JPMorgan & Chase Co. is hoping to help mid-market businesses to control costs and improve their overall purchasing efficiency through the recent introduction of several card offerings.
The new services include single-use accounts, reporting and program management capabilities, a refreshed rewards program, and the re-launch of the bank’s Executive card. Chase defines mid-market businesses as companies with less than $500 million in annual revenues.
“Clients have been asking for a single-use account capability for the last 12 to 18 months as a replacement to check-spend,” Lisa Steury, Chase executive director of commercial cards, tells PaymentsSource.
The single-use account, or virtual MasterCard, enables clients to use a one-time-use credit card number to pay for larger purchases. “Using the card is like writing a virtual check but with no hassle,” Steury explains. Moreover, using a single-use account enables “companies to have more control over their purchases upfront,” she adds.
Client’s pay no fee to use a single-use account, and purchases made from the account contribute to the client’s cash rebate, which is based on transaction volume, Steury says. Chase declined to comment on its rebate program.
Chase integrated the single-use accounts with its Order-to-Pay network to enable company managers to view every purchase, choose to approve or deny the transaction, and request information before approving a purchase.
The bank also revamped its existing rewards program, which now includes 2,500 redemption items including travel discounts and gift cards, up from 25 previously, Steury says. Clients earn points for every dollar they spend and can redeem them online, and they are in addition to the cash rebates.
“We also have been able to open up the eligibility so that there are no spending caps on the card,” Steury adds. The rewards program costs $75 per cardholder per year and is managed by Total Systems Services Inc.
Chase also refreshed its Executive card, which includes regular and elite service levels. This service primarily is available to the “top 1% of a company’s cardholders,” Steury says. Different from a regular corporate rewards card, Executive cardholders also may receive benefits, such as concierge service and travel insurance. The elite level comes with more benefits, such as priority passes to airport lounges.
New clients may start using the program immediately; Chase will migrate its existing clients over in June. The MasterCard-branded Executive card carries an annual fee of $325 per cardholder.
Clients also may to use MasterCard’s smart data reporting program, smartdata.gen2, to manage their spending online through a free expense-reporting platform, receipt-fax imaging, and the ability to view online statements and payments.
Because most corporate purchases still are made by check, “this is an opportunity to convert payments electronically by transferring check spend onto a card rather than using ACH, which in turn, means more money for the banks,” Judson Murchie, an analyst with Boston-based Aite Group, tells PaymentsSource.
Moreover, the corporate space poses less risk than the consumer market because companies tend to pay off their balances, Murchie adds. Plus “companies enjoy the rebates they receive from the cards,” he says. “If you buy through an [automated clearinghouse or wire payment], you don’t earn any points towards rewards.”
However, while single-use accounts may reduce risk for large purchases, suppliers may not want to accept credit card payments because of the interchange fees applied, Murchie notes. “Suppliers will have to pay the interchange fee, which can be around 1% to 2.5% compared to an ACH transaction fee at 15 cents per transaction,” Murchie says.
As such, Chase may have to come up with some incentives for suppliers to encourage card acceptance, Murchie notes. “As long as the bank can increase the value to suppliers, it can increase penetration in the corporate market, … which is under-penetrated compared to retail in the card market,” he says.
Steury contends suppliers are willing to except card payments and have been for some time. As for value, despite paying a fee, “the reality is the supplier is going to get paid faster, which is of value to them,” she says.