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Commerical Cards: An Opportunity for Suppliers

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SOURCE Citizens Financial Group

Value chain needs to be revised to incent suppliers to accept cards

NEW YORK, Feb. 22, 2012 /PRNewswire/ -- Today's commercial card programs are heavily skewed toward merchants and issuers. "We have spent many, many years getting 15 million merchants to accept commercial cards as an efficient, cost-effective method to accept payments," says D. Stephen Wooters, Head of Commercial Cards for RBS Citizens. However, for larger business-to-business transactions, commercial card acceptance by suppliers has not been nearly as extensive.

"We have not created a value chain in which suppliers say, 'Yes, let me accept payments through this much more efficient, much more easily tracked and better reporting system of a commercial card,'" he says. "We need to modify the value chain across the processing system so that suppliers are incented to accept commercial cards."

When the value chain is revised, says Mr. Wooters, "supplier enablement will be a huge wave of change in the next generation of card activities."

Merchants are willing to pay an interchange fee on transactions because they see a significant increase in their overall sales by offering payments through a commercial card. In contrast, suppliers, believing they will not see material revenue growth, say they are not going to accept the card and add another perceived discount to the current markdowns they offer buyers.

How are suppliers going to be persuaded to accept cards, especially for big-ticket items? "We have to update the value chain so that suppliers will accept the $100,000 transaction from a commercial card," says Mr. Wooters.   

Mr. Wooters sees strong signs that the $90 trillion global business-to-business payments market is changing toward increased supplier acceptance of commercial cards. As an example, a growing number of companies are renegotiating their payment arrangements with suppliers. These market innovators are saying, "Accept my card for payment and reduce my discount so that I can take full advantage of my buyer rebates, the information reporting and spend management services the card provides."

For suppliers, the benefits of commercial card acceptance include:

• Immediate Payment – Today a supplier invoices a merchant, which customarily sits on that invoice for 30-60 days, and then sends the supplier a check. In this new supplier-directed environment, the supplier invoices the merchant and gets paid the next business day.
• Improved Reporting – Commercial cards can consolidate and streamline all of a supplier's transaction information in an efficient and cost-effective spend management program.

Mr. Wooters concludes: "Commercial cards provide buyers with a highly efficient system that enables them to achieve a thorough understanding of their expenses. The more suppliers accept the card, the greater that level of understanding will be."

For more information, or to speak with D. Stephen Wooters, please contact Suzanne Oaks of Temin and Company at 212-588-8788 or news@teminandco.com.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc., is a $131 billion commercial bank holding company. It is headquartered in Providence, R.I., and, through its subsidiaries, has more than 1,500 branches, approximately 3,900 ATMs and more than 20,000 colleagues. Its two bank subsidiaries are RBS Citizens, N.A., and Citizens Bank of Pennsylvania. They operate a 12-state branch network under the Citizens Bank brand in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont; and the Charter One brand in Illinois, Michigan and Ohio. CFG has non-branch retail and commercial offices in more than 30 states. CFG is owned by RBS (the Royal Bank of Scotland Group plc). CFG's website is citizensbank.com.

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