Transcript Neil D. McHugh, CTP VP, Commercial Card Sales Manager TD

The Sustained Expansion
of Commercial Card
Based Payments
Neil D. McHugh, CTP
VP, Commercial Card Sales Manager
TD Bank, America’s Most Convenient Bank
January 26, 2011
Card Payment Solutions
 Gift Cards
 Reloadable Debit / Payroll Cards
 Corporate Credit Cards
 Charge Cards……
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Card Payment Solutions
 Charge Cards
̶ Purchase Cards
̶ Commercial Cards (“One Card”)
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•
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Purchasing / T&E / sometimes Fleet
Declining Balance
Ghost
Virtual – Single Use
All are Complementary Payment Solutions…
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Market Trends
 Growth!
Ernst & Young
2010 Projections
̶ Sustained demand
̶ Trickle down effect
 Why?
̶ Shared value for all
̶ Technology
̶ Competition
̶ Cost and risk mgt.
̶ Comfort with cards
Coin & Currency
+ 2%
Check Clearing
- 7%
ACH
+ 2.5%
P-Card
+ 8%
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Market Trends
Commercial Card for T&E2
Commercial Card for Purchasing1

2005 – 2010
̶ Annual spend in North America grew
from $110 billion to $176 billion

2004 – 2009
̶ Annual spend in North America grew
from $120 billion to $140 billion
 2009 – 2011
 2010 – 2014
̶ Projected annual spend growth of
nearly 7% annually to $159 billion
̶ Projected annual spend growth of
nearly 10% annually to $255 billion
$300
$200
$225
$150
$150
$100
$75
$50
$0
1
2005
2010
$0
2014
RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey
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2004
2009
2011
RPMG Research Corporation – 2009 Travel Card Benchmark Survey
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Leveraging Commercial Cards
 Better articulating the business case
̶ Drivers
• Improve working capital
• Increase DPO
• Cost reduction / efficiency
̶ How?
•
•
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Involve all stakeholders
Incorporate in vendor contracts
Employee education
Enforce strategic usage
Support from senior management
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Leveraging Commercial Cards
 Integration in an overall payments strategy
̶ Reduce / eliminate cash
̶ Convert check / ACH transactions
̶ Distributed vs. centralized/vendor card programs
̶ Target specific vendor payments
̶ Hybrid applications
Small $ Transactions

Large $ Savings
Aggregate cost savings of $38 billion annually in North America
 Average monthly spend per card of $2,060
 Average number of monthly transactions per card is 7

Average Transaction amount of $315
RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey
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Leveraging Commercial Cards
Traditional Spend Categories

MRO – Maintenance, Repair and
Operations

Office Supplies

Computer Equipment

T&E
Expanding Spend Categories

Professional Services

Advertising

IT

Insurance

Telecommunications

Utilities

Other?...
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Macro Environment
Fostering Demand
CFO’s View of A/P: High Pressures for 2009
Aberdeen Group: February 2009
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Macro Environment
Fostering Demand
TD Bank – Corporate Finance Executive Survey
 Ongoing Concerns
Nearly 70% of respondents said managing cash worries them the most
The most significant risk to cash flow will be non-performing A/R (21% of
respondents)
Other financial challenges include interest rates (55%) and access to credit
(52%)
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 Cautious Optimism
̶
̶
̶
Over half (58%) expect sales to increase in 2011
Almost 40% of respondents expect capital investments to increase
Only 7% plan on reducing expenses in 2011
TD Bank: Survey of corporate finance executives of middle market companies - August 2010
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Substantial Economic Benefits
 Shared value
Buyers
Suppliers
(Merchant)
Issuers
 All participants
benefit
 More equal
distribution
SHARED
VALUE
Card
Networks
Merchant
Acquirers
Processors
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Substantial Economic Benefits
 Buyer (cardholder) perspective
̶
Elimination of the 3-way match
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Reduced processing costs
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Expedited payment cycle times
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Streamlined internal processes
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Payment controls
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Enhanced reporting and spend visibility
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Negotiate mutually beneficial trade terms
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Improve working capital
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Increased DPO – payment float
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Revenue share – rebates
SHARED
VALUE
Buyers
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Substantial Economic Benefits
 Supplier (merchant) perspective
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Convenience
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Reduce DSO
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Receive prompt payment
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Improve incoming cash flow
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Eliminate costly paper remittances
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Conduct a cost/benefit analysis
SHARED
VALUE
Suppliers
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And the survey says…
 Commercial Card for Purchasing1
Reduce costs by 75% or $71 per purchase
Reduce payment cycle times by 72%
Eliminate PO and other payment/remittance docs
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 Commercial Card for T&E
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Reduce costs by nearly 50% or $10 per purchase2
Improve discounts from travel vendors by 13%3
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RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey
2
RPMG Research Corporation – 2004 Travel Card Benchmark Survey
3
Visa and Deloitte & Touche -2002 T&E Card Study
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And the consultant says…
Most Expensive
Manual process with check
$59 per transaction
Least Expensive
Procurement Card
$9 per transaction
Projected Savings
$50 per transaction
The Role of Procurement Cards in the Source-to-Settle Process (Accenture, June 2007)
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Recent Developments
 Evolution towards automated payment integration
̶
Single Use / Virtual Cards - “pull pay”
̶
Straight-Through-Processing - “push pay”
̶
EIPP – Electronic Invoice Presentment and Payment
̶
Integrated outsourced payables (check, ACH, wire, card)
 Regulatory Changes…
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Recent Developments
 Summary of changes to Federal IRS 1099 Requirements1
2010:
• No change to existing reporting requirements
2011:
• Relief - No reporting required for payment card transactions
• Check transactions subject to the current rules
2012:
• Relief - No reporting required for payment card transactions
• Expanded reporting for all transactions for check payments
• Revised withholding regulations for federal/state/large local governments
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Additional Resources:
• Internal or External tax advisors
• www.irs.gov
• www.napcp.org
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1
The above is intended to provide a summary of the recent changes. It is not legal or tax advice, or a complete
examination of the IRS regulations. TD Bank does not make any warranty or representation as to the completeness or
accuracy of this information or assume any responsibility that may result from reliance on such information. Please
consult with your independent tax professionals where advice is required.
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Any Questions?
Thank You!
Neil D. McHugh, CTP
VP, Commercial Card Sales Manager
Cash Management
TD Bank, America’s Most Convenient Bank
2070 Chain Bridge Road, Suite 135
Vienna, VA 22182
Phone: 703-663-4389
Email: [email protected]
Please visit www.tdbank.com for more information
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