The State of the U.S. Commercial Card Market
There is a general relationship between commercial cards growth in the United States and three other variables: gross domestic product (GDP), the level of business travel, and the level of business-to-business spending. The GDP growth has remained positive (albeit tepid) for the past two years at about 2.4%. This sets the general tone for business activity and corporate financial decision making, including payments methods and volumes. Business travel affects corporate cards used for travel and expense (T&E) management. Business travel has remained positive but somewhat limited at 3% growth rates over the 2014–2015. The third variable is the level of business-to-business spending volume, which is an indicator of the opportunity for purchasing card (P-card) related products. Mercator Advisory Group estimates the growth rate in B2B payments will be about 4% between 2014 and 2018. When combining these variables with other factors, such as a continued shift toward B2B digital payments and away from paper, one would expect reasonable growth in commercial cards. Indeed, that was the case in 2015.
In a recently published research report titled Supply Chain Finance Is Coming of Age
, released in May 2016, Mercator provides a detailed discussion of the reasons why corporations should be digitizing corporate processes, including payments. In this continued transition, companies are turning to commercial cards more frequently than in the past as a payment method with high value. This method allows them to generate more insight into their payment transactions and helps them to manage cash and vendors more effectively.
According to Mercator’s estimates, in 2015 the U.S. commercial card volume reached $428 billion, which represented year-over-year growth of approximately 8.6%, a consistent growth rate for the past two years. The growth in 2015 is indicative of the evolving U.S. commercial card landscape, which was driven specifically by the P-card product category, most specifically the use of virtual accounts.
While the commercial card industry continues to benefit from this ongoing shift and increase in purchase volume, vast opportunities for growth still exist. In 2014, Mercator estimates that the B2B payments market (including check, ACH, wire transfer, and cards) was about $23 trillion (USD). Purchasing cards captured about 1% of this volume. Of the roughly $16.9 trillion in electronic B2B payment volumes, P-cards represented only 1.6%. Figure 1 graphically represents these percentages. Much of this ongoing growth opportunity will be driven by nonplastic single-use accounts. The effort to drive further adoption of SUA among suppliers is one of the key activities of commercial card issuers and their corporate clients.
You can find out more information on the state of the U.S. commercial card market, including market size, changing dynamics, emerging trends, and potential challenges affecting the industry segment, in this recently published report titled The U.S. Commercial Card Market: A Growing Virtual Reality