Citibank Presents: Credit Card Basics. GSA Federal Supply Service

Transcription

1 Citibank Presents: Credit Card Basics GSA Federal Supply Service

2 Explore Citibank Commercial Cards, Government Services Citibank Presents: Credit Card Basics The Eighth Annual GSA SmartPay Conference Clark Davis, Jud Staniar, August 1, 2006

3 Goal & Objectives To provide an overview of the industry structure Commercial card value propositions, why it is important to you Information on what s next Industry overview & trends Best practices 2

4 Agenda Industry Structure Commercial Card Value Propositions Industry Overview & Trends Best Practices Q&A 3

5 Citibank Presents: Credit Card Basics Jud Staniar MasterCard International

6 Industry Structure 5

7 What is MasterCard? MasterCard International is an association of issuers and acquirers. It provides its members with: An information network with a common platform for authorization, clearing and settlement A brand that is universally recognizable and valued A set of operating policies and procedures that must be consistently followed by all members 6

8 Industry Structure ACQUIRING BANK Step 3: $98.50 ISSUING BANK Step 2: $98.00 MASTERCARD Step 4: $ Merchant Step 1: $100 Cardholder 7

9 Quantifying the Value Proposition 8

10 Purchasing Card Value Proposition Spending Quadrants Low Transaction Size High Capital Expenditures Sundry Traditional P-Card Direct Materials Staples High Transaction Volume Low Average Transaction Size Low Transaction Frequency High 9

11 Purchasing Card Value Proposition P-Card Value Levers Increased Process Efficiency 1 Current Situation Average manual process cost =$89 per transaction P-Card Value P-Card process cost = $22 per txn (76% reduction in process cost) Improved Spend Compliance 2 Average spend compliance = 68% Spend compliance improvements of 12%-21% Increased Sourcing Effectiveness 3 Average negotiated contract discount = 9.5% Improvement in average negotiated contract discount up to 10.8% -15.0% Reduced Cycle Time 4 Average manual cycle time of 9.26 days (identify need to receipt of goods) P-Card cycle time of 2.96 days (68% reduction in cycle time) 1,4 Palmer & Gupta 2005 P-Card Benchmark Survey Report 2 Accenture Benchmarking Survey Aberdeen P-Card Benchmarking Survey

12 Travel Card Value Proposition Estimates based on Agency with annual charge volume of $40M Soft Dollar Savings $0.6M $364,500 $202,500 EMS Pre-Population (Employee) 2 EMS Pre-Population (Administrative) 2 $42,000 Cash Advance 2 $192,000 Rental Car Discount (5%) 3 Hard Dollar Savings $3.0M $1,260,000 $1,560,000 Hotel Discount (15%) 3 Air Discount (10%) 3 \2 RMPG 2004 Corporate Card Survey 3 Runzheimer / MasterCard International 2005 Enhanced Data Study 11

13 Industry Overview & Trends 12

14 US Payments Landscape Value 65.2% 33.9% 0.9% = Checks = ACH* = Commercial cards US$31.3 trillion Source: Celent Communications 2004 *ACH transactions exclude cash concentration transactions (used by corporations to consolidate accounts). 13

15 North American Purchasing Card Industry $185.0 $ Billions $150.0 $167.0 $136.0 $80.0 $89.0 $98.0 $122.0 $110.0 $57.0 $0.8 $1.3 $3.1 $7.6 $11.0 $17.0 $28.0 $ RPMG Research Projected 14

16 Market Average Monthly Organizational Purchasing Card Spending: $1,298,797 $1,062,329 $800,540 $632, RPMG Research 15

17 Purchasing Card Market Trends Average Monthly Spend All Respondents Average Monthly Spend per Card $632,936 $800,540 $1,062,329 $1,297,453 $777 $1,053 $1,026 $1,831 Average Transaction Size $201 $227 $195 $263 Average Monthly Transactions per Card P-card Monthly Spend per Employee $48 $104 $119 $156 RPMG Research 16

