The last few years have seen commercial credit cards mature into a sophisticated expense management solution for businesses of all sizes.
With a spend volume of over $500 billion in 2018, commercial credit cards are solidly becoming a part of the everyday financial decisions and actions of businesses, from your average mid-size businesses to multi-national corporations. Given that we can expect to see that number rise an additional $343 billion by 2022, we can also expect to see commercial card usage continue to rise.
What is it that is driving this increased commercial card usage? Using a credit card is not much different than it was when the little plastic rectangles were introduced in the 1960s. However, what happens behind the scenes when transactions are processed—especially for cards issued to businesses—is another story.
Until recently, cards issued to small businesses were not much different from personal credit cards. Large corporations pioneered the integration of card transactions into corporate accounting systems, but that kind of integration was not available for small business users.
Until the last few years, the corporate card market was dominated by American Express, and most banks were not issuing many corporate cards. That started to change five to seven years ago, as Visa and Mastercard grew their presence in the market. The rates those companies charge participating banks, as well as their quicker transaction settlement times, jumpstarted the corporate card market, which began experiencing rapid technological advances.
Commercial cards fall into two primary categories: travel and entertainment cards, and purchasing cards. Even before this market shift, travel and entertainment cards were fairly common.
“Travel and entertainment cards are what most people think of when it comes to commercial cards,” according to Ralph C. Aiello, Senior Vice President and Treasury Management Sales Manager for Sterling National Bank. “But, purchasing cards have really been taking off in the last five years, and Sterling’s commercial card program is expanding significantly.”
Commercial Card Benefits
Commercial card programs offer mid-size companies cost savings and easier expense management. Paying with a credit card is significantly cheaper for a company than using checks. Cards also offer rebate programs and opportunities to negotiate discounts that would not be possible with paper payments. In addition, commercial cards can be programmed with custom restrictions for individual users. One user might be authorized to purchase only office supplies, or a truck driver might be limited to buying fuel and repairs but not meals.
“Data from credit card purchases can be exported to a company’s own system or accessed through the commercial card platform,” adds Greg Williams, Senior Product Director and Head of Payables for Sterling. “The commercial card platform allows a company administrator to do expense management for all cards issued to employees in one place.”
For more information about commercial credit cards as an expense management tool, read Sterling National Bank’s white paper, “Commercial Cards: An Emerging Solution for Mid-Size Companies.”