Five years after its 2008 launch, the U.S. General Services
Administration's SmartPay 2 charge card program is halfway through its contract
term with Citi, JPMorgan Chase and U.S. Bank. GSA overcame challenges when
transitioning from the first SmartPay program, but officials said more work can
be done to add value.
SmartPay 2 provides payment services to more than 350
federal agencies and organizations. Card types include purchase, travel and
fleet. Travel cards can be either individually billed or centrally billed.
The program also generates rebates (called "refunds"
within SmartPay 2). "It's one of the only payment mechanisms that pays the
government back," according to GSA Office of Charge Card Management
director David Shea. As with typical corporate payment programs, the government
program earns refunds based on two factors. The first is volume: Simply put,
the more money spent, the more is returned. The second is payment velocity, or
how quickly bills are paid.
Refund rates vary by card type and by federal agency, with
the heavy-spending Department of Defense, for example, realizing a larger
return than a smaller agency. Though Shea said SmartPay 2 refunds are higher
than commercial rebates (but wouldn't say by how much), maximizing those
refunds is a challenge, especially during a time of federal budget cutting.
In GSA's fiscal year 2012, which ended Sept. 30, 3.5 million
SmartPay 2 accounts (including 2.5 million travel accounts) generated 95.5
million transactions, 49 percent of which were on travel cards, according to
Shea's presentation in March at a Commercial Payments International conference
in New York. Spending totaled $29.3 billion and resulted in $306 million in
refunds. Purchase card spending dropped nearly $1 billion in FY 2012 versus the
prior year.
"The tough budget environment is certainly a
contributor," Shea said. "Our products provided to the agencies are
used by mission need. Depending on what those agencies may be doing in a given
year, you're going to see the dollar amounts change."
According to Shea's presentation, "if agencies
increased the use of GSA SmartPay purchase cards from FY 2012 spend levels of
$18 billion to $60 billion, net refunds increase to as much as $1 billion."
Shea said misconceptions exist about how SmartPay 2 works. "The
data systems behind the cards and the capability of both plastic and cardless
solutions are much broader than many people imagine," he said, noting a
continuing need for education about how the solutions can be applied across the
payment spectrum to add value through improved efficiency, higher refunds or
better data. "It's about building awareness of the broader range of
solutions we can bring," he said.
SmartPay 3?
In 2007, when he spoke with Travel Procurement about the then-soon-to-be-launched SmartPay 2
program, Shea alluded to challenges related to card issuance and
electronic access. Each, he said, was overcome.
To facilitate a smooth transition, contracts with card
providers were awarded 18 months in advance of the effective dates to allow for
data collection on cardholders, locations and spending limits. GSA also
conducted education sessions.
The transition to SmartPay 2, Shea said, "went very
successfully."
The next transition is just over the horizon. Work on
SmartPay 3, which would launch in 2018, will begin in about a year, Shea said,
with a goal of leveraging innovative products that work in the government
context.
However, a key question is what future payment solutions
will look like. Mobile and other technologies will be a major factor, as will a
move toward EMV—a global interoperability standard for integrated circuit or "chip"
cards named after original standard developers Europay, MasterCard and Visa. "I
can't sit here and tell you today I know what the magic answer is," Shea
said, "or even if it's one answer."
This report
originally appeared in the May 2013 issue of Travel Procurement.