By Karen Lynch
Card companies, banks, and fintechs have established a foundation of cloud networking, application programming interfaces (APIs), mobile technologies, and data analytics as a basis for accelerating the development of new business credit card products and features. Many such innovations hit the market in 2018, driving SMEs’ shift from paper checks to digital options including virtual credit cards.
Virtual cards can be employed once or multiple times, for a specified use, with an authorized amount and an expiration date. In a way, virtual cards work like another credit card technology that took root in 2018—the chip card, which provides merchants a single-use number, or token, that changes with every chip card use.1 (Chip card use achieved critical mass in the U.S. in 2018, according to the U.S. Payments Forum, paving the way for contactless payments, as well.2)
Virtual cards may go by several names, including ghost cards and purchasing cards. “As card products have evolved over the years, the terminology to distinguish them has become blurred,” according to Nvoicepay, a provider of payment automation solutions.3 Business credit cards used for travel and expenses often have fewer restrictions than virtual cards, functioning more like personal credit cards. Other digital options include ACH and peer-to-peer payments.
The benefits of virtual cards for B2B purchasing include greater transaction control, security, and speed, as well as less manual processing and real-time visibility into payments. The capability to generate virtual cards from an SME’s accounting system is typically provided by business credit card issuers and linked to permanent cards. Virtual cards are even included in business credit card rewards programs.
Suppliers’ initial resistance to buyers’ use of virtual cards was waning in 2018, especially with new techniques that minimized the cost and process involved in accepting them, according to TSYS, a payments technology company. With a buyer-initiated payment (BIP), for example, the supplier simply receives payment as a direct bank deposit.4
Nearly three-quarters of companies reported increasing their digital use of business credit cards from 2015 to 2018, in a survey by RPMG Research. In 2018, that’s how they paid 24 percent of their supplier base, up from 17 percent in 2015. About half of those payments have been for operating expenses (including operating goods and supplies, office equipment and supplies, and computer-related hardware and software), and about 21 percent have been for assets (primarily inventory). The remainder have been spread across a variety of services, including professional services, education and training, and contractual repair and maintenance.5
“SMEs can add value to their business today by accessing digital innovations that can significantly improve B2B payment efficiency,” said a 2018 report from Deloitte. “The digitization of payments is … providing the foundation for process automation, improved reconciliation, and better business analytics for buyers and sellers alike.”6
Most companies are reported to be automating their accounts payable processes. For those that do, the resulting benefits could include lower administrative costs, less inconvenience to suppliers, lower risk of losing essential records, and better data analysis capabilities.
Companies have also started to introduce more mobile-friendly payment portals that provide B2B payment flexibility and automated controls, in addition to mobility—with the potential for integration into accounting software.
SMEs are gradually automating their travel and expense accounting as well. In addition to enhanced automation, travel policy enforcement, and integration with travel booking tools and credit card feeds, capabilities are expanding to what could eventually become a “self-building” expense report, relying on GPS mileage tracking, calendar integration, and voice interaction with the application, according to a Gartner report.7
In addition, “leading vendors are now focusing on a new generation of solutions that deliver greater insight and business value from the travel expense management application to make it predictive and strategic, rather than an ‘after the fact’ report of spend,” Gartner said. Machine learning and integration into customer relationship management systems can provide more insight into areas such as the cost of acquiring and maintaining new business.
Mobile credit card technology is advancing for business travel, as well, and some business credit cards can now be added to mobile wallets, storing payment information from a credit card to enable the device to make purchases. Expense management tools also use mobile image uploads, optical character recognition, and machine learning to ease expense reporting and auditing, according to the 2018 Business Travel Buyer’s Handbook.8
The digital transformation of business credit cards was in full swing in 2018, and SMEs could benefit in the coming year from credit card technologies that provide greater control of B2B and travel spending, as well as growing insights into their strategic value.
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1. “Virtual Credit Cards Explained,” U.S. News & World Report; https://creditcards.usnews.com/articles/virtual-credit-cards-explained
2. “U.S. Payments Forum Summer 2018 Market Snapshot,” U.S. Payments Forum; http://www.uspaymentsforum.org/us-payments-forum-summer-2018-market-snapshot-with-emv-card-payments-reducing-fraud-us-payments-industry-works-to-create-secure-convenient-cross-channel-experiences-for-consumers/
3. “Card Payment 101: A Guide to P-card, Virtual, and Other Card Types,” Nvoicepay; https://content.nvoicepay.com/blog/card-payment-101-guide-p-card-virtual-other-card-types
4. “Virtual Credit Cards Are Faster, Guaranteed, and More Data-rich. So Why Haven’t They Exploded Yet?” TSYS; https://www.tsys.com/news-innovation/whats-new/Articles-and-Blogs/nGenuity-Journal/virtual-credit-cards-are-faster-guaranteed-and-more-data-rich-so-why-havent-they-exploded-yet.html
5. “2018 Electronic Accounts Payable Benchmark Survey Results,” RPMG Research; http://www.rpmgresearch.net/product-view.php?product_id=89
6. SME Digital Payments: New Opportunities to Optimize, Deloitte; https://www2.deloitte.com/content/dam/Deloitte/au/Documents/financial-services/deloitte-au-fs-sme-digital-payments-270218.pdf
7. “Market Guide for Travel Expense Management Software,” Gartner; https://www.gartner.com/doc/reprints?id=1-3VU5IV5&ct=170317&st=sb
8. 2018 Business Travel Buyer’s Handbook, Business Travel News; http://www.businesstravelnews.com/Business-Travel-Buyers-Handbook/2018/Core-Technology-Data-Reporting