With the nation's personal credit-card market becoming saturated, MasterCard International sees commercial payments by small- and medium-sized enterprises (SMEs) as a market segment with great potential.
Citing statistics for the Asia-Pacific region, including Taiwan, China, Japan and South Korea, MasterCard said 59.8 percent of the US$700 billion exchanged in business-to-business transactions consists of cash and checks.
This proportion is believed to be bigger in Taiwan, a massive but underdeveloped market which the company is eager to tap, Peter Gordon, MasterCard's vice president for commercial payment solutions, told reporters yesterday.
Operating in a similar fashion to personal credit cards, commercial cards allow cardholders -- who are owners or employees of businesses -- to make payments when purchasing office supplies and stationery or purchasing business trips and meals.
This saves businesses the trouble of making advances and applying for reimbursement, and can help corporations and the public sector lower costs, streamline procurement processes, reduce paperwork and increase operational efficiency, according to MasterCard.
Moreover, it is a lucrative business for card issuers, Gordon said, citing MasterCard's global figures showing that an average of US$6,664 per year is spent on commercial cards, four times that spent on personal cards.
Banks can design loyalty programs to build better ties with their corporate customers, he added.
Visa International is also upbeat about the under-penetrated market.
"The transaction volume made through commercial cards shows strong growth. The opportunity is huge," said Christopher Clark, Visa's country manager in Taiwan.
By cooperating with 16 banks to target large-sized enterprises and SMEs, Visa had issued 17,000 commercial cards in Taiwan by the end of last month, generating over NT$5.3 billion in transactions in the year ending March, or 150 percent growth year-on-year, Clark said.
While the idea might be new to some business operators, American Express Bank Ltd took the lead by issuing the nation's first "corporate card" in 1989, targeting big corporations and foreign companies, followed by the issuing of a "business card" in 2000 to serve SMEs, said Kelly Yang (
Although the market development sounds enticing, an academic pointed out that the lack of a rating reference system on SMEs would make banking institutions bear higher risks.
"Card issuers have less access to understanding the nature of a company, whose success or failure is closely related to the economy," said Thomas Lee (李桐豪), professor of money and banking at National Chengchi University.
But if a scoring system is established, banks instead would garner better information about how their corporate customers spend money with the help of commercial cards, he said.
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