Putting Commercial Card Programs To Work for Your Customers and You

Bob Legters
Chief Data Officer of Banking and Payments
Posted on October 28, 2013

At one time or another you’ve no doubt considered what it would take to attract and retain commercial payment customers using a commercial card program. Some of you thought it through and decided it was good business and so you set about making it happen and you’ve reaped the benefits of your hard work. Others of you agreed that it was good business but your efforts fell by the wayside either because it was too hard or not profitable enough. Still others decided it was just not worth the effort or expense.

Let me encourage those of you who fall into the latter two categories that commercial card programs are good business. In fact, they are very good business indeed. A commercial card program allows your financial institution to accomplish two objectives: first, they provide you with a viable method for building or strengthening your relationships with your commercial card customers; and second, they allow you to tap into what can be a very profitable new revenue stream. If you doubt that, a Nilson report published in September, 2013, provides a few salient points to ponder:

  • Commercial Cards represent 21.1% of the total US card purchase volume and continue to grow.
  • Purchase card volume was up 13.1%. (Why you ask? I suspect it’s because procurement is starting to catch on that the card is more efficient)
  • Commercial Cards generated $797.24 billion in 2012.

Add in the fact that some estimates put the commercial card interchange income earnings approximately 33% higher than a consumer card program, and you’ve some very compelling reasons to start reaching out to your commercial clients with a commercial card program. Try cross-selling Commercial Cards to your Treasury customers and you’ll both discover that it’s a win-win situation. Marrying the two programs enables you to provide a consistent yet powerful integrated solution to commercial customers that helps put an end to their challenges with cash flow and procurement while providing expert management of payables and receivables.

Once you’ve found the right commercial card clients, you must be able to provide them with world-class services and solutions. Failing to do this means those new clients of yours will be someone else’s new clients before long. This may mean an overhaul of your technology infrastructure, as well as the implementation of a comprehensive banking solution that ties all your business and client processes together seamlessly. Here are some considerations for those banks that are serious about capturing commercial card clients:

  • Invest in improving your service offerings. If you don’t provide high-touch, high-quality service, there is a competitor out there that does.
  • Don’t neglect convenience or back-door capabilities; these are necessities for a busy business. Make it hard to bank with you, and they won’t.
  • Keep your fees client-friendly. Again, make it expensive to bank with you, and they won’t.
  • Learn to take the long view on client relationships and always try do what is best for both of you.

If you’ve ever worked closely with business owners, you know that their concerns are myriad. Everything matters to them because their day-to-day reality is that everything, from cash flow to reducing operating costs to increasing control over projects, people, and money to gaining deeper insights into their expenses to maximizing productivity, matters. As the other half of their banking relationship, they look to you to be part of the solution, not part of the problem.
Being solution-oriented is always a good thing to practice. Hand-in-hand with that is offering a broad spectrum of Commercial Payments solutions that actually help business owners. Consider that business owners are a bit like diners in a restaurant, they are scanning your menu of offerings looking for something that satisfies their hunger. Solutions on your menu should include:

  • Travel & Entertainment cards
  • Fleet cards
  • Purchasing cards
  • Virtual cards
  • Pre-paid cards
  • Payroll cards

Your commercial payments card solutions help commercial clients implement long-term process changes in how they track spending, manage cash flow, segregate expenses, and streamline the procure to pay cycle for their respective businesses. If your programs are robust enough, they’ll find invaluable assistance in key management areas such as:

  • Enhanced risk management through improved monitoring, analysis, and control of expenses.
  • Tracked spending that enables them to negotiate favorable discounts on supplies as well as better contracts with vendors.
  • Automated accounts payable process.
  • Integrating payment data with ERP applications and other systems.

Here’s good news: not only are these card programs good business for your commercial clients, they are also good business for you. Corporate cards not only help deliver cost savings to your customers, but because of the fees and interest involved, they also make a significant contribution to the growth of your bank. One of the keys to making this mutually beneficial situation work lies in ensuring that your Corporate Card product line is based on the way you segment your commercial clients according to their size. This means that for each business size segment, there should be a card program matched to their specific requirements. Typically, those sized segments break down this way:

  • Micro business
  • Small Business
  • Medium
  • Enterprise
  • Public Sector

Making this workable for you and your commercial clients takes some thought, research, and planning. However, the benefits that can be reaped are significant enough to justify the effort involved.
Remember this: No matter what strategies, tactics, solutions, programs, or services you offer, in the end, be sure to make it simple, make it convenient, make it accessible, and keep it low-cost. It’s a formula for success that is tough to achieve, tough to duplicate, and tough to beat!

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Bob Legters
Chief Data Officer of Banking and Payments

For the past two decades, Bob has focused on products and services support for clients. He has spent 17 of those years in a leadership role with groups ranging from 5 to 200 employees. Bob’s unique experience allows him to efficiently operate at a level that exceeds the normal executive role of understanding and recognizing client and consumer needs in the payments space.