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Payment Solutions News | The Drive for Optimization | Spring 2017
A Note from Jeff Felser, Senior Vice President
As businesses of all sizes continue to deal with a low-revenue growth environment, with annual changes in real U.S. gross output below 3% every year since 2010[1], they are looking to drive greater efficiencies and returns from their various operations.
For many, new technologies provide significant opportunities for achieving that transformation.
One of the operational areas that offers considerable potential for technology-based transformation is the payments system. Over the past decade, commercial payments have shifted significantly towards electronic payments methods.
However, there has been a recent slowdown in the growth rate of electronic commercial payments.
- Following a dip in the immediate aftermath of the Financial Crisis, total U.S. commercial card volume rose by annual double-digit rates between 2010 and 2014, but this rate slowed to just 8% in 2015.[4]
- A recent AFP survey found that checks’ share of B2B payments rose slightly from 50% in 2013 to 51% in 2016, thereby reversing a long-term downward trend.[5]
This can be partially attributed to the fact that many technology-centric companies have already converted to electronic payments. Additionally, a significant percentage of organizations may be reluctant to fully commit to electronic payments due to a number of factors, including organizational inertia and the perceived cost of adapting legacy payment systems to handle the new payment methods. It can also be due to a company’s lack of in-house resources and external support to transition from trialing new payment methods to broad company-wide adoption.
To address these challenges, companies are looking to commercial card issuers for a range of payment solutions, as well as comprehensive onboarding and optimization support.
PNC provides industry-leading support when implementing and optimizing our commercial card clients’ programs. The strength of this support is demonstrated by better client performance:
Our average spending per corporate card and purchasing card in 2015 was significantly higher than that of other leading commercial card providers.
PNC Commercial Card Program Optimization
PNC provides program optimization support for all our commercial card clients, which includes:
- A commitment to engaging with our clients at all stages of the relationship.
- Providing a number of benchmarks and analyses to help clients gain insight into their commercial card program performance relative to peers.
- Implementation support for a select number of support activities, such as recruiting suppliers to accept card payments.
How we Engage with our Clients
Engagement
The impetus for program optimization is initiated by both the client and PNC. Clients looking to drive efficiencies throughout their organizations are increasingly interested in the types of program optimization support offered by PNC. We regularly reach out to clients to encourage and help them analyze their commercial spending patterns and then implement recommendations based on these analyses. We also provide insights and practical tips on program optimization, which are shared in articles, videos and webinars on PNC Ideas.
Consistent with our client relationship focus, PNC sees program optimization as an ongoing process, with new opportunities emerging as businesses continue to shift towards electronic payment systems.
PNC account managers lead teams that provide additional program optimization support, acting as a single point of contact for client interactions. These account managers, over time, gain a strong understanding of a client’s operations and unique financial needs. For program optimization, account managers:
- Work with the client’s program administrator to obtain detailed spend data on both distributed cards and accounts payable
- Establish a tailored program optimization plan, based on the account manager’s knowledge of the client, as well as on a detailed analysis of the client’s spending patterns
- Coordinate the type and level of optimization support from PNC
- Develop recommendations to improve program performance
- Work with the client to prioritize activities to be undertaken
- Support implementation
How Benchmarks and Analysis Tools can help Clients
Analysis & Implementation Support for Distributed Cards
For distributed card programs, PNC provides a wide range of analyses and benchmarks that enable clients to see how their programs perform in comparison to their (industry and revenue) peers.
Key Benchmarks for Distributed Cards
Benchmark Category |
Key Benchmarks |
Card Deployment and Activation |
|
Card Volume |
|
Transaction Types |
|
Spend Category Trends |
|
PNC also provides tools, such as our Cost Savings Calculator and ROI Analysis, enabling clients to assess the potential impact of improving performance and closing gaps relative to peers.
Once the benchmarking and analyses identify opportunities for program optimization, PNC works with the client to prioritize these opportunities, makes recommendations for improving performance in targeted areas, and provides advice and tips on the best way to implement these recommendations. In addition, bank representatives regularly interact with program administrators to see if their efforts are bearing fruit.
How we Establish Implementation Support for Accounts Payable
Accounts Payable
An important part of program implementation is to analyze accounts payable data and identify suppliers who could be converted to an automated payment method, thus increasing the opportunity to generate financial benefits through revenue share and working capital improvements.
Once we receive a client’s vendor file, PNC performs a vendor analysis to identify specific suppliers who are likely to accept card payments from the client. These could be large suppliers who want to retain the client’s business or suppliers in PNC’s extensive database of suppliers that have already accepted electronic payments from other clients. Our vendor enrollment database contains thousands of suppliers and has doubled over the past three years. PNC and clients use the vendor analysis to identify spend categories in which clients have lower commercial card usage than their industry peers. Additionally, the vendor analysis can help to quantify the potential impact of converting a portion of the client’s suppliers to commercial card payments.
PNC actively supports clients in recruiting suppliers to accept electronic payments from clients. And account managers continually monitor the effectiveness of optimization efforts. Working with program administrators, they identify issues with supplier recruitment, as well as activation of suppliers who have agreed to accept electronic payments from clients. We continue to analyze client spend data to determine whether current efforts are succeeding, as well as to identify emerging spend categories and/or suppliers that would benefit from a switch from paper-based to commercial card payments.
Important Legal Disclosures & Information
1. Source: U.S. Bureau of Economic Analysis
2. The Nilson Report, issue 863, August 2006, and issue 1093, August 2016
3. NACHA, The Electronic Payments Association
4. The Nilson Report, issue 1093, August 2016
5. 2016 AFP Electronic Payments Survey
This Payments Solution News was prepared for general information purposes and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, and does not purport to be comprehensive. Under no circumstances should any information contained in this newsletter be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. (“PNC”) will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission.
Bank deposit, treasury management and lending products and services are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC.
Lending and leasing products and services, including card services and merchant services, as well as certain other banking products and services, require credit approval.
PNC and PINACLE® are registered marks of The PNC Financial Services Group, Inc. All other trademarks are the property of their respective owners.
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