The U.S. Market For Corporate Credit Cards and Purchasing Cards

The Products

• Market Definition: Cards Used for Business Purposes
• Three Major Categories
• Corporate Cards
• Purchasing Cards
• Business Cards
• Background of Commercial Credit Cards
• How Purchasing Cards Work
• New Types of Purchasing Cards

The Market

• Market to Reach $326 Billion by 2002
• Table 1-1: US Market for Commercial Cards: Dollar Volume of Transactions, 1993-2002 (dollars)
• Corporate Cards Constitute Bulk of Transactions, But Purchasing and Business Use Rising
• Figure 1-1: Share of Commercial Card Transaction Volume by Category, 1997 (percent): Corporate, Purchasing, Business
• 20 Million Cards in Circulation
• Factors Affecting Market Growth
• Different Factors at Play in Commercial Card Market vs Consumer Market
• Shift to Plastic and Employer Willingness to Provide Cards Are Pivotal Trends
• Business Market Not Saturated
• Plastic Reduces Costs and Boosts Efficiency
• Market Segmentation to Cover All Bases

The Marketers

• American Express Leads Commercial Card Market
• Twelve Leading Bankcard Issuers
• Another 30 Issuers Have 10,000 Cards or More
• Bankcard Issuers Not the Only Players
• American Express Leads Two of Three Categories
• US Bank Leads Purchasing Card Category
• Mergers Play Dramatic Role in Competitive Situation
• Market Attracts Nonbank Players
• Trend to Combination Cards
• Courting New Markets
• Only $29 Million Spent on Commercial Cards

The Consumer

• Corporate/Business Card Use Not Widespread
• Marriage, Employment, and College Education Indicative of Corporate/Business Card Ownership
• Cards Not Just for White-Collar Employees

Scope and Methodology

• Scope of Report
• Research Methodology

II THE PRODUCTS

Product Definition

• Cards Used for Business Purposes
• Three Major Categories
• Corporate Cards
• Purchasing Cards
• Business Cards
• Background of Commercial Credit Cards
• The First Purchasing Cards
• Visa and MasterCard Initially Cool to Purchasing Cards
• How Purchasing Cards Work
• Benefits to Users: Slashed Costs
• Other Benefits to Users
• Benefits to Suppliers: Faster Payment
• Benefits to Banks: Profit and Relationships
• New Types of Purchasing Cards
• Additional Products and Terms
• Charge Cards
• Credit Cards
• Bankcards
• Payment Systems
• MasterCard and Visa Payment Systems
• Issuing Banks
• Acquirers or Payment Processors
• Automated Clearinghouse and FedWire

Establishing a Commercial Card Program

• Programs Are Straightforward
• Purchasing Card Programs Require More Planning and Implementation
• Data Requirements More Important Than Supplier Acceptance—At Outset
• Query Existing Bank Partners First
• Providers Often Help with Implementation
• How a Corporate or Purchasing Card Program Works
• Front-Office vs Back-Office
• Merchant Acquirers and Payment Processors Often Overlap
• One-Stop Shopping Still Not the Norm
• Card Associations Respond
• Leading Merchant Acquirers
• Ten Leading Payment Processors

III THE MARKET

• Figure 3-1: Estimated US Market for Commercial Cards, 1993-1997 (dollars)

Market Size and Growth

• Market Approaches $128 Billion in 1997
• Corporate Cards Constitute Bulk of Transactions, But Purchasing and Business Use Rising
• Table 3-1: Value and Share of Commercial Card Transactions by Product Category, 1996 vs 1997 (dollars and percent): Corporate, Purchasing, Business
• 20 Million Cards in Circulation
• Table 3-2: Estimated Number of Commercial Cards in Circulation: By
• Type, 1997 (number): AmEx, Visa, Fleet Cards, MasterCard, Other

Factors Affecting Market Growth

• Different Factors at Play in Commercial Card Market vs Consumer Market
• Shift to Plastic and Employer Willingness to Provide Cards Are Pivotal Trends
• Business Market Not Saturated
• Industrywide Shift to Electronic Payments
• Federal Mandates Will Speed Transition to Electronic Commerce
• Plastic Reduces Costs and Boosts Efficiency
• Reengineering Trend Boosts Purchase Card Use
• Better Things to Do with Human Resources
• Technology and Merchant Acceptance
• Supplier Complaints Regarding Purchasing Cards
• Bankcard Associations Are True Believers
• Market Segmentation to Cover All Bases
• Electronic Commerce Likely to Compete with Cards
• Figure 3-2: Projected US Market for Commercial Cards, 1997-2002 (dollars)