18 Purchase Card to Employee Ratios: % 9.8% 8.5% 6.2% RPMG Research 17

19 Reasons for Expected Spending Increase Use p-card more frequently to buy same types goods and services 61% Use p-card to buy new categories of goods or services 53% Increase use of p-card as a tool to pay for e-procurement transactions Increase acceptance by suppliers 45% 43% Increase average transactions size 27% Increase average monthly spending limit 22% Other 10% RPMG Research 18

20 Current Spend Categories Addressed by Purchasing Card Programs Office Equipment Advertising & Printing Services Computers / Peripherals / Softw are MRO Supplies Maintenance Services Airline & Rail Telecommunications Hotels/ Lodging/ Rental Car Transportation & Logistics Fleet Management Capital Purchases Temporary Labor Utilities 30% 24% 23% 21% 41% 61% 61% 56% 55% 49% 73% 70% 89% Aberdeen Research 19

21 Spend Categories Targeted for Future Purchasing Card Use Utilities Temporary Labor Transportation / Logistics Advertising / Printing Services Capital Purchases Consulting Services Telecommunications Fleet Management & operations Hotels & lodging & rental car Maintenance Services Computers/ peripherals/ softw are Airline & Rail Raw Materials MRO Supplies Office Equipment Footnote appears here Aberdeen Research 9% 8% 8% 7% 23% 23% 21% 21% 21% 19% 15% 15% 13% 30% 61% 20

22 Static Program Goals Increase convenience of purchasing for employees 70% 71% Reduce process cost 69% 70% Increase process effieciency 67% 69% Reduce the time needed to obtain goods and services 59% 62% Reduce the number of paperwork errors that occur in the purchasing and payment process RPMG Research 39% 40% When Initiated Today 21

23 Emerging Program Goals Increase control over spending 34% 42% Generate rebates for the organization 33% 50% Obtain better data about spending 29% 45% Increase supplier acceptance of p-card 23% 41% When Initiated Today RPMG Research Leverage spending to reduce price paid for goods 20% 34% 22

24 Travel Market Sizing and Statistics* The global travel industry is estimated to be $600B, growing at 11%** Organizations in North America spend $193B annually on travel, of which $120B is captured on travel cards. The typical organization issues travel cards to 23% of its employees and captures over 70% of travel spend on those cards. RPMG Research Corporate Travel Card Benchmark Survey ** Packaged Facts

25 Total Travel Card Opportunity Total Travel Card Spending ($B) CAGR = 7.1% RPMG Research 2004 Corporate Card Benchmark Survey 24

26 What Factors Will Drive This Growth? Increase in travel budget 29% Other 4% Increase in spending limits 6% Expand use to non-travel categories 20% Enact "mandate" policy 11% Increase number of employees given a card 30% RPMG Research 2004 Corporate Card Benchmark Survey 25

27 Current Issues in Travel Management Cost control Globalization Internet Globalization is driving the demand to manage T&E expenses on a multinational scale Cost control initiatives are leading to the increased use of information and lower cost travel alternatives The Internet is quickly replacing traditional channels for travel management 26

28 Globalization has led to increased complexity The role of the global travel manager has evolved considerably and must address new challenges: Multiple currencies Global MIS and reporting Integration with multiple systems Regional travel policies / cultures Multinational legislations and tax rules Sarbanes-Oxley In a recent survey, 58% of organizations indicated that they have global travel operations in an average of 26 countries * * Runzheimer 2005 Travel Technology Survey 27

29 Travel Management Costs are Expected to Rise Overall travel management costs are expected to jump 9% next year Airfares are expected to rise by an average of 6% US hotels posted record revenue growth with an 8.3% average increase Average daily rates increased by 5.6% Rental car costs should increase by 5% Source: National Business Travelers Association Smith Travel Research 28

30 and Today Only 31% of Spend Is Under Formal Management Percent of Total Spend Under Management of Procurement Percent Companies Reporting 35% 30% 25% 20% 15% 10% 5% 0% 33% Less than 20% 25% From 20 to 50% 11% From 61 to 75% 25% From 76 to 99% 6% All 100% Spend Managed Source: Aberdeen Group Agencies must find ways to aggressively reduce their travel costs 29

