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Purchasing molds more powerful tools: card providers enhance their products in response to buyer demand.

Article Excerpt
Purchasing operations are taking a new look at purchasing cards. For the past 20 years or so, buyers have used purchasing cards as a payment tool for low dollar indirect goods and services, i.e., mainly some repair and operations (MRO) items and office supplies, requisitioned by employees within the company. The cards promised to streamline internal processes and help reduce costs of purchasing transactions.

For the most part, the cards have served their purpose well. While some purchasing operations have had some misgivings about controlling use of the card and adequacy of monthly spend data, many programs created in the 1980s and 1990s are, by many accounts, thrived these programs by adding cardholders, spending categories and suppliers.

Executives at card companies interviewed for this story believe the industry now is at a crossroads, with some established card programs poised for unprecedented growth. Purchasing operations have become comfortable using the cards, they say, and are starting to reap the benefits of the e-procurement systems they installed at the beginning of the decade; they are ready to use the cards for goods and services beyond MRO. At the same time, technology has evolved to the point that card companies, oftentimes in partnerships with other software providers, now have the capability to offer purchasing operations additional controls and data reporting functionality they require to begin using the cards in new and innovative ways.

Poised for growth

Many long-time purchasing card programs have potential for strong growth in the coming years, according to Chris Pieroth, senior vice president, Product and Marketing, U.S. Bank Corporate Payment Systems, issuer of Visa Purchasing cards.

>From his post, Pieroth views the purchasing marketplace as a payment continuum. On one end are low-dollar discrete purchases; on the other are high-dollar, more strategic purchases. Historically, purchasing card programs have been positioned at the low-dollar end of the continuum. "We are starting to see purchasing cards being used further up the continuum," he says. "In some cases, a card is not being used to settle the transaction. Instead, buyers are using an account with additional controls to pay for the purchases." The controls limit spending to specific commodities or suppliers. As such, buyers are looking to card companies and issuers for increased capability to reconcile transactions back to orders now being placed by a centralized purchasing operation that may not take delivery of the item rather than a requsitioner that typically does. They're also looking for more data on card spending.

At the same time, some suppliers...

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