Exploring Profitable Avenues in the Digital Payment Sector via Virtual Card Sales

In the ever-evolving world of finance, virtual cards are proving to be a game-changer in business-to-business (B2B) transactions. These digital payment solutions, once limited to travel expenses, are now finding their stride in a variety of industries.

One such industry is travel itself, where online travel agencies (OTAs) like Expedia are using virtual cards to streamline payments. OTAs pay hotels, car rental companies, and airlines some or all of the booking value upfront, but may not have been paid the full value by the traveler yet. This arrangement allows for variable timing and management of final payment amounts.

But the benefits of virtual cards aren't limited to the travel sector. They are also making waves in industries with complex supply chains, such as home centers, food manufacturers, general merchandise stores, and healthcare. The reason is simple: virtual cards authorize for one amount and settle for another, bridging gaps in working capital.

For instance, in healthcare, payments have to go through many parties, making them data-intensive and ideal for virtual cards. Moreover, using virtual cards as purchasing cards can shorten the payment cycle time, expanding the business case for cards and increasing their use.

Industries with regular recurring payments and variable spending, such as energy suppliers, subscription services (e.g., fitness memberships, streaming services), business services like accounting or office cleaning, and companies needing flexible payment processing for supplier relationships, also stand to benefit from virtual cards. These sectors can improve their cash flow management by shortening payment periods and leveraging the card networks' ability to message authorized transactions and later settle them.

However, the lack of common awareness of where virtual cards are best used and the circumstances of their best use indicates that the product is still finding its level in terms of use cases. This is further highlighted by the varying usage of virtual cards among financial institutions, suggesting that the product is being sold opportunistically rather than with industry-specific awareness.

A report titled "The Virtual Economy: Measuring Buyer Industry Receptiveness to Using Virtual Cards" offers perspectives on other industries where virtual cards may be poised for a breakthrough. Hugh Thomas, Commercial & Enterprise Lead Analyst at Javelin Strategy & Research, suggests that virtual cards may have use cases in B2B payments in many other industries.

Early card applications for B2B payments were straightforward, enabling staff to travel and make purchases without reaching into their own funds. Today, virtual cards come with controls such as maximum transaction limits and the ability to work only for a given vendor or vendor industry, offering businesses more flexibility and control over their spend.

In conclusion, as the B2B landscape continues to evolve, virtual cards are emerging as a powerful tool for businesses seeking to streamline their payments and improve cash flow management. The potential for virtual cards to revolutionise industries beyond travel is becoming increasingly apparent, and it will be interesting to see how this technology continues to shape the future of B2B transactions.

Exploring Profitable Avenues in the Digital Payment Sector via Virtual Card Sales