If they are to capitalise fully on opportunities within the fast-growing commercial banking sector, banks will need to get a much fuller understanding of and more comprehensive insight into their clients’ purchasing patterns and trends.
By embracing client data in this way, banks can begin to benefit from monitoring parameters such as ‘Average Transaction Value’ (ATV) and ‘Spend Per Account’ (SPA), allowing them effectively to create an in-depth ‘DNA’ of each client. This in turn enables them to start to identify potential commercial card opportunities and ultimately maximise the return on investment they can extract from them and to start to identify and solve any underlying issues such as high delinquency rates.
Moving up a level
Of course, banks already recognise that offering commercial cards to their clients is a valuable service. By making the payment process easier and offering added value such as improvements to working capital, chief financial officers (CFOs) can see the clear benefits. For banks, it means a larger share of expenditure flowing through their service rather than via invoicing and as a result, increased revenues.
There is more potential in commercial card schemes than simple end user convenience, however. Provider banks need to realise that by enhancing the technology used to support these schemes both from the end user and back end perspectives, they can help to drive up revenues.
Currently, many banks are falling short in this respect. Even larger institutions that may have commercial card programmes worth billions of pounds annually often do not have any systems in place to analyse overall spend per account and still less which of their customers are growing faster or future potential to grow revenues from specific programmes.
There are a broad range of reasons why they should look at putting technology in place to get a sharper insight into their commercial card programmes and start driving up value for themselves and their customers.
Brand trust and customer analytics
Transparency is always highly valued, yet in reality remains rare in the world of commercial finance. CFOs struggle to manage the constant stream of reporting from different sources that is time-consuming and sometimes contradictory.
Providers that can clearly dashboard spending so CFOs can see at-a-glance where spend is happening, identify trends and dial up or down approval controls deliver transparency and trust where it is most required. Payments automation and the ability to capture all spend types, not just card-based, makes financial tracking easier and more efficient, finding sources of non-compliant spend (leakage) and enabling financial directors to act quickly.
Even beyond this focus on the brand, banks have the potential to leverage enhanced technology to underpin their commercial card offerings and to use that to drive critically important customer analytics.
Key metrics for a bank to track in order to improve card delivery and performance in this area while also enhancing client engagement include spend per account, average transaction value, operational costs and profitability.
A higher SPA is likely to mean improved profitability and ROI for the issuer, greater client satisfaction with the product and better client references. Higher average transaction value (ATV) scores generally result in greater profitability for the issuer. Moreover, tracking operational costs helps identify controllable costs which can be rapidly minimised without impacting service levels while monitoring profitability helps to pinpoint immediate opportunities to extend the surplus of revenue over costs.
Added to this, the technology also offers the opportunity to track further metrics from delinquency rates which if kept low offer the potential to increase issuer profitability and end user ROI to client retention which if kept high will substantially reduce costs and increase the net present value of
accounts booked. Other key metrics which can be tracked to drive benefits for the bank and its clients alike include end user cardholder perception and client perception of the banking relationship.
Finding a Focus
Taken together, analysis of these metrics will help banks to understand where greater marketing effort is needed and also whether or not the products that the customer is currently using are fit for purpose. Beyond this, by being able to assess and segment the customer portfolio, marketers can prioritise products and manage incentives to keep growing their existing customer base and share of budget.
Technology in and of itself is not a sales point for any client or commercial card provider. However, the associated benefits from delivering convenience, analytics, speed and efficiency all combine to improve client retention and their overall share of wallet.
Great experiences are as important in the B2B environment as they are in B2C sectors. If a product is easy to use and provides added value, customers are far less tempted by change. Card owners see their costs of client acquisition fall and lifetime value increase. Payments technology has the ability to deliver strong revenue growth for issuers, even within the context of budgetary constraints.