2018 - 2019 Edition of Citi Perspectives for the Public Sector

Citi Perspectives for the Public Sector |  2018-2019 45 Commercial Cards: Innovation is Key to Efficient Government Spending T here are card programs available to meet every government need. All deliver lower costs and greater control than traditional payment processes while innovations are opening up the potential for improved reconciliation and fraud detection writes Gary Schneider, Head of Public Sector for North America. Commercial cards were first introduced by the United States government more than 30 years ago. It blazed a trail that many governments around the world, state governments in the U.S. and corporates around the globe have subsequently followed. The success of many programs has led to their expansion. According to RPMG’s 2017 Purchasing Card Benchmark Survey, average monthly purchasing card spending has increased from $1.32 million in 2006 to $3.15 million in 2017. Moreover, governments around the world are increasingly taking advantage of new innovative technologies in commercial cards, such as virtual technology, automated reconciliation and enhanced fraud detection. The rationale for the adoption of commercial cards is straightforward: they are a great efficiency play. Respondents to RPMG’s survey reported administrative cost savings of $69.85 per transaction and a 71% reduction in the time elapsed from the placement of an order to the date goods are received, compared to the traditional purchase-order driven acquisition process (similar or higher costs are likely at government agencies). Comparable savings are achievable on travel and other spend covered by commercial cards. Given the many hundreds of thousands of transactions made by government employees every year — both in the U.S. and around the world — the potential savings for purchasing and travel spend are vast. Commercial cards also offer an important additional financial benefit. Governments have the opportunity to earn a rebate for every dollar spent. Depending on the size of the program and the speed with which the organization pays its bills, rebates can range from 20 to 200 basis points. U.S. government spending on purchase and travel cards is $30 billion a year, meaning its rebates amount to a material sum for taxpayers. Gary Schneider Head of NAM Public Sector, Citi