Projected Market Growth

• Market to Reach $326 Billion by 2002
• Table 3-3: Projected US Market for Commercial Cards by Category, 1997-2002 (dollars): Corporate (T&E), Purchasing, Business

IV THE MARKETERS

Marketer and Brand Shares

• American Express Leads Commercial Card Market
• Table 4-1: Leading Commercial Card Issuers: By Estimated Number of Cards, Charge Volume, and Market Share, 1997 (number and dollars): 6 Leading Issuers
• Twelve Leading Bankcard Issuers
• Table 4-2: Leading Bankcard Issuers of Commercial Cards, 1997 (number): 12 Issuers
• Another 30 Issuers Have 10,000 Cards or More
• Bankcard Issuers Not the Only Players
• Fleet Cards a Type of Purchasing Card
• Oil Company Cards Also Used for Fleet Purchases
• American Express Leads Two of Three Categories
• US Bank Leads Purchasing Card Category

Competitive Situation

• Three Associations and Several Independent Players Compete
• Competition for a Relatively Untapped Market
• Market Segmentation About to Change
• Mergers Play Dramatic Role in Competitive Situation
• Globalization of Plastic Payment Industry
• Cost Savings Given; Competitors Focus on Delivering Information
• Big Three Purchasing Card Brands Support Standard Codes
• Technology Plays Major Competitive Role
• Issuers Also Working to Improve Ease of Use
• Competitive Issues in T&E
• Bankcard Issuers Have Advantage in Business Category
• New Products Part of Competitive Strategy
• Perks and Bonus Programs Being Added to Corporate Cards
• Hefty Annual Fees Characterize Reward Programs
• But Purchasing Card Market Not for Everyone
• Market Attracts Nonbank Players
• Competitive Trends in Fleet Card Segment

Competitive Profile: American Express

• The Acknowledged Leader
• T&E Strength Stems from Travel Experience, Extends to New Markets
• Closed-Loop System Gives Greater Control
• More Than 31,000 Commercial Supplier Locations
• Program Offers Flexible Purchasing Limits
• Comprehensive Management Reporting
• No Fees for Purchasing Cards; Per-Card Fees for Others
• Aggressive Supplier Strategy
• Difference Between Corporate and Purchasing Card
• Largest Users Earn Rebates
• Dedicated Commercial Support
• Product Enhancements Under Development
• Strikes Deal with Wright Express
• Strategy Pays Off But Has a Price
• Expands Corporate Card Offerings in Other Countries
• Issuer Develops Credit and Co-Branded Cards
• Changes to Become More Competitive
• Moves Aggressively to Challenge Visa and MasterCard
• American Express Courts Banks for Two Reasons
• Looking for Global Issuers
• A Marriage in AmEx's Future?
• Increasingly Aggressive Advertising

Competitive Profile: Visa USA

• Visa the Largest Bankcard Association
• Visa Helps Members Compete for Commercial Card Market
• Association Bullish on Commercial Cards
• Visa Corporate Cards
• Visa Purchasing Cards
• Visa Business Cards
• InfoSpan 20 Supports Corporate and Purchasing Cards
• Visa Enters Alliance with Score
• Visa Teams with D&B to Develop Market Intelligence for Business Card Issuers
• Strategy Is to Grow Market Rather Than Compete for Existing Share
• Visa Battles American Express Over Ban on Competing Cards
• Visa and MasterCard Match Programs
• Visa Active in Smart Card Development

Competitive Profile: MasterCard International

• MasterCard Is Second-Largest Association
• The Third-Largest Brand of Commercial Cards
• MasterCard Breaks Rules on Co-Branded Corporate Card, Teams with British Airways
• Mondex and Smart Cards
• Introduces Premium Corporate Cards
• Introduces World Card
• New CEO to Help Company Focus on Global Market
• Strategy Built on "Four Pillars"
• MasterCard Switches Ad Agencies
• New Campaign Is "Priceless"
• MasterCard Produces Creative Plastic Promotions

Competitive Profile: US Bank

• From First Bank to US Bancorp to US Bank
• The Largest Commercial Bankcard Issuer
• Success Attributed to Size, Economies of Scale, and Stability in Other Businesses
• Products Tailored to Size of Company
• Started with a Single Client
• First Bank Wins GSA Contract
• Company Expands Corporate Travel Program
• Teams with International Automated Energy Systems to Offer Fleet Card
• Product Enhancements Introduced in 1997
• Company Acquires Lockheed Martin Account in 1997
• Company Manages Four Product Lines
• Acquisition on Ongoing Part of Strategy

