How P-Cards Work

The following figure depicts the P-Card process in a four-party payment system for which the network (Visa, Mastercard) links end-users, issuers, suppliers and merchant acquirers. (Technically, the network is a fifth party; nevertheless, this scenario is known as a four-party system.) As stated above, within the American Express model, which is representative of a three-party payment system, American Express fulfills the roles of card issuer and merchant acquirer, working directly with end-users and suppliers.

The card issuer typically provides a single electronic invoice to the end-user organization—at a minimum of once per month—reflecting all cardholders and their respective P-Card transaction totals plus a grand total. An organization does not carry a balance, instead paying its card issuer in full (at a minimum of one payment per month) for all cardholders’ transactions. The organization processes the invoice, creating accounting entries and facilitating payment to the card issuer.

With P‑Cards, the end-user organization assumes liability for payment—the cardholder neither owes the card issuer nor makes payments. However, cardholders are expected to follow their organization’s policies and procedures related to P-Card use, including reviewing and approving transactions according to a set schedule (at least once per month). The organization can implement a variety of controls for each P-Card; for example, a single-purchase dollar limit, a monthly limit, merchant category code (MCC) restrictions and so on. In addition, a cardholder’s P-Card activity should be reviewed periodically by someone independent of the cardholder.

In addition to cardholders and suppliers, other parties are involved with the P-Card payment process:

Merchant acquirers 

Merchant acquirers enroll suppliers in the card acceptance process and implement equipment and software solutions related to this purpose. In addition, they facilitate payment flow, including payment to suppliers. A merchant acquirer is sometimes referred to as a supplier’s bank.

Networks

Networks facilitate the movement of transactional data between the issuer and merchant acquirer and set the rules pertaining to card acceptance by suppliers. Organizations in this role include Visa, Mastercard and American Express. (Note: American Express also assumes the roles of issuer and merchant acquirer.) Networks are sometimes referred to as "associations" (an outdated term) or the card brand.

Processors 

Processors provide various services to card issuers and merchant acquirers, which may include card production, statement printing, authorization and data delivery.

 

Transaction Data

Transaction data is captured by a supplier’s point-of-sale (POS) system and transmitted through the card network. The level of transmitted data depends on the supplier’s process and technology systems. Data levels include: