Virtual Cards Deliver Against Economic Headwinds

It’s a familiar story in B2B payments: Virtual cards are the ideal payment instrument for corporates, better for B2B uses than consumer credit cards in almost every way, and yet for years they’ve merely chugged along. 

Well, rev your engines because that steady chug seems to be gaining velocity fast. 

A toxic mix of high interest rates and high inflation have rendered forecasting difficult for several quarters, making cash management and cost-cutting top priorities.  

With a nod to the fact that virtual cards have taken a slower path to market, Finextra recently reported that “Rapid digitalisation, advances in card solution designs and pressure on corporate treasury departments to improve cashflow (caused by the current economic climate), have seen an uptick in commercial card use.” 

Similarly, PaymentsJournal reported that virtual card usage stats were rising in Q4 2023, writing that “With virtual cards allowing businesses to control and manage business spending, coupled with an increasingly digitalized B2B payment ecosystem, we should expect the adoption of virtual cards to grow.” 

Getting Paid for Making Payments 

Like the loyalty programs we belong to but constantly forget to use in our personal lives, we often don’t think about what we lose – or fail to gain – when we make business payments.  

The virtual card is a classic case of leaving deal money on the table, in the form of rebates that many B2B vendors pay out for the savings and security. It’s been estimated that a company making $30 million in card spend annually can recoup over $400,000 through rebates alone. And the quickest route to rebates is often a virtual card. 

“Virtual cards can bring in a substantial amount of rebate for corporates, however it should not be lost on us that there are also significant savings associated with fraud losses by digitizing check transactions. With fraud on the rise, this often outweighs, or is equally important to, driving rebates,” said Michelle Pasquerillo, Vice President and Head of Bank Channel Strategy at Bottomline. 

Pasquerillo added that “there is a hidden or soft revenue potential with mitigating fraud losses with virtual card. Removing paper is another area that can remove hidden costs and ultimately drive revenue growth.”  

The Future of Virtual Card 

One of the places where virtual cards took flight a long time ago is travel and hospitality. Between corporate T&E largesse and the all-too-common human errors when placing orders and making payments, a virtual card that is programmed for specific types of purchases at preapproved amounts helps CFOs and treasurers sleep better. 

Virtual cards are also popular with trucking fleets and logistics companies, which for years have used virtual cards to control costs, concentrate spending, and earn rebates. 

Per a previous Bottomline blog, “Back in 2020, Juniper Research in the United Kingdom unveiled a study predicting that the volume of virtual card payments would increase threefold from $1.6 trillion by the year 2025. Currently, the firm estimates the total value of virtual card payments globally clocks in at $2.4 trillion. The market size for these payments is expected to increase to $9.1 trillion by 2027.” 

Put another way, virtual cards are finally outpacing predictions.  

As Pasquerillo noted in a LinkedIn article, “Over time, it’s likely virtual card will approach a third-to-a-half of all B2B payments made, given their obvious benefits for buyers and suppliers alike. Your ideal mix will include a ratio in that range, and once you start receiving rebates and saving time and money on virtual card payments, you might find you’d like to encourage your suppliers to accept them at an even higher rate.” 

“Regardless of how your mix shakes out,” she added, “virtual cards are shaking up the natural order in supplier payments.”