Last week, JPMorgan Chase & Co. launched ExacTrac, a new card-based corporate payments vehicle designed to be integrated into a company’s purchasing systems.
The product issues users a unique credit card number, complete with spending limits, for particular events. The system automatically reconciles the transactions connected to that event and includes that special account number on all bills and payments connected to it, and populated within company books.
Bryan Clancey, chief financial officer of Embryon Inc., has been using ExacTrac for a year to control spending on his pharmaceutical marketing firm’s conferences and roundtables. Clancey says he likes the system because it allows him to closely track his expenses—and because it’s free.
“I like it because I have no administration,” he says. “When that record comes in, it goes right into my system. We send out a request for a unique card, and when that transaction is passed back to us and the transaction has occurred, Morgan passes the same meeting ID back to me, so I can automatically load it into my system.” Clancey describes that system as a financial supply-chain logistics program that was developed in-house seven years ago. Using the product, he adds, meant writing a lot of customized security software to protect the interface with the bank.
Clancey also likes the JPMorgan Chase product because of its perks. “I get rebates (when using ExacTrac),” he says. “I pay face value on the bills, and get 100 to 145 basis points back on total annual value spent.” Embryon was one of ExacTrac’s beta sites; it’s been using it since last July. Another, unidentified company has been testing the product for about 18 months. The product which JPMorgan Chase issues under both Visa and MasterCard branding is part of its PaymentNet core payments processing system.
Clancey says he pays for thousands of meetings in restaurants every year, and to have a major credit card issuer like Morgan Chase forgo a lucrative revenue stream like that may sound unusual. But Frank Dombroski, a Morgan Chase vice president of commercial card solutions, says one of the reasons for launching ExacTrac was to reinforce Morgan Chase’s card business. He also confirms the rebates.
Because it would be a poor CFO indeed who carried an interest-earning credit card balance, clients would typically use it only as a transaction account, meaning that Morgan Chase earns only between 55 and 100 basis points per transaction—not much more than the program’s administration costs.
“We do make money on it,” says Dombroski. “The margins are thin in this business, much more so than four or five years ago, but for us, it’s a numbers game and (allows for) efficiency of processing and automation.”
That may be true, says Christine Barry, a research director at Aite Group, but it’s hardly the only reason Morgan Chase chose to promote a card system like this: It’s mostly a matter of shifting priorities, and of meeting the competition wherever it happens to be.
“There’s been a lot more investment by banks, recently, on the corporate side, instead of the retail side of their business,” she says. Barry estimates that until now, about 60 percent of bank technology expenditures have been on the retail side of the bank.
“They’re shifting focus, and a lot of the new investments they’ve been making don’t necessarily result in cost savings for the bank, or even new revenues being generated,” she adds. “It’s been a big focus on providing more service and convenience to customers. It’s the customers that are getting the benefits, and not the banks, except on paper.” (Contact: Embryon Inc., Brian Clancey, 908-231-6000; JPMorgan Chase & Co., Frank Dombroski, 212-270-7013; Aite Group, Christine Barry, 917-546-9180)