Treasury Today Country Profiles in association with Citi

Australian companies see value in corporate cards

credit card close shot

Corporate card usage in Australia is surging as more and more companies use them for strategic B2B spend.

Across Asia Pacific there is a growing usage of corporate cards as organisations look to achieve greater control and automation in payments reconciliation, most notably for employees’ travel and entertainment (T&E) expenses.

This is especially true in Australia, where adoption has increased markedly of late. And according to Janice Dang, Head of GTS Australia, Bank of America Merrill Lynch, this is only set to continue as corporates begin to see the value in utilising cards for B2B flows.

T&E spend

Cards are already a well-established solution for T&E spend across Australia. Indeed, Dang estimates that organisations with corporate card programmes are putting as much as 95% of their domestic T&E spend through their card programmes.

“Doing so has enabled corporates to more accurately capture T&E expenses, improve visibility and strengthen internal controls and policy compliance,” explains Dang. “This helps reduce operating costs by automating expense reimbursement and AP processes. It also provides financial benefits through programme rebates and improving organisations’ DPO metric.”

Evolving use case

Now more and more corporates are looking to extend these benefits to their procurement spend. Dang explains that corporates have historically put their “tail end” spend – one-off suppliers or very low value (under US$5,000) transactions – onto cards.

This has helped corporates bring this spend – which traditionally is not often closely managed – under control, driving cost savings.

However, there has been a significant shift in the thinking of corporates in recent years and many are now investigating the potential to put larger ticket procurement spend on a card to maximise working capital, says Dang.

“Recurring invoices and strategic suppliers are now being targeted for card usage and we have seen the amount of spend put through a card grow significantly,” she explains.

Multiple benefits

There are clear benefits for shifting this spend onto a card programme. Dang notes that paying by card provides overall cost reduction from direct and indirect expenses, such as lower transaction fees, the ability to unlock additional working capital and possibly rebates on overall spend.

In addition, using cards also offers the possibility for the corporate buyer to automate the AP process end-to-end to bring further efficiency gains. They can also help mitigate risk when compared to other forms of payment because of the insurance coverage that comes with a card programme.

On the supplier side of the equation, payments are received on day one. “This provides them with funding efficiencies and straight through reconciliation from automated data feeds on their receivables,” says Dang.

Continued growth

Despite the recent growth, Dang expects to see more and more corporates using card programmes for their tail end and strategic procurement spend in the years to come.

Numerous factors are driving this, including the recent move from the Reserve Bank of Australia to reduce interchange fees in July last year. “This helps build the business case for merchants/suppliers and corporate buyers/consumers to further increase usage of cards for business transactions,” says Dang.

Elsewhere, Australia’s vibrant fintech environment is also boosting corporate card adoption by providing services that convert card transactions to low-cost ACH payments for suppliers and merchants.

“This means that there is an opportunity for corporates to implement this programme to an even broader set of suppliers,” says Dang. “Previously, suppliers may not be incentivised to migrate to a card platform given interchange and merchant discounting fees associated with accepting cards.”

Read how the Australian-British multinational implemented an Adam Smith Award winning corporate card programme that covers T&E needs as well as B2B purchasing requirements.