The use of virtual cards is on the rise with COVID-19 driven remote work producing an increase of 11% in transactions in 