Commercial Cards: The Rebate Calculation Imperative

Navigator Editions: Commercial Payments: Special Edition Navigator, May 2013
By: Allan Reynolds

Recent trucking sector industry news may indirectly shine a spotlight on a facet of commercial banking not typically under regulatory or compliance scrutiny – rebates paid for commercial card programs.

By way of background, an organization with a commercial card program of at least a few million dollars of annual spend will often be offered a rebate paid by the commercial card issuer calculated on the basis of quarterly or annual spend with progressively higher rebates paid for higher spend amounts. While annual spend is typically a major driver of the rebate amount, calculating the rebate can be quite complex as issuers seek to balance the competitiveness of their offer with the profitability of the card program.

Numerous factors that can impact rebate calculations include:

  • Program type (corporate / purchasing)
  • Physical plastics or virtual accounts
  • Expected annual spend
  • Rebate grid spend tiering approach
  • Growth thresholds (if any)
  • Rewards (corporate travel only)
  • Large ticket spend (purchasing only)
  • Average ticket size
  • Payment terms (billing cycle / due date)
  • Fraud loss responsibility (issuer / end-user)
  • Delinquencies / losses (individual liability)
  • Target profitability levels

Although the forward-looking calculation of rebate quotation should clearly remain internal to issuers, creating more transparency around the backward-looking rebate calculation of actual amounts paid may now become more common.

For an issuer, selecting a rebate value to bid and calculating the rebate dollar value to pay out can be labor intensive. With the right calculation tools, issuers can improve pricing efficiency and rebate calculation accuracy.

For more information, please contact Allan Reynolds, Associate specializing in Commercial Payments,

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