Study puts total transactions under $10K at $456 billion
Susan Avery -- Purchasing, 9/4/2003 6:00:00 AM
Purchasing card spending in North America is expected to double in the next five years, according to the 2003 Purchasing Card Benchmark Survey Results. That's after doubling from $40 billion in January 2001 to $80 billion in January 2003. The survey was conducted by Richard J. Palmer, Lumpkin Distinguished Professor of Business, Eastern Illinois University and Mahendra Gupta, Professor, Washington University, St. Louis.
Results of the survey are based on 579 responses from purchasing card-using organizations that are either customers of one of 19 major financial institutions or members of a national purchasing card administrator. Purchasing card spending was analyzed with respect to past, present and projected spending patterns in aggregate, by category of goods purchased and by dollar value of purchases.
Strongest growth in card spending is in the corporate sector, while activity at governmental agencies and universities is subdued. Expectations of future growth in purchasing card spending are based on increased card use for low-dollar purchases (supplies, MRO items, office products, etc.) but a minority of respondents project relatively higher growth rates based on card use for some inventory, capital assets, travel and auto-related purchases.
Survey respondents identify a variety of benefits attributable to card use. In the past 12 months, card users generated more than $23 billion just in transactional cost savings in North America. Card users also report significant reductions in time needed to acquire goods, the MRO supplier base, and number of petty cash accounts. However, benefits are not realized by all users.
Results also shed light on trends and concerns in the market, such as dual and multiple uses of purchasing cards, emerging goals that organizations have for card programs and card misuse. For example, results show that card misuse is not a significant problem in the industry. What's more, dollar amount of misuse as a percentage of purchasing card spending at state and federal agencies is lower than both the sample average and all other individual organizations. Findings show that:
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While purchasing card spending is expected to rise, the rate of growth is expected to decline over time.
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The current total market size for all transactions under $10,000 in North America is about $456 billion. Of total market spending, $271 billion is attributable to transactions of amounts between $2,000 and $10,000 and $185 billion is due to transactions under $2,000. Ninety percent of under $10,000 transactions are for amounts less than $2,000.
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Card spending is fueled by increases in the percentage of employees given and actively using purchasing cards, transaction activity and dollar value of goods and services acquired.
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Overall, average card spending in the corporate sector has grown 140% since 2001.
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Purchases are of goods and services in traditional card spending categories: MRO, office supplies, computers and peripherals and miscellaneous goods.
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Cards contribute to a 74% reduction in procurement cycle time, a 57% reduction in the number of petty cash accounts and a 42% reduction in number of MRO suppliers.
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The main barrier to card use for higher ticket goods and services is "inability to obtain detailed information needed about purchases of higher priced goods." Other primary concerns relate to how card use integrates into existing business processes for higher dollar purchases and potential for increased card misuse due to higher transaction limits.
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Most adopters use e-procurement technology to acquire the "same kind of goods" bought with purchasing cards. About 43% of e-procurement purchases are paid by paper check. By 2006, respondents expect that percentage to be cut in half and replaced by purchasing card, wire, and other payment tools. Card payments for e-procurement purchases are expected to increase modestly, growing from 27% today to about 34% of transactions by 2006.
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Average number of transactions and amount spent per transaction in the corporate sector are up 8% and 16%, respectively.
For more information on the survey results, contact Professor Palmer by phone at (217) 581-8308 or email at inksling@midwest.net.
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