In the rapidly growing commercial card market, virtual cards are seizing dollar-volume share and are poised to dominate business-to-business card payments, according to Digital Transactions.
Corporate cards, purchasing cards and virtual cards accounted for $523 billion in U.S. commercial card volume in 2018, up 10% from 2017, according to Accenture Payments. Of the 2018 total, virtual cards totaled $169 billion in spend, up 24% from the previous year, the study shows.
“Indeed, virtual cards are by far the fastest-growing of the three commercial card categories studied by Accenture, with a compound annual growth rate of 21% over the five years from 2017 to 2022,” stated Digital Transactions in its analysis.
What is a Virtual Card and How Does it Work?
Virtual cards, also known as Single Use Accounts (SUA), are one-time use, auto-generated credit card numbers sent by Accounts Payable (AP) departments to their suppliers. These cards offer buyers a lot of control, convenience and security. Once an invoice is approved for payment, the buyer’s virtual card platform (which usually lives in their bank or AP portal) automatically emails a one-time use credit card number to the supplier for the exact dollar amount of those invoices. After the supplier charges that card number once, it can’t be charged again.
Mobile Devices Boost Virtual Card Use
Virtual card spend, on mobile devices alone, will grow at a 43% clip, Accenture forecasts, totaling $42 billion in 2022. Mobile usage will continue to increase as “issuers continue to enhance solutions to issue/approve virtual cards from mobile form factors, and corporate travelers become more comfortable with mobile wallet capabilities from the ‘Pays’ (e.g., Apple, Google, Samsung), banks, and merchants,” says Frank Martien, managing director for payments research in North America, in a blog post.
By 2021, virtual cards will take over as the biggest segment of the commercial card market, registering $300 billion in volume and taking over the lead from purchasing cards ($275 billion), Accenture projects.
FinTech is Preparing for the Shift
Technology companies and payments providers have recently responded to the rapidly growing opportunity in virtual cards. For example, Noventis Inc. and HighRadius Corp., both based in Houston, collaborated this spring to offer software that automates for suppliers the chore of processing and reconciling virtual card transactions while helping them meet PCI-compliance requirements. It is essential for the FinTech industry to become an integral part of the virtual card equation so that businesses can take advantage of everything a virtual card can bring to the table.
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