SAN DIMAS, Calif. — Procura LLC, a CUSO owned by WesCorp, PSCU Financial Services, Callahan and Associates and Members Development Company, LLC, suggests that credit unions are missing a card opportunity in so-called purchase cards. Purchase cards are usually branded with either a Visa or MasterCard, but differ from the usual corporate or small business cards because they are products that are meant to be dovetailed into an organization’s purchasing or procurement processes. They have long been a fixture in the government and educational sectors and have gradually migrated into the business world as well, according to Amanda LoBiondo, managing director of Purchase One, Procura’s card program. Purchase cards are becoming increasingly popular with business and other organizations as tools they can use to simplify and streamline their purchasing and accounting processes, LoBiondo explained. On average, studies have shown that companies that use purchase cards can enjoy over 76% in increased efficiency and cost savings over using payment systems based on checks and purchase orders.
These efficiencies and resulting cost savings have been resonating with credit unions and their SEGs, LoBiondo asserted. Since Procura’s launch in 2005, 43 card programs, 40 from credit unions and three serving credit union SEGs, have started using the cards, LoBiondo said. In the first quarter of 2007, users spent $19.7 million on the cards, over 147% over the amount spent in the first quarter of 2006.
“I think a good analogy is that purchase cards are the washing machines of the procurement process,” LoBiondo said. “They are simply the quickest, most efficient, most cost effective way of getting a necessary job done.”
Purchase One allows the credit unions who use it to eliminate costly checks, reduce invoice processing, and automate purchase reconciliation, LoBiondo said, all while also extending the float time on funds and increasing control and transparency in purchasing. Credit unions can also offer the card to their SEGs, allowing them to reap the benefits as well.
The cards are branded with the credit union’s logo along with Visa’s, even though WesCorp actually issues them and PSCU Financial Services handles the accounts and runs the call center that can take cardholder questions about the accounts. The cards can be completely integrated into a credit union or SEGs procurement system, by e-mail, so that when a manager or executive signs off on a purchase order e-mail by clicking an approve button, the funds are automatically made available on the purchase card of the cardholder who initiated the purchase order. “Among other things, this completely eliminates petty cash,” LoBiondo pointed out. “Say you have a branch that needs some money for extra coffee and some food for a member appreciation day. Instead of generating a purchase order which might need to be moved from branch to headquarters and back, the branch manager can outline his or her purchase request in an email, get it approved by e-mail and have the funds needed added to their purchase card in minutes.” And the card also serves for larger purchases. Flexible spending limits and the ability to approve and control spending in real-time mean that credit unions have used the Purchase One card to pay for items such as ATMs and to make other bigger ticket purchases, she reported.
This is significant. In the past, Visa USA executives have explained that card limits have been one of the stumbling blocks preventing Visa from penetrating more deeply into the corporate payments market, even for corporate cards. The example that is often used is of a print shop owner who might like to pay for a large paper order with a standard corporate Visa card but cannot put the $12,000 purchase price on their card. LoBiondo said this sort of example is precisely one that the Purchase One card can address. Recycling Interchange Fees
The card has additional benefits as well. Since WesCorp issues the card, it receives the interchange that would normally flow to the card issuer, but rather than keep it, the corporate shares it with Procura which uses it to generate a rebate program which allows credit unions and SEGs to receive money back according to their transaction volume. This amount of money can also be significant. According to Procura, the CUSO paid out $117,000 in rebates for the first quarter of 2007, up from $36,000 for the same quarter of 2006.
In addition, because the system uses Web based applications, they are generally easy to use and can be accessed from anywhere an employee has an Internet connection with a Web browser, LoBiondo said.
On the down side, because the Purchase One card offers such a highly integrated system which can be applied to a credit union’s or SEGs purchasing system, there are also some start up charges which other cards would not have. Specifically Works Inc., a leading provider of commercial credit card management and optimization technology and services, has a start up fee of $10,000 and PSCU Financial Services charges $2,000. But LoBiondo stressed that these are the only additional fees and that Procura pays Works for additional upgrades and needed updates out of the interchange income left over after the rebates are paid.
Credit unions using the card, even smaller ones, have found that savings from the card pays back the startup costs within a year. “You have to remember how much time and energy can be taken up in these procurement questions,” LoBiondo said. “When you weigh all the costs is when the real power of Purchase One becomes evident,” she added. –firstname.lastname@example.org