I started in the industry when cards were all about convenience, but it did not take long for rebates to take center stage. This has shown no signs of slowing, which is why recent emails in my inbox intrigued me. One referenced a study about surprising consumer attitudes toward credit card rewards. Another email had an eye-catching subject line: ‘Rebates are toxic’—do you agree?
Consumers vs. Organizations
Last month, the results of a 2015 Bankrate Money Pulse survey made headlines with these statistics:
Only 14% of American consumers noted that points and cash back are their major driver of card use
51% of respondents would continue to use a card in the same manner as before if their issuer eliminated rewards*
I am certain that the results would be very different for a survey aimed at Commercial Card users. Why don’t our consumer views carry over to the workplace?
*On a related note, at least two European issuers have cut consumer credit card rewards in light of new debit and credit interchange regulation in the European Union (excludes Commercial Cards).
The “rebates are toxic” email was from Commercial Payments International (CPI). They are generating a discussion now in preparation of their fall Global Commercial Cards & Payments Summit during which they plan to tackle this sensitive topic.
I would not necessarily say rebates are toxic (nor did CPI claim this as their belief), but I previously wrote about the dark side. I questioned how long the high levels, especially in the United States, would be sustainable. Even without U.S. regulation of credit interchange, banks/issuers face pressures stemming from other regulation. Yet, I recognize no one wants to be the first issuer to cut back on rebates. It is an interesting topic, so I applaud CPI and their partner EuroFinance for being willing to discuss it.
A couple years ago, I had a hypothetical conversation with an end-user about what would happen to their traditional P-Card program if rebates were reduced. He quickly replied that they would decrease or even cease card usage. In reply, I observed this would cause a huge increase in work for their accounts payable staff (e.g., handling invoices for every purchase, most of which were under $2,500, and setting up all suppliers in the AP system). He initially overlooked the bigger picture, but then acknowledged the value of Purchasing Cards even without the rebate. How would your organization react?
What You Can Do
I do not know where rebates will be in the future. Everything might remain as-is. Regardless, I do suggest that organizations routinely evaluate the other benefits gained from Commercial Card usage. For a review, see benefits of Purchasing Cards, and benefits of electronic payables and how they compare to P-Cards. As an end-user, make metrics a regular part of program management to ensure your internal decision makers are aware of the advantages. Industry providers can play a role by helping end-user customers measure the status of their card programs and identify improvement opportunities.
About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…