P-card Prophecy

Study: spending with purchasing cards to double in two years

St. Louis  June 12, 2001  Purchasing card spending is expected to double over the next two years, according to a 2000 Purchasing Card Benchmark Survey study conducted earlier this year by a team of academic researchers: Richard Palmer from Eastern Illinois University, Mahendra Gupta from Washington University, and Antonio Davila from Stanford University.

Organizations view purchasing cards as the payment vehicle of choice for low-dollar transactions, now and in the near future. The survey reports strong growth in organizational purchasing card spending over the past two years, particularly by state governmental agencies and large corporations where card spending grew by 278 percent and 104 percent, respectively. The purchasing card spending is expected to double over the next two years, elevating purchasing card market size from approximately $40 to $80 billion by the year 2002. The most frequently cited factors driving spending to the purchasing card are the speed and convenience for the end user, reductions in the cost and time associated with purchasing-related activities, and the ease with which purchasing cards can be used to acquire goods over the Internet.

The bulk of the projected spending increases are driven by traditional purchasing card acquisitions of maintenance, repair and operating (MRO) items; computer equipment; and office supplies. However, significant percentage increases are expected in non-traditional card purchases of direct materials inventory, capital goods and temporary services.

Survey respondents find purchasing card programs as highly successful technology initiatives that translate into a variety of organizational benefits. The average savings per purchase transaction, with the use of purchase card relative to traditional purchase order, is noted to be $68. Many organizations also reported over 40 percent reduction in the MRO supplier base and over 80 percent reduction in the number of petty cash accounts with the use of purchasing cards.

The study also examines card program management practices, customer satisfaction with card issuer service and technology, and provides benchmark purchasing card statistics by size of business, type of governmental unit and industry category.

The study was managed by Palmer and Associates, an e-commerce and commercial card technology consulting firm specializing in industry-academic research partnerships to address e-technology implementation issues. An executive summary and the full text of the report can be found at http://www.napcp.org/palmersurvey.