Aite Group suggests that p-card issuers' strategy is likely to be detrimental to their own interests. Rewriting p-card acceptance rules may be key to opening up bigger revenue opportunities for issuers.

Boston, MA, December 11, 2007 – A new report from Aite Group, LLC suggests that the main barrier to p-card (aka purchasing cards or procurement cards) issuers' revenue growth may lie in card issuers' and card networks' faulty strategies. It provides an analysis of how an adjustment of the card network rules for suppliers will create a more balanced value proposition for all parties, including an opportunity for issuers and networks to more rapidly increase market share and revenues.

The report argues that issuer strategies to increase p-card usage for large-ticket items may actually be hindering p-card growth in the United States. Currently, card issuers and networks seek to expand p-card usage from low-ticket, high-volume payments, to high-ticket, low-volume transactions, in which profits appear greater. However, because p-cards are the only payment vehicle priced as a percentage of a transaction in B2B transactions, high-ticket items translate to higher costs of acceptance for suppliers, which has resulted in only a small number of suppliers accepting p-cards. The report encourages card networks and issuers to consider allowing suppliers to accept p-cards for low-ticket items only, and discriminate against their use for high-ticket items.

"In order to maximize the growth potential of p-cards, the number of suppliers accepting p-cards needs to increase," says Judson Murchie, analyst with Aite Group and author of this report. "Clearly, it is worth further investigation by the card issuers and card networks to determine whether the benefits of prohibiting suppliers from discriminating against p-card payments truly outweigh the costs."

This 26-page Impact Note contains 21 Figures and 3 Tables. Clients of Aite Group's Wholesale Banking service can download the report by clicking on the icon to the right.

Related Aite Group Research:

• The State of the Merchant Acquiring Industry
• Acquisition and Retention in Today's Merchant Acquiring World
• The Future of Card Networks: Gauging Battle-Readiness for a Post-Visa IPO World
• Are Banks Effectively Meeting the Cash Management Needs of Middle Market Businesses?
• Procurement Cards: Will They Become Part of a Strategic Payments Arsenal for Banks?

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