31 All Contributing to the Tightening of Travel Budgets and More Cost Savings Initiatives Travel managers increasingly need access to better information and integration of systems to manage and control their travel expenses Enhanced data Expense management systems Business intelligence Travel managers must source lower cost travel options Low cost carriers Trains, instead of short haul flights Local hotels Agency and GDS alternatives 30

32 The Future of Card Management The Convergence of Card, Procurement, and Travel Management Functions Will Impact an Organization at Many Levels Strategic Organizational Indirect Spend Management Supplier Sourcing Card Strategy Hierarchy / Reporting Relationships Financial / Treasury Relationships Process Multinational Operations SOX Compliance Technology System Integration (Booking, Card, EMS) Enhanced Data Global MIS 31

33 Summary and Key Implications Globalization has affected organizations practices and the role of card managers Cost savings initiatives have fueled the demand for better information and system integration The Internet has changed the landscape of card management and may force industry consolidation and use of alternative distribution channels The convergence of card, procurement, and travel management functions will shape the future of the industry 32

34 Best Practices 33

35 Program Best Practices Broad distribution of cards Method of payment shutdown Mix of card applications non point-of-sale cards Strong executive endorsement Cross-functional support (Purchasing, A/P, IT, etc) Connection to broader cost management agenda Integration with technology investments 34

36 Program Best Practices Higher spending limits, driving more active card use Expanded span of acceptable purchases Perform a process mapping / cost analysis Quantify purchasing card ROI Set & track performance goals Provide comprehensive training and communications 35

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38 Summary Provided you with an overview of the industry structure Commercial card value propositions, why it is important to you Information on what s next Industry overview & trends Highlighted best practices for your program to adopt 37

39 Citibank Presents: Credit Card Basics Questions? 38

40 Reminders Thank you for attending this session! Visit the Citigroup Welcome Center Majestic Ballroom C, Level Two National Industries for the Blind will have a display of products Visit the Citigroup Technical Demonstration Center Landmark 5, Level One Please take a moment to complete your GSA survey for this session Citibank party is tonight! America s Center, Exhibit Hall 3, Level One, at 7:00 p.m. 39

41 Citigroup's Corporate and Investment Bank ("CIB") maintains a policy of strict compliance to the anti-tying provisions of the Bank Holding Company Act of 1956, as amended, and the regulations issued by the Federal Reserve Board implementing the anti-tying rules (collectively, the "Anti-tying Rules"). Moreover, our credit policies provide that credit must be underwritten in a safe and sound manner and be consistent with Section 23B of the Federal Reserve Act and the requirements of federal law. Consistent with these requirements, and the CIB's Anti-tying Policy: You will not be required to accept any particular product or service offered by Citibank or any Citigroup affiliate as a condition to the extension of commercial loans or other products or services to you by Citibank or any of its subsidiaries, unless such a condition is permitted under an exception to the Anti-tying Rules. CIB will not vary the price or other terms of any Citibank product or service based on the condition that you purchase any particular product or service from Citibank or any Citigroup affiliate, unless we are authorized to do so under an exception to the Anti-tying Rules. CIB will not require you to provide property or services to Citibank or any affiliate of Citibank as a condition to the extension of a commercial loan to you by Citibank or any Citibank subsidiary, unless such a requirement is reasonably required to protect the safety and soundness of the loan. CIB will not require you to refrain from doing business with a competitor of Citigroup or any of its affiliates as a condition to receiving a commercial loan from Citibank or any of its subsidiaries, unless the requirement is reasonably designed to ensure the soundness of the loan. This presentation is for informational purposes only. Citibank USA, N.A. and its affiliates does not warrant the accuracy or completeness of any information or materials set forth herein. This material does not constitute a recommendation to take any action, and Citibank USA, N.A and its affiliates are not providing investment, tax or legal advice. Citibank USA, N.A. and its affiliates accept no liability whatsoever for any use of this presentation or any action taken based on or arising from the material contained herein.

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