Pumping Up the Purchasing Power

As corporations focus on strategic sourcing initiatives, many are re-examining their entire procure-to-pay processes, hoping to reduce paper and lower transaction costs. At the same time, banks and card issuers are looking to increase spending among corporate purchasing-card holders. Many financial institutions are finding that helping companies streamline procurement processes through information integration can go a long way toward making purchasing cards the electronic payment method of choice.

"There's a realization now with Visa and MasterCard and the banks that it's not just about making the payments, but about providing the information [businesses] need," says Jeanne Capachin, research director, corporate banking, at Financial Insights, Framingham, Mass.

Today, the focus is more on workflow than on the payment piece, she says. "It's acknowledging that payments are the easy part of it. The hard part is providing a service that equals the information you can get with a check and exceeds it, because hopefully it could be integrated with your ERP [enterprise resource planning] and accounts payable and accounts receivable systems."

To achieve straight-through processing, however, information must be captured electronically at both ends of the supply chain. Until that can be done without the need to rekey each transaction, companies won't get the true value of electronic payments. According to Capachin, firms want to plug into a network that provides a consistent means of integrating information into back-office systems. "But the reality is, that's not anywhere near here, unless you can mandate what your trading partners do," she says.

That's where credit card issuers come in. "Visa Commerce and MasterCard are trying to build the value so they can get the critical mass in their networks and provide value even if you can't convert all of your trading partners," says Capachin. "But it's a big sales job to try to get the businesses to understand the value and see that if I change my processes and use this new technology, it's really going to benefit me, as opposed to just making things more complicated."

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