Optimizing Commercial Card Profitability

The situation

Commercial card executives know that commercial card profitability is at risk. Interchange revenue is under pressure from large ticket and negotiated rates. Strong—sometimes seemingly irrational—price competition is driving lower fees and higher rebates. Faced with decreasing margins, issuers must carefully optimize the profit levers within their control.  But with only their own portfolios and high level benchmarks to reference, commercial card teams lack the resources to identify specific, actionable improvement opportunities.

The insights

In the exhibit above, note how the example issuer’s spend mix differs from the top quartile.  While it is not surprising that the benchmark’s top groups outspend the issuer’s, the single largest driver of spend (utilities) was not the issuer’s top merchant category. Mix differences like this abound across our dataset and regularly reveal actionable insight. By understanding these deficits, issuers can better educate their clients and change vendor enrollment strategies. These changes will help issuers increase commercial card spend, one important profit lever covered by the benchmark.

Alone, issuers can only reference their own spend performance. With a traditional benchmark, issuers can only identify spend opportunities at the industry level. Our unique approach allows benchmark participants to identify opportunities across a granular array of customer segments, yielding much more actionable insights and a tailored approach for each customer segment.

The data

GCI’s Commercial Card Benchmark helps issuers optimize profitability through detailed, segment-level data and insights across a comprehensive array of commercial card profit levers.   

A recent analysis of spend across a detailed segmentation matrix of commercial card users highlights the power of our approach.  Comparing portfolios from multiple issuers, GCI found spend patterns that single issuers could not. Specifically, the benchmark studied best-in-class companies by market segment (defined as those in the benchmark’s top quartile for total spend), and found that their spend profiles differed substantially in terms of merchant category mix from those of similar, lower spending companies. Using this data to recommend card spend initiatives specific to each customer segment, the benchmark found opportunities for every issuer.