Commercial cards have been a key banking product for years. Their usage is established among both issuing banks and corporate customers.
In recent years, we have seen growth across all commercial card types. This is being driven by the increasing automation of back-office payables capabilities as corporate and business customers shift away in greater numbers from paper-driven processes.
Over the years, the market has expanded into areas such as T&E (travel and entertainment) cards, central travel accounts and executive cards, but the use of e-payables and virtual cards has recently skyrocketed as organisations adopt them to improve business processes and exert tighter control over payments.
One factor driving this is the consumerisation of commercial banking. Many consumers today are using less cash, instead opting for more modern payment methods, such as digital wallets within mobile devices. The concept of using virtual cards is, therefore, familiar to most, and something employees quickly adapt to at work.
Virtual cards appeal to employees by reducing friction within the payments process, but can also deliver direct business benefits. One such is the reduced credit exposure faced by an organisation through limiting the number of plastic cards issued to employees. Businesses can instead move to a request-based process with a virtual card issued to employees when spend is required. With the addition of card controls, a business can further restrict spend to only the approved criteria within the request.
A process based on pre-spend request ensures that a business has visibility of spend before it happens, therefore, significantly reducing erroneous spend and reducing the back-end work required to manage expenses. Further to this, integration with an expense management system ensures no double-touching of an expense by an employee as correct categorisation of spend can happen upfront.
Long-term growth in virtual cards will also depend on an expansion in the kinds of business use cases available. If virtual card usage is to continue growing fast within the business arena, providers must promote them outside of the traditional travel use case. There needs to be a process of educating businesses and driving usage for a wider range of spend needs, currently only serviced through traditional plastic cards.
Indeed, by promoting virtual card use among smaller, growing businesses which are looking to manage cash flow and retain tighter spend controls, fintechs can promote best-practice expense management processes to a market thirsty for innovation.
Bright future ahead
The long-term prospects for virtual cards look good – as virtual cards and e-payables have reportedly exploded in popularity. It seems reasonable to expect that the consumer who never wants to carry cash today, will also never want to carry debit or credit cards with them in the future.
In line with this, the actual term virtual card may be short-lived. With the use of the word ‘card’ being misleading in a digital age, branding may change to virtual or online accounts and will effectively involve access to payments through a user’s digital wallet.
Ultimately, the benefits of virtual cards are too significant to be ignored. Businesses gain through enhanced control of the expense management process, increased payments security and reduced opportunity for fraud, while business users have a more intuitive and convenient way of managing business expenses. Even if the name ‘virtual card’ is not long-lasting, the concept behind it is here to stay.
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