The title of this piece, which is posted at Dawn, suggests that corporate cards are not the ubiquitous payment entities that we have come to know in most markets across the globe. The article is actually about the corporate card market in Pakistan, where the local dynamics apparently don’t exactly fit well with existing banks’ business hurdles.
‘A few weeks ago, the State Bank of Pakistan (SBP) announced that local companies would now be able to pay a maximum of $200,000 annually in favour of specified digital service providers, such as Facebook, Amazon, DocuSign, Shopify etc, covering a range of major software and other popular products….The move was hailed by the industry as it eases the process of paying for white-listed services without having to go under the needless bank scrutiny regarding details of the transactions. However, its benefits would be mostly limited to mid-sized or large companies — the likes of Bykea or big software houses — given the size of the transaction and the involvement of financial intermediaries.’
Those with some knowledge of the corporate card space (these are the ones specifically used for T&E) will know that the bank revenues associated with the product are basically derived from interchange on the issuing side and transaction fees on the acquiring side. The merchant discount rate is a combination of these two sides of the transaction. Corporate cards are charge cards, meaning no revolving interest.
There are also not typically any annual fees involved, except for things like specialized rewards programs. So a bank needs some purchasing scale to justify the expenses of managing a card program with corporate clients. According to the article, there are only two banks issuing corporate cards in Pakistan, leaving a supply gap that one would think ignites competition. The lack of competition leads to poor experiences.
‘“It took around three months to issue the card and required multiple forms, a guarantee on stamp paper. We had to put a lien on our account in order to get this, which also determined the credit limit,” the founder added….He is also the only one from the organisation due to have this card since the process is complex with requirements of locking in funds. “We need this card to pay for subscriptions, so we put up with it. But it’s not a pleasant experience,” he said, adding that the customer service is “rubbish”.’
We are not intimately familiar with the Pakistan market, but it would seem like there is some demand and perhaps a few more institutions might be able to shape a market, especially with virtual card payables.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
