Commercial card spending set for strong recovery by 2022, RBR says

By Sunniva Kolostyak

The European commercial card spending will reach new highs as we move into a post-Covid environment, according to predictions from research firm RBR.

According to the Commercial Cards in Europe 2021 report, the long-term future for the commercial card sector is bright, despite being hit hard by travel restrictions in 2020. As one of the most underexploited opportunities in the payments industry, with unregulated interchange fees in most countries, RBR expects expenditure to reach record levels by 2022, rising to €529 billion in 2025.

The 2025 forecast is 45 per cent higher than pre-Covid numbers in 2019 – a year when European commercial card spending rose by 11 per cent to €366 billion and accounted for 8 per cent of the total value of card payments.

According to the 19-country study, charge cards, where transactions must be paid for in full, typically monthly, represent 57 per cent of commercial card expenditure in the region. Products held by large businesses, such as corporate, lodge and purchasing cards, tend to be issued as charge cards. Commercial credit cards are not as popular as their consumer equivalents, making up 15 per cent of European commercial card spending.

The value of commercial debit and prepaid card payments grew much more quickly than that of pay-later (charge and credit) cards, partly because eligibility requirements tend to be less stringent. In many countries the debit and prepaid sectors are under-developed, and together they account for just 28 per cent of regional commercial card expenditure.

The RBR research also found that commercial pay-later cards bore the brunt of losses due to global travel restrictions, and corporate and lodge cards, which are most associated with business travel, were the worst affected. In contrast, debit and prepaid cards tend to be used for more everyday purposes and were therefore impacted less. Commercial debit card spending bucked the overall trend and actually grew in 2020.

In the coming years, company policies to mandate their use (in France, for example), as well as the rollout of contactless commercial cards and greater tokenisation of such cards in mobile wallets, will boost spending levels. The growth of card usage among SMEs is also expected to grow as issuers in several countries will increase their focus on the segment.

RBR also expect that although the short term will remain challenging for the commercial cards sector, continual improvements in technology will enhance the appeal of commercial cards to businesses in the longer term.

Chris Herbert at RBR commented: “Advancements in reporting tools that monitor spending will be a major benefit for the commercial card sector. In addition, growing issuance of virtual cards will bring added control and security to payments, and reduce the need for companies to provide physical plastic cards to travelling employees.”