Government Payments

As a result of the recent IRS scandal, I am pretty sure credit card charges for government employees will draw extra scrutiny. There are some 3.5 million charge card accounts in the General Services Administration’s SmartPay program, according to the federal government’s procurement titan. In fiscal 2012, about 95.6 million transactions were made and $29.32 billion was charged on SmartPay cards. These cards are issued through three banks — Citibank, JP Morgan and U.S. Bank.

When we speak of the payments industry, we often are remiss to include the government in the conversation, as the sector isn’t one to set the industry on fire with its technology usage. However, as part of the GSA’s efforts to provide payment services to more than 350 federal agencies and organizations, the SmartPay program was instituted.

SmartPay uses a unique class of credit card processing, Level 3. The Level 3 classification only applies to specially issued Purchase Cards, or p-cards, that can accept an enhanced set of data about the goods and services being purchased.

In 2008, the GSA created SmartPay 2, which includes cards for purchase, travel and fleet services. Travel cards can be either individually billed or centrally billed. It also gives rebates (“refunds” within SmartPay 2) to the government based on money spent (volume) or how quickly bills are paid (velocity).

The SmartPay 2 charge card program is halfway through its contract term with the three banks. Despite the success of the SmartPay program, it seems as though more can be done. While the program isn’t being fully utilized, I do wonder how mobile payments will be phased into the next iteration of SmartPay.

SmartPay 3?

SmartPay 3 is slated to be completed in 2018. Based on the attention given to payments today, SmartPay will be at an entirely different discussion at that point. As far as adoption goes, the government seems to be on the latter half of the S-curve.

However, with memos like the one President Obama issued in May 2012, “Digital Government: Building a 21st Century Platform to Better Serve the American People,” I wonder whether the government will try to drive innovation in the payments sector over the next few years.

Since government contracts are awarded 18 months in advance of the effective dates, we’re looking at adoption of whatever innovative payments system emerge around 2016. The key question is, will the government be an innovator or a late adopter?

While technology will inevitably and truly enhance everyday life, I’m of the mindset that we should let the marketplace decide what solution is best, rather than let the government try to invent these things itself. While the SmartPay program as a whole has quite a bit of weight behind it, I believe the best way to maximize the value of new technology is to let capitalism do its work.enterprise application software

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s