Banking giant Wachovia Corp. has partnered with GE Money's Corporate Payment Services to provide by the end of the year a corporate card product that includes travel and entertainment capabilities, the two companies announced this month.
Under the terms of the agreement, Charlotte, N.C.-based Wachovia will provide commercial and purchasing cards, for which MasterCard will be the preferred brand, generally targeted to small and midsize business customers. The cards, a similar product to what GE Money already issues to its corporate clients, could be used both for purely T&E purposes or as a one card with T&E and procurement functions, according to Jeffery Dye, CEO of GE Money's Corporate Payment Service.
"It will be a very robust travel card product for those companies that desire it," he said. "Basically, it has all of the capabilities that even the largest travel customers are currently enjoying."
Those capabilities include a global rewards program, a full online servicing suite and complete reporting functions, Dye said. GE Money is providing the back-office functions and the analytical and reporting tools, while Wachovia will sell, underwrite and manage the asset portfolio, the expected size of which was not disclosed.
The access to GE Money's already-developed technology platform was a key selling point as Wachovia explored its options, said Bob Ryan, Wachovia's executive of product development and innovation. "Not only was there a lot of synergy, but there was a lot of alignment too," Ryan said. "We were both pursuing the same thing." Sales of the new product line should begin sometime in the fourth quarter.
Wachovia only recently began its move back into the credit card business as a direct issuer, following the termination of a joint marketing agreement with MBNA near the end of last year. It introduced new retail credit card products in July.
The partnership with GE Money—the consumer and small business financial services unit of General Electric—was logical for Wachovia because the company is not a direct competitor, unlike many of the other major credit card issuers, Dye said. The customer bases of Wachovia and GE Money also complement one another, he said.
Wachovia, which has more than 3,100 offices in 16 states, brings to the table "unmatched distribution capabilities in the wholesale banking and middle market segment," Wachovia Card Services president Steve Boehm said in a prepared statement. GE Money reported a volume of almost $3.6 billion in 2005 for Business Travel News' 2006 Business Travel Survey, and Dye said the company welcomed the chance to broaden its reach to midsize companies, which he defined as those with $300 million or less in annual revenue.
"A majority of our business is either in the small business space or in the large market," he said. "So, it puts two people together who have a common interest and leverages our mutual strengths."
Although small businesses are showing phenomenal growth within the corporate card industry, said Dye, midsize companies remain a key growth area for the industry as well. The market for large companies already is mature, as most have long-established card programs. The midmarket also is a much stronger client base for one cards, as they don't have the structural complexity that separates the purchasing and travel populations.
"While I wouldn't say it's untapped, it probably is less served," Dye said. "We have a good partner now that has relationships with those customers, and our partner is offering them a full choice of banking services."
The midsize market also figures into the larger trend of increased globalization of card programs
(BTN, May 15). Dye said GE Money's reporting capabilities fall in line with those needs.
"Our European business is growing, and it is pan-European in scope," he said. "That's where we're spending a lot of our time."
The agreement is one of several ways that GE Money has found other to expand its customer base within its corporate payment segment this year. In May, for example, it announced a purchasing card program for Educational & Institutional Cooperative Purchasing, a buying cooperative for colleges and universities with more than 1,500 member institutions. As with the Wachovia agreement, the cards have the ability to be used for both T&E and one-card purposes in addition to procurement.