The NAPCP Tackles Interchange—The Card Industry’s Most Complex and Controversial Topic
Industry polling continues to show a tendency by buying organizations to overlook suppliers’ costs when determining the appropriate payment method(s) for purchases.
Within the business-to-business (B2B) payments industry, the economics of card acceptance are often foreign to, or misunderstood by, buyers and sellers alike. This can create frustrations for both, complicating the buyer-seller relationship. The National Association of Purchasing Card Professionals (NAPCP) consistently encourages its members, particularly the card-using buying organizations (e.g., corporations, government agencies, higher education entities), to recognize that all parties need to realize benefits to prevent the system from eroding.
Interchange, the largest component of the merchant discount fee paid by suppliers, entered the political arena years ago and not only in the United States. Merchants worldwide have complained, lobbied and sued over the fees and rules related to card acceptance because they feel they are being short-changed. On the buying side of the equation, interchange and the related costs are not topics that card providers typically address with their card-using clients. The NAPCP fills the gap, providing education to help all parties in the Commercial Card process obtain a clearer perspective. Visit www.napcp.org/CardFees.
“Buyers often hinder suppliers through inefficient purchase-to-pay (P2P) processes,” says the NAPCP’s Education Manager, Lynn Larson. “An NAPCP first quarter 2011 poll on payment methods for accounts payable (A/P) spend revealed a questionable practice. Within the poll, A/P spend was defined as payments initiated by accounts payable for approved invoices. One question asked, ‘What is the primary card product/application that your organization uses for A/P spend?’ The top answer, reported by 41% of respondents, was traditional Purchasing Cards (P-Cards) issued to specific A/P employees. Taking this at face value, it indicates that a buying organization waits for a supplier to provide an invoice and then, at some point following invoice receipt and approval, an A/P staff member contacts the supplier to pay via P-Card.” The supplier loses out on quick payment, but still pays the merchant discount fee. Neither the organization nor the supplier gains the benefit of process savings—not an ideal P-Card P2P process. Traditional P-Cards provide buyers and sellers alike with the opportunity to re-engineer processes to eliminate non-value-added steps. Buying organizations need to consider this when developing payment strategies.
As cited in a 2010 report published jointly by the NAPCP and First Annapolis Consulting, 57% of survey respondents (buying organizations) seldom or never consider the costs/fees to suppliers when determining how to pay a supplier. The same question was recently addressed through a four-question NAPCP online poll, “Suppliers’ Acceptance of Card Payments” that closed August 31, 2012. Forty percent of poll respondents said seldom or never, indicating that suppliers still seem to be a neglected party.
The NAPCP also places responsibility on suppliers to not overlook the cost of checks and cash, and the resulting impact on the receivables process. One respondent to the NAPCP’s “Suppliers’ Acceptance of Card Payments” poll commented, “We often have to share with suppliers the cost of cash and other payment methods because it is readily assumed that ACH and cash are ‘free.’ This is simply not true, causing many issues that, in the end, cost both the supplier and our organization time, effort and money.”
While there certainly might be times when a card payment does not make sense—when the fees exceed the benefits, some cases could be due to a supplier using outdated or inefficient processes. Like end-user organizations, suppliers have the opportunity to re-engineer their processes to realize savings as a result of P-Cards. A supplier might also be in need of a better contract for card services. Suppliers need to be proactive in understanding the costs of all payment methods and pursuing improvements. Overly focusing on interchange is not the answer.
Utilize the NAPCP to gain an education on the interchange and the economics of card acceptance. Become an NAPCP member or complimentary subscriber to participate in polls and review results.
About the National Association of Purchasing Card Professionals (NAPCP)
The National Association of Purchasing Card Professionals (NAPCP) is a membership-based professional association committed to advancing Commercial Card and payment professionals and industry practices worldwide. The NAPCP is a respected voice in the industry, serving as an impartial resource for members at all experience levels in the public and private sectors. The NAPCP provides unmatched opportunities for continuing education and peer networking through its Annual Conference, Regional Forums, webinars, website, newsletters and weekly communication. The association sponsors research and publishes timely and relevant white papers, survey results and other documents. The NAPCP certifies professionals through the Certified Purchasing Card Professional (CPCP) credential program. Please visit the NAPCP website to learn more about Commercial Card and payment programs in general, the value of membership, current member demographics, upcoming events and benefits of becoming a year-round partner sponsor.
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