Platform is leading the commercial card evolution today
Corporate Cards for long have been an important instrument in business payments. With more and more businesses pushing towards utilizing cards for their business payments, there is an upward swing in acceptance of purchase cards as a means of procuring goods and doing business payments However one needs to understand how the entire card evolution and the socio-business impact it has created in the entire ecosystem. Let us see how the overall card industry has evolved over time.
The Inception Story and more (1950s to 1970s)
It started more than 7 decades ago, when businessman Frank McNamara realised that he forgot his wallet while dining out at a restaurant. He thought of a charge card as a payment alternate in case anyone is stuck in a similar situation. This instance led to the birth of the world’s first credit card in the form of - The Diners Club International charge card (cardboard format). This led to specific restaurants, hotels and even department stores accepting these cards allowing users to buy things without having cash at the moment.
Even travel purchases all over the world were allowed using the Diners Club Card. In essence, DIner Club provided the facility to shop at several stores using the same card. Customers paid based on the monthly statements they received, while businesses paid a service charge to the card issuer. The card phenomenon became a hit, and more thousands of people adopted it in the first year of business.
By the 1960s, the Diners Club had more than 1.3 million members to its card program. More innovations came in the form of the first magnetic strip credit card, which replaced the cardboard format. After this, the cardboard versions became plastic format.
Banks and other companies noticed the success and started launching their own version of the cards. In mid 1960s, BankAmericard (now VISA - Visa International Service Association) launched its first card known as the Travel & entertainment’ (T&E) card, which as the name suggested, was primarily used to pay for travel and entertainment expenses The decade also saw the formation of the Interbank Card Association (now MasterCard) which came together to form the first national credit card system.
The 1970s saw an increase in acceptance, popularity and usage of the credit card - all combined to give rise to the intricate business payments system we see today - including banks, the card issuers, card networks and processors. The 70s also saw the advent of plastic cards, and cards with magnetic strips so as to curtail the increasing card fraud. The strip would contain the required financial details of the user that would help in instant and secure transfer of money across banks. It was in this decade that we saw the introduction of the corporate credit cards, though it took a few decades before it came into prominence. Corporate cards had features more suitable for businesses as against personal use.
The Progression Phase (1980s to 1990s)
The 1980s recession also fueled the growth of credit cards. The decade also saw the birth of the concept of co-branding credit cards, and the advent of loyalty based reward programs. Many airlines partnered with banks so as to incentivize their frequent flyers for every trip by giving them points they can collect and redeem later. Many offers and schemes like cashbacks were also introduced to lure more and more people to take part in the cards program
The rise continued in the 1990s. In India, many banks started issuing debit cards, so as to give the user the ease and convenience to withdraw money at any given time, from an ATM machine. These debit cards started getting known as ATM Cards.
The Digital Age (2000 to 2010)
The new millennium saw more users had magnetic strip based debit and credit cards than cash. The decade also saw technology advancements made to curtail frauds and making the ecosystem more secure. The innovation phase came again in the form of chip cards in 2003. Since then chip based cards have taken over as a dominant form of payment using better processing power leading to a more secure and seamless payment mechanism.
Travel became a big thing in the decade years of 2000. Talking specifically about India, - with the launch of national and international portals like IRCTC (Indian Railways), travel booking sites (MakeMyTrip) and low cost airlines (Indigo, SpiceJet etc) users started using more online services and started using cards other than just internet banking. With e-commerce companies mushrooming, payment between merchants, platforms and the user became an area of improvement. Online merchants were looking for easy ways of transaction and accepting card payments online. This gave rise to online payments systems and companies. Online payments since then have become increasingly streamlined, for both users and for merchants.
2000s also saw the rise of the EMV (Europay, MasterCard, Visa) network - which became the global standard for simple, convenient and secure payments using the EMV payments network infrastructure and bank cards. The rise was further strengthened with the introduction of NFC (Near Field Communication) cards. The technology enabled technology. - the complementary technologies delivered more secure payments for the merchants as well as the users
The increased importance of B2B payments (2010 onwards)
The global rapid rise of smartphones, along with technological advancements in financial products, pushed to a more customer and merchant friendly, simplified payment process. Banks & payment aggregators realised the importance and reach of mobiles, and came up with innovations to suit the device.
Later in this decade, there was a string of innovations around POS machines - making it easier for merchants to collect non-cash payments. Business to business (B2B) payments also gained more importance and acceptance as more and more businesses moved to the digital route of payments and incurring expenses. This led to the birth of a lot of B2B financial technology (Fintechs) who helped accelerate the digital business payments trend.
More and more banks also realised the importance of up-in their game and not only started working on issuing offerings specifically for corporates to make business payments more seamless. Fintechs like EnKash have since inception partnered with many national and international banks, as well as payment networks to provide innovative solutions for corporates with Travel, Fuel, Expense and Commercial Credit Cards
With more emphasis given to the merchant/ business side of the transaction, there has been continuous evolution towards technology enabled softwares and tools that accelerate the payment process and take care of any gaps that have earlier existed.
New gen businesses increasingly demand feature laden platforms and have since then provided an opportunity for usage of purchase cards and other forms of cards against business transactions. These platforms and softwares are needed to be easily integrated with various accounting tools, e-comm platforms and banks to give a comprehensive solution to the enterprise. The rise of financial technology innovations in cards, processes, and financing options has helped to give a simpler, seamless experience for the businesses at large.
There has also been an increasing importance given to Purchase cards (P-cards) for the Procure-To-Pay process. More and more businesses are using it and more and more banks are issuing them. Purchasing cards are commercial cards that companies can use to make B2B payments. The P-Card streamlines payment and purchasing procedures, reduces the administrative burden traditionally associated with small dollar value purchases, and allows for quicker receipt of goods. It offers more accountability through consistent and timely reconciliation processes and electronic management controls.
Card led payments have come a long way since the start. No matter what era, what products or services or whatever banks/organisations - the objective has always been to make payments more seamless, secure and simple. What started from a B2C led solution, has slowly but steadily entered into the B2B solution with more and more banks and fintechs acknowledging the importance of this part of the payment ecosystem. Instruments like T&E cards and purchase cards have been at the forefront to make lives simple for the corporate world with newer and more evolved features and benefits passed on to the corporates.