June 2010
by Mary Ann McNulty


Commercial card volumes last year declined for the first time in history as organizations implemented across-the-board spending cuts and "put far greater focus on control and transparency," according to MasterCard Advisors commercial payments practice senior managing consultants Hugh Thomas and Al Diamant.

"Card spend volumes are unlikely to recover as quickly as they declined," Thomas and Diamant wrote in an online column published on Commercial Payments International, a Web site and conference organizer for the payments sector. "T&E spend restrictions are not likely to be lifted as quickly as they were implemented, and discretionary spending budgets will likely be even slower to rebound. Purchasing policies implemented during the depths of the recession will not be abandoned at the first sign of recovery, and in the near term we can expect the focus to remain on spend reduction and control."

In its biennial travel card study published last July, RPMG Research Corp. forecast travel card spending in North America to decrease to $140 billion in 2009, from $152 billion in 2008, but rebound to $159 billion by 2011. The forecast was based on 824 responses from travel card-using organizations that included corporations, governments and nonprofits. Corporate respondents forecast an average decline of 3.7 percent in 2009 travel card spending from 2008 levels. Government and nonprofit entity respondents said they expected travel spending to decline 8.4 percent in 2009 from 2008.

The research firm tracks and forecasts purchasing card spend in North America in a separate biennial report last published in 2007 as volume grew to $137 billion. The researchers predicted a purchasing card growth rate of 12 percent per year between 2007 and 2012, to grow the market to $218 billion.

$1 Trillion Global Market?

Globally, the commercial payment cards market was $917 billion and forecast to grow 9 percent to more than $1 trillion in 2010, according to a new report by market research firm Packaged Facts.

Amex Reports Rebound

Despite expectations of a slower rebound, American Express in the March 2010 quarter reported a 25 percent jump from a year earlier in average basic corporate cardmember spend of $4,400 on 7 million cards. Even with the first-quarter increase, average commercial card spending was down from the March 2008 average of $4,770. The average spend on corporate cards in March 2009 declined 26 percent, to $3,517.

Altered Landscape

The new marketplace has forced corporations and banks to rethink how and why they use such commercial card types as travel, meeting or procurement. Diamant and Thomas argued that card-issuing banks should dive into data to figure out ways to gain the most profitable new card customers or enhance the services offered to existing ones, especially those now focused not only on the administrative cost savings of card programs, but the control and transparency that they can provide.

Driven by economic pressures, BMO executive managing director and group head of North America corporate payment sales Terry Wellesley said some customers are "being forced to look at current contracts" to ensure that they have the best deals available. Companies typically aren't initiating a formal request for proposals process, but "we're sensing that there are more opportunities for unsolicited proposals. I don't think it's widespread. It's selective, but we're seeing it more often. I don't believe it will be a trend that will go that long." But it dovetails with the broader trends of added functionality, "integration with enterprise resource planning systems" and demands to "make our life easier, improve efficiency and give us better returns," said Wellesley, charged with BMO's Diners Club NA acquisition.

To meet that need, BMO a couple of years ago added a fee-based consulting service to help corporations--especially those implementing new card programs--optimize the savings, data and knowledge they can bring, Wellesley said. Numerous other banks have announced new products and partnerships designed to deliver enhanced workflow to ERP and financial platforms.

"We think we're finally bottoming out of this recession," Wellesley said. "In the United States, the hockey stick is finally starting to curve up. We see 2010 as a stabilizing year. The push on growth will come in 2011. We see the second half of 2011 really starting to show some positive uplift."