Competitive Profile: Citibank

• Second-Largest Commercial Visa Issuer
• The Major Subsidiary of Citicorp
• Global Presence Gives Citibank Edge with Multinationals
• Launches Three Commercial Products in 1997
• Citicorp Processes Cards In-House But Sold Merchant-Processing Business
• Acquisitions Major Part of Growth Strategy
• Citibank Inherits AT&T's MasterCard Executive BusinessCard Program

Competitive Profile: First Chicago NBD 108

• The Third-Largest Commercial Bankcard Issuer
• The First Private-Sector Purchasing Card Issuer
• Offers Procurement, Fleet, and T&E Purchases on Single Card
• Enhanced Reporting Capabilities
• Offers ProValue SERVICES Software
• Offers T&E Enhancements on Purchasing Card Platform
• Provides Implementation Assistance and Technical Support
• Offers Cards for Smaller Businesses and Fleet/Travel Card
• Merger with Banc One Creates Nation's Fifth-Largest Bank

Competitive Profile: GE Capital

• The Fourth-Largest Commercial Bankcard Issuer
• GE Capital Corporate Card
• GE Capital Commercial Direct for Smaller Businesses
• GE Capital Purchasing Card Program
• GE Capital Fleet Travel Card
• Enhanced Data Capture
• GE Experiments with Different Kind of Reward Program

Competitive Profile: Household Credit Services

• The Sixth-Largest Card Issuer
• Growth Through Acquisition
• Issues MasterCard Corporate Executive Cards
• Enters Smart Card Trial with MasterCard

Competitive Profile: Bank of America

• Sixth-Largest Commercial Bankcard Card Issuer
• Merger with NationsBank Will Create Nation's Largest Bank
• A Major Merchant Acquirer and Card Transaction Processor

Competitive Profile: Paymentech

• Merchant Acquirer/Payment Processor Is Seventh Largest Commercial
• Bankcard Issuer
• Spun Off from First USA
• Offers Several Types of Cards
• Develops Combination T&E/Purchasing/Fleet Card

Marketing and New Product Trends

• Card Issuers Offer Rewards and Enhancement Products
• Trend to Combination Cards
• Smart Commercial Cards
• Courting New Markets
• Direct Mail to Business Owners

Advertising Expenditures

• Big Three Card Brands Spend $574 Million in 1997
• Scant Data on Commercial Card Advertising
• Only $29 Million Spent on Commercial Cards
• American Express Dominates Spending
• Print Plays Major Role in Commercial Card Advertising
• Advertisements Appear in Specialty/Business Publications

Advertising Positioning

• Functionality a Key Theme
• Cost Savings Another Featured Benefit
• Efficiency Akin to Cost Savings
• "Reengineering" a Buzzword
• But Data Capture Critical to Achieving These Savings
• Service Also Key

V THE CONSUMER

Ownership and Use of Corporate/Business Cards

• Note on Simmons Market Research Bureau Data
• Corporate/Business Card Use Not Widespread
• Table 5-1: Ownership and Use of Corporate/Business Credit Cards by Type, 1997 (number and percent): 7 Types
• Marriage, Employment, and College Education Indicative of Corporate/Business Card Ownership
• Cards Not Just for White-Collar Employees
• The American Express Corporate Cardholder
• American Express Executive Corporate Profile Similar
• MasterCard Business Cardholders
• Visa Business Cardholders Present Younger Profile
• Table 5-2: Demographic Characteristics Favoring Ownership of Corporate/Business Credit Cards, 1997 (US Adults): AmEx Corporate, AmEx Executive Corporate, MasterCard Business, Visa Business
• Heavy Users Present Different Profile
• Table 5-3: Demographic Characteristics Favoring Heavy Use of Corporate/Business Credit Cards by Type (US Adults): AmEx Corporate, AmEx Executive Corporate, MasterCard Business, Visa Business
• Frequent Users Present More Typical Profile
• Table 5-4: Demographic Characteristics Favoring Frequent Use of Corporate/Business Credit Cards by Type, 1997 (US Adults): AmEx Corporate, AmEx Executive Corporate, MasterCard Business, Visa Business
• College Education, Employment, and $30,000+ Income Indicate Occasional Users
• Table 5-5: Demographic Characteristics Favoring Occasional Use of Corporate/Business Credit Cards by Type, 1997 (US Adults): AmEx Corporate, AmEx Executive Corporate, MasterCard Business, Visa Business
• Purchasing Card User Survey Reveals Spending Limits

APPENDIX I: EXAMPLES OF CONSUMER ADVERTISING
AND PROMOTIONS

APPENDIX II: ADDRESSES OF SELECTED COMPANIES
AND RESOURCES