Feel safe to use p-cards online

By By Jianfeng Pei -- Purchasing, 9/7/2000

Electronic procurement is not complete if the payment is not taking place online. Procurement cards are widely believed to be a convenient and cost-saving tool for online payment. But some purchasing managers are concerned about the security and control issues of using p-cards online.

Card issuers are adopting the latest technologies to make online payment safer and help purchasing managers control online spending.

Safe to pay online

Visa International launched a global e-commerce initiative in June to make Internet shopping safer for both buyers and sellers. The initiative is designed to enhance Visa's payment system and is expected to reduce Internet transaction disputes by up to 50%.

The initiative includes two major components-the Payment Authentication Program and the Global Data Security Program.

The Payment Authentication Program, based on a new "3-Domain" model, is designed to reduce the risk of unauthorized use of a cardholder account. It adopts a globally interoperable approach to make sure that an Internet transaction is conducted by legitimate parties and to reduce the potential for disputes.

The 3-Domain model provides options to authenticate the payment online, protect the privacy of transmissions, and ensure that data in transmission remains unchanged. The model will also work with new payment products and channels, including chip cards, mobile phones, personal digital assistants and set-top boxes.

The Global Data Security Program, to be deployed later this year, will protect the transaction information on a merchant's Web site. It includes a series of standards and guidelines for e-commerce transactions that both buyers and sellers should follow.

American Express and Ariba will jointly develop next-generation electronic payment services, which will help buyers, suppliers and market makers streamline and automate their end-to-end e-commerce process.

The first joint offering includes a new "pay-on-ship" service, which will provide a single-step process for authorization, revenue collection and payment settlement based on online order and shipment events.

"The pay-on-ship service will help prevent suppliers from over billing be-cause electronic payments are triggered at shipment time, based on established purchase order prices," says Julie Gerdeman, director of marketing for e-payment, American Express.

When buyers and suppliers have disputes over online payments, they have to settle them offline. "It is usually easy for buyers and suppliers to settle such disputes because most suppliers want to develop close relationships with buyers," says Al Diamant, vice president, Global Corporate Payment Solutions for MasterCard International.

"It is safe to use p-cards online," says Diamant. "There is no increase of disputes between buyers and suppliers because of using p-cards for Internet transactions."

Easy to control

Card issuers are helping purchasing managers control spending with transaction limits and restrictions that can be customized for individual purchasers, cost centers or at the corporate level.

The American Express Corporate Purchasing Card Solution enables purchasing managers to control the maximum dollar amount allowed for each purchase. The transaction limit is checked by the American Express authorization system every time a transaction is attempted. Purchasing managers can also set spending limits for each month.

To help control the supplier network, American Express allows purchasing managers to restrict spending to selected suppliers. Purchases from non-preferred suppliers can be blocked. Purchasing managers also can set up different limits for preferred and non-preferred suppliers.

"With all these control features, purchasing managers can eliminate out-of-policy purchases and reduce costs by directing spending to preferred suppliers," says Gerdeman of American Express.

MasterCard allows purchasing managers to establish pre-set limits on how, when and where employees can use p-cards. Electronic reporting also gives purchasing managers quick access to transaction data from suppliers so they can track spending trends.

To protect against misuse of p-cards by employees, MasterCard offers the MasterCoverage Liability Protection program. Under the program, companies with five or more cards receive coverage up to $15,000 per card if a terminated employee has misused his or her MasterCard purchasing card.

"This program is designed to address the reluctance of some companies to adopt purchasing cards," says Diamant. "Actually, employee misuse of company p-cards is very rare, less than 0.5%."

GE Capital Financial has developed a patented approach, Pre-Authorization System, to provide key controls and prevent card misuse. Under this system, purchasing managers can create pre-authorization parameters, which can limit transactions to specific suppliers, certain dollar-amount ranges and time periods. Transactions falling outside of the authorization parameters are declined at the point of sale.

GE NetReport system can automatically check transactions against business policies and notify purchasing managers of any violations. It also alerts managers to review suspicious transactions, says Michael O'Malley, marketing manager, Corporate Expense Management Services at GE Card Services.