Virtues of going virtual in B2B payments: security, efficiency, and transparency

Alternative payment methods continue to grow in popularity across the business-to-business (B2B) landscape, as digital channels offer important advantages over traditional, paper-based schemes.

One option that is increasingly on corporates’ radar is virtual cards, which offer highly sought-after capabilities around payment automation. The compelling efficiencies afforded by virtual cards are responsible for the exponential growth this payment method is predicted to enjoy over the next five years. The global value of virtual card transactions is expected to increase from $1.9 trillion in 2021 to an astronomical $6.8 trillion by 2026.¹

A RFi Group study titled Capitalizing on the potential in virtual cards and conducted on behalf of Visa, found that virtual cards are becoming an important option for businesses across the globe. In Australia, 54 percent of businesses that already use purchasing cards find virtual cards appealing. This figure is even higher (at 60 percent) for businesses who do not currently use purchasing cards. In other regions, namely Canada and the U.S., where corporates already use purchasing cards, the appeal for virtual cards goes up dramatically; 74 and 93 percent of businesses respectively indicated they find virtual cards an attractive option.²

This growing awareness and interest for virtual card use amongst corporates represents a sizeable opportunity for issuers looking to deepen relationships with their business customers. By focusing on the many enticing benefits of virtual cards, issuers can position themselves to improve relationships with existing customers and future B2B clients.

The many virtues of going virtual in B2B payments

Arguably the most compelling reason to make the switch to virtual cards comes down to security. By their nature, virtual cards eliminate the risks associated with issuing plastic, hence reducing potential for loss, theft, or compromised data; not to mention making compliance and auditing simpler. Additionally, because virtual card numbers can be issued for both single use or multiple related purchases and can be limited to specific suppliers, the risk of fraud is significantly reduced too.

A second major benefit of virtual cards is efficiency – a leading focus area for most organizations and a key concern for business owners. Virtual cards can help improve organizational efficiency by allowing payments to be fully automated, whether they are recurring or ad-hoc. They also enable automated reconciliation for invoice or on-demand payments and employee spend, hence minimizing the time and resources spent on doing these tasks manually.

Another closely linked benefit of virtual cards is transparency. This payment method offers corporates centralized, customizable data on every transaction, which can inform decisions going forward. Virtual cards also offer the ability to align invoice settlement with preferred workflows to effectively manage working capital easing the burden on finance teams and business owners alike.

Accelerating the adoption of virtual cards, globally

As virtual cards make their presence more commonplace, issuers have a great opportunity to get ahead of the curve and drive uptake by talking to their corporate clients about their comprehensive benefits. Messaging should be targeted around features which matter most to current and prospective virtual cardholding businesses. But beyond this, our research uncovered industry verticals and business types most likely to make the shift to virtual cards.

The RFi study revealed that the greatest opportunity to grow virtual card adoption was found in specific verticals in different regions. For instance, the construction industry in the U.S., manufacturing in Canada, the professional services industry in the UK and Australia, and customer services businesses in Singapore. Within those industries, the study found that the primary use cases for virtual cards involved travel expenses in the U.S., Canada, and Singapore, while fuel expenses were most prevalent in the UK, and insurance expenses in Australia. This finding is consistent with generic card use data showing travel and entertainment as the most popular category when it comes to commercial card use.

However, issuers should encourage cardholding businesses to expand their use of cards to more strategic spend such as procurement of office supplies or raw materials, software subscriptions, etc. These are all use cases where virtual card automation can add real value.

Corporates who have already embraced virtual cards present issuers with an opportunity to expand their use of other bank products and services. The RFi study found these businesses are more likely to utilize additional financial services products in the coming year. In Canada, for example, businesses that use virtual cards were 30 percent more likely to use additional bank products. In Australia and the U.S., virtual-card-using businesses were more predisposed toward borrowing products.

Positive prospects

SMEs are undeniably a crucial segment in any card issuer’s customer set. When a part of this market segment is categorized by businesses who drive roughly 50% plus of an issuer’s total SME portfolio spend, it’s clear to see why they should not be ignored. Rather, this customer segment must be actively embraced. Issuers can strengthen relationships with these high spending businesses and ensure growth for their own portfolios and for their business customers too.

The pandemic has shone a light on the fact that SMEs have felt their bonds strengthen with the suppliers and stakeholders who have helped them weather the storm.¹ Now is the time to nurture relationships with this key segment. Cards already feature prominently within high-spending SMEs’ payment repertoires. This gives issuers a unique opportunity to step in and use this touch point to develop lasting partnerships which will ultimately help these businesses not only navigate a post pandemic landscape but also thrive for the future.

The trademarks and copyrights not attributed to Visa are the property of their respective owners.

1. Steven Jones, Virtual cards ~ The future B2B solution (June 2021) Juniper Research
2. Source: RFi study, 2021, Capitalizing on the potential in virtual cards