson in the US has a prepaid card in their wallet,” said Tiede. “Every time they register a sale, it goes into the system. Toyota sends us a file with the sales data; we then deliver the payment onto the card and inform the recipient by either email or text.” This notification contains not only payment information but also data related to that payment, such as details of the vehicle sold and location of the dealer.
Another recent innovation is Singapore-based OCBC’s first corporate card, the OCBC Business Card.
Launched in November and using a MasterCard network, the business debit card is specifically designed for SMEs incorporating, for instance, an ATM cash withdrawal function.
So far, so normal. But according to Raymond Chee, OCBC’s head of cash management, group transaction banking, the card fulfils far more than cost control and visibility. Based on feedback from an SME survey, the card is designed to give recognition to SMEs by featuring the company name, logo and name and designation of the cardholder. In short, it resembles a business card.
“In the survey SMEs told us two things: they want services from banks to be simple, fast and convenient, and they want respect and recognition,” said Chee. “CEOs of SMEs want to be respected as owners of their companies, as CEOs in their own right. While they may not have big companies, they are after all founders or business owners.”
Commercial cards still have a long way to go. And it seems that it is the innovators who will continue to drive the business.
This story was first published in the March 2011 issue of FinanceAsia magazine.
