As purchasing cards continue to gain popularity in the realm of supply chain procurement, their revenues are expected to grow from US$1.7 billion in 2006 to US$3.6 billion in 2010, Aite Group speculates.
The procurement card is a business-to-business payment mechanism that facilitates businesses’ procurement functions and creates straight-through-processing from purchase order to payment and account posting.
A new Aite report, titled “Procurement Cards: Will They Become Part of a Strategic Payments Arsenal for Banks?,” recognized that changes would have to be made to procurement cards’ supporting infrastructure in order for the model to be adopted by merchants. That’s because interchange fees on large purchases may prove prohibitive, and the introduction of card payments may be disruptive to the pre-arranged shipping and payment terms that exist between buyers and suppliers.
“In order to promote this model, issuers will have to demonstrate a case to the supplier side,” said Nancy Atkinson, senior analyst at Aite Group. “Success will depend on the flexibility of the industry. P-card issuers need to adjust the pricing model to make it beneficial for suppliers as well as buyers, and they need to effectively articulate those benefits.”