Credit-Card Firms Find Eager Customers Behind Office Desks

CREDIT-card companies have found a big market in small business-to-business transactions.

United States firms spend up to $300 billion a year on small purchases - things like paper, ink cartridges, and so on.

In the process, they spend a lot of money processing purchase orders and invoices. Small items often amount to only 10 percent of a company's purchases by cost, but these items can eat up as much as 90 percent of the money a company spends to track purchases.

Visa U.S.A. has so far led the effort to market credit cards designed to help streamline the paper-based purchasing process into an electronic system.

Visa launched its corporate purchase card in the fall of 1993 after several pilot programs. American Express started a similar program early in 1994, and MasterCard International followed later that year.

Agencies of the federal government that opted for the program started using the Visa purchase card to buy supplies five years ago, before the card was offered commercially.

''We have nearly 400,000 of these business-to-business cards in use,'' says Robert Levaro, Visa's senior vice president for commercial card products, and they are used to buy about $3 billion in products and services a year.

Some companies have saved close to 90 percent of their administrative costs on small transactions, Mr. Levaro says, while managers ''can focus more on other ways to save money, and suppliers get paid [by the banks] right away.''

The billing statements, meanwhile, provide useful records by which companies can track their purchasing patterns.

In addition to cutting red tape by offloading paperwork, the cards offer security features that make them different from consumer credit cards: Companies decide who to ''empower'' to use the cards and, as part of this decision, dollar limits are set, based on previous purchasing patterns. Also, ''smart'' software at banks can detect changes in the purchasing patterns of users. And suppliers also know the purchase patterns of customers.

The product is stealthy, Levaro says, because a lot of people haven't heard of it yet. Yet the dollar volume of purchases from such Visa cards ''is doubling each six months.''

Bankers, not wanting the cards to be a secret, were busy promoting them at a recent Treasury Management Association convention in Boston. The corporate treasurers are a conservative group that does not usually deal in cutting-edge items.

Visa has about 70 percent of the still-small market, according to bankers at the conference. (Banks are the middlemen for Visa and MasterCard; American Express markets its own cards.)

''Our competition is not other such cards,'' Levaro says, ''but the [outdated] way companies do business.''

Although the market has only been scratched so far, the list of Visa's purchasing-card customers is impressive, including Hewlett-Packard Company, Intel Corp., and PepsiCo Inc.

An official with Pepsi Cola of New England says the company has had the Visa card for two years and is working to get more of its suppliers to accept it because ''it saves money and speeds up the purchasing process.''

Conoco Inc., a petroleum company in Houston, adopted the Visa purchase card when it reengineered its whole corporate process.

Visa has introduced a software product related to its card: a desktop-computer reporting system that enables businesses to more quickly evaluate the efficiency of their purchasing program. The tool summarizes purchases by vendor, spending category (equipment, utilities, etc.), and even indicates which suppliers are minority- and women-owned. Thus a company could shop for discounts from high-volume vendors, check efficiency region by region, target certain social goals, and monitor cost estimates.

The computer program also helps companies with tax reporting: for example, in complying with the codes of different states, listing by tax-exempt status, and other specialized questions.

Visa says about 12 million merchants now accept its card worldwide, including those in Britain and Canada. Levaro says a Japanese bank is very interested in starting a program. Banks in Hong Kong, France, and Germany will issue cards starting in early 1996.

The average commercial-purchasing-card transaction is $350, says Thomas Peterson, who heads consumer banking for Bank of America - which issues MasterCard's version.