Virtual Cards 2.0 Set to Boost Commercial Card Uptake

by Steve Murphy 0

The growth curve for commercial cards prior to the 2008 financial crisis was relatively healthy but mostly limited to the North America corporate market, along with some decent usage in several European markets (predominantly in the UK). The spending driver outside the US market (into Asia Pacific, Latin America and Western Europe) has been primarily in corporate cards (T&E Cards), while traditional plastic-based purchasing cards have lagged in growth quite a bit. Mercator writes extensively about commercial cards with ongoing coverage of the global market. As a product category, commercial cards have been valuable and useful payment vehicles, but never really gained more than a roughly 1% share of massive (and lucrative) global B2B spend market.

despite the fact they provide a convenient & flexible purchasing option for relatively low value and ad hoc items. In fact, commercial cards have a very small share of commercial spend compared with other payment methods. They account for less than 1% of global commercial payments by value, and 8% by volume.

In the post-financial crisis era, commercial card growth rates have continued at relatively healthy pace with very strong adoption now also occurring in APac. But a major boost over the past 4 years has been the increasing adoption of virtual cards (also known as virtual accounts and single use cards). In the article, the author first discusses some of the reasons for the limited adoption of traditional plastic-based commercial cards, including merchant resistance, concerns about employee abuse and lack of integration with other payables-related software. He then elaborates on the value of virtual cards and how they overcome many of the obstacles related to traditional plastics through technology allowing for greater control over the transactions and better payables process integration. He argues that banks should continue to embrace this technology for the tremendous opportunity it presents.

According to Deutsche Bank, “Virtual cards could serve as a ‘catalyst’ for card adoption in commercial and B2B payments, which could double US purchase volume to $160 billion by 2018.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

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