American Express Co.’s recent announcement of a partnership with Walldorf, Germany-based business-software provider SAP could play a key role in the company’s efforts to expand its market share in routine commercial card and business-to-business payments, Andrew Jamison, vice president of B2B product development for AmEx’s Global Commercial Card unit, tells PaymentsSource.
Founded in 1972, SAP, which stands for Systems, Applications and Products in Data Processing, and its core platform are designed to enable corporations to manage diverse types of operations, including transactions, broadly across their organizations. Its key rival is Redwood Shores, Calif.-based Oracle Corp.
AmEx’s strategy with the SAP partnership is to adapt its payment technology to fit SAP’s platform, creating a “seamless” path for corporations using SAP. That way, the organizations could plan and analyze diverse types of transactions that would harness AmEx purchasing cards for routine supplies and expenses, its vPayment virtual account numbers for one-time purchases, large-scale “buyer-initiated payments” for major supplies and other acquisitions, and routine wire and ACH transfers, Jamison says.
“Rather than requiring a corporation’s data to fit into AmEx’s technology, we have created a partnership enabling AmEx’s systems to automatically dovetail with one of the most common systems many corporations already have in place,” he says.
Unknown is whether the SAP partnership will drive much new B2B payment volume to AmEx, but capitalizing on B2B and commercial cards this year is a wise move, Patricia McGinnis, director of banking group advisory services at Maynard, Mass.-based Mercator Advisory Group, tells PaymentsSource. Key factors include a resurgence in B2B spending as the recession wanes, and the fact that consumer credit card issuers are recently struggling with a variety of economic and regulatory headaches.
“While there are all kinds of problems on the retail side of the cards business, commercial cards are pretty healthy, and that’s where a lot of banks expect to see significant growth in the next couple of years,” McGinnis says.
Handling corporations’ broader B2B payments is somewhat new turf for AmEx, whose B2B offerings almost exclusively were centered on travel-and-entertainment card services until about a decade ago. AmEx in 2006 began a heavier push into general B2B payments with its purchase of B2B payments-specialist Harbor Payments, and in 2008 AmEx acquired GE Money Corporate Payment Services, which included 300 corporate card accounts and a patented electronic payment and settlement tool called vPayment.
AmEx’s U.S. B2B payment volume, which excludes its core corporate T&E charge volume, has generated a compounded annual growth rate of 13% over the past three years as many longtime T&E clients have expanded their use of AmEx’s routine B2B payments offerings, Jamison says.
Billed business within AmEx’s broader global commercial services, including T&E spending volume, increased 19%, to $33.2 billion during the third quarter ended Sept. 30 from $27.9 billion during the same quarter a year earlier, AmEx reported in October.
Citigroup Inc., J.P. Morgan Treasury Services and Bank of America Corp. also claim to have experienced strong growth over the past year in their global commercial card and B2B operations by expanding their B2B payments outside the U.S., helped by the improving economy (see story).
AmEx claims its B2B spending growth in the U.S. in recent months is outpacing that of rivals.
Daniel Henry, AmEx chief financial officer, in October told analysts at a teleconference to discuss third-quarter earnings that AmEx’s global commercial services unit during the fourth quarter is likely to “gain share in the U.S. as growth in our spending by customers is notably above the growth we see in our competitors’ spending.”
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