Banks trudging along slowly with digital advancements are getting a push from virtual card technology providers touting the concept of mass distribution for commercial card issuers.
Issuing digital cards to corporate customers addresses the need for secure contactless payments during the COVID-19 pandemic, as companies have many employees working from home, as well as suppliers in need of quicker payments.
Technology provider Extend says it cracked a new barrier last week through a partnership with Mastercard and processor TSYS in launching a mobile virtual card solution in which corporate cards can be loaded into any mobile wallet.
Fintechs have long wanted to distribute virtual cards to other parties, building out the technology to enable single-purpose and disposable card numbers.
"The top line here is virtual card issuing to mobile wallets has been simmering at a low level for several years, but has really exploded this year as the result of the pandemic," said Gilles Ubaghs, analyst for Aite Group.
Previous solutions, like U.S. Bank's launch of a focused expense management wallet last year, have been more focused on the travel space and low-level purchases, Ubaghs added.
"With the sudden shift to work-from-home scenarios and disruptions to normal payables processes, like writing checks or even the use of a physical card having been thrown into the air, alternatives like mobile wallets and instant issuance have really come to the fore," he said. "It’s not just the issuance that’s beneficial here, but also the added visibility on spending, spending controls, rapid approvals and other factors, which of course are a benefit in economically turbulent times."
At New York-based Extend, it's the distribution aspect that makes the difference now and illustrates how critical technology has been in payments during the pandemic.
"The concept of distribution hasn't existed," said Andrew Jamison, Extend's founder and CEO. "This is the idea we have brought to life, that you can have instant access, but also instant distribution to other people."
With that access, the company can also deploy the typical virtual card assets of establishing rules such as where it can be used, what it can be used for and for how long. "It's all of these controls coming to life that takes issuers to another level," said Jamison, a former B2B corporate payments products executive at American Express.
Plus, the security of virtual cards is enhanced through encryption, and the full set of a card's numbers never really move along the payment rails. Through Extend's agreement with Mastercard, the card brand will use its digital enablement services to tokenize the card numbers, making them less appealing to fraudsters and eliminating the need to manually update numbers. TSYS generates the virtual card number, which is accessed through the Extend mobile app and loaded into a mobile wallet.
In the coming months, companies like Extend will be looking to tighten relationships with the card brand networks and seeking processing partners to advance new use cases.
A significant competitive play on the landscape has been the launch of Visa Commercial Pay in its partnership with Conferma, a top player in the travel virtual card landscape. And
Much of this new competition has come about through the acknowledgment that
And it's not always an easy implementation for corporate end users to get virtual cards integrated into existing workflows and processes, Aite's Ubaghs said. "That’s always a challenge at the best of times, especially when you consider legacy processes and older tools, and only become harder as organizations get bigger," he said.
However, with so many processes disrupted in 2020 "it's actually the perfect time to roll out these capabilities," he added. "If processes are changing anyway, might as well replace them with something better. Even once the pandemic finally ends, businesses will be looking at solutions like this as part of their disaster recovery planning, let alone what could be long-term changes in remote working."
Extend is basing much of its future strategy on the belief that virtual card growth is going to be significant — and sooner, rather than later.
"We believe virtual cards are going to explode and will grow between 2019 and 2022 by 90%," Extend's Jamison said. "That means about $1 trillion in payments will be made through virtual cards in 2022, and these numbers are only getting bigger because of COVID."
Extend has nine banks as clients for its virtual card services, with the most recent being PacWest Bancorp, Bank of the West, and Regions Bank. The company has remained network and processor agnostic in order to work with any number of clients or partners.
In addition to helping banks expand virtual card distribution, Extend is also bringing a
"People spend a lot of time bashing credit cards by saying they will be gone soon, but they won't be gone mainly because they establish a trust between two unknown entities — and that is really hard to do," Jamison said.
"We are passionate about bringing this technology to banks and make it easier for everyone, because it was previously only available to the top companies," he added. "There is plenty of benefit in this all the way down the (financial services) chain."
