Context:

Small amount payments represent a major part of the companies’ and organizations’ purchases (overhead, temporary work, travel expenses….). They are often recurrent and their processing costs can sometimes largely exceed the value of the order itself. These purchases are often difficult to control since they are generally widely scattered and are often based on paper processes that can represent up to 40% of the management costs of the company or organization. 

The purchasing card is an easy and innovative payment solution to settle the purchases of goods or regular services in various ways :

• face-to-face payment,
• traditional distance selling (fax, mail, telephone),
• online selling (commercial websites, e-marketplaces,…)

The purchasing card makes it possible to combine :

• regular financial data (resulting from payment by credit card),
• invoice data,
• as well as possible specific complementary data.

The purchasing card, a simplification and modernization tool of the purchasing-accounting-payment chain, is based on four key principles:

• secure delegation of purchasing,
• data transmission (invoices and complementary data),
• payment automation, 
• analysis and monitoring capabilities.

The implementation of the purchasing card can be undertaken in two different ways :

• as a simple project : a card to have access to the order in an easy and controlled way,
• as a more complex project : a means of payment for a global optimization of the process

(there is a possibility for the simple project to very naturally develop into a more complex project).

Typical purchasing scope :

• non strategic or non-production related operating goods and services i.e. office supplies, small hardware and consumable, industrial supply, small equipment, temporary work and training, parcel services and freight, hygiene and security, etc.

The purchasing card in the purchasing processes’development

The purchasing card first appeared in the United States at the beginning of the 90’s. It was used in public services before being adopted by companies, where it established itself as a reference tool for the simplification and optimization of less than $ 2,500 purchases.

• Key figures in the United States 

At end 2003, the volume of business made by purchasing card added up to 80 billion dollars, with nearly 3,5 million cardholders. In 2005, it totalled 110 billion dollars.

With an expected growth of 11%, the American market is estimated to reach 185 billion dollars in 2010. The Palmer & Gupta 2005 survey relative to the public sector expenses in the United States shows that :

• the average cost of a purchase comes to $ 89,21 without a purchasing card/ $ 21,83 with a purchasing card
• the average processing time per purchasing transaction is of 9,3 days without a card/ 3,0 days with a card

In North America, the purchasing card is not considered anymore as being part of the “good practices” but rather of the “common practices”.

The expansion of the purchasing card in Europe

The use of the purchasing card progressively expanded to European countries at the end of the 90’s. At European level, the most mature market is the United Kingdom, where the card was introduced in October 1997 as one of the three essential approaches contributing to the rationalization of costs. It became a new standard form of payment in the public sector in this country thanks to the Government Procurement Card program launched in October 1997 by the government authorities.

As in the United States, the success of the government program represents a solid basis for the adoption and the expansion of the purchasing card in the private sector.

• The Government Procurement Card program

During the first program (GPC1), the objective was to reach an amount of expenses paid by purchasing card of £ 300 million (€ 460 million) over 5 years and to save £ 70 million (more than € 100 million). This objective was greatly reached (€ 600 million in volume and € 103 million in savings). Total savings since the launching of the program add up to more than £ 321 million (€ 480 million).

In 2006, the GPC included 790 programs, nearly 94,000 cards on the market for approximately one billion euros of expenses.

Since 1997, 13 million transactions have been carried out, with nearly 4 million for the 2006 fiscal year alone (one million more than in 2005), and savings total 156 million euros. Public entities using the purchasing card posted savings of 30 to 75 euros on the processing of invoices, and of 5 to 15 euros regarding payment.

“The greatest savings for using GPC Visa are generated through the process efficiencies that are gained when GPC Visa is used to reduce the steps and time required to fulfill a purchase” (GPC annual report 2006).

• At the same time, the purchasing card is progressively being introduced and offering promising development perspectives in continental Europe (Benelux, Finland, Italy,…).

In France, the public sphere is also showing the way

At the beginning of the 2000’s, considering the results obtained in the UK and the USA., the French Ministry of Finance and Industry decided, after a pilot phase, to launch a generalization procedure of the use of the purchasing card in the public sector.

At the end of 2004, the French decree n° 2004-1144 relative to the execution of government contracts by purchasing card, now authorizes the State services, local authorities and public institutions to use this modernization tool of public purchase.

Once the generalization phase is over, the development and expansion phase can begin.

As a continuation of the first survey, carried out in 2005, the DGCP ( a division of the French Ministry of Finance and Industry) releases an overview of the use of the purchasing card in the public sphere on an annual basis. In 2006, the card expanded quickly, spreading to new territories. In 2007, the purchasing card kept progressing and the whole public entities are now using it.

The purchasing card is taking advantage of the legal context which is now favorable to the dematerialization of exchanges between authorizing officers and accountants. The French decrees of March 28, 2007 and June 27, 2007 constitute a legal basis which makes it possible to develop a framework convention regarding the dematerialization of the statements of transactions. This context therefore offers new development possibilities for the purchasing card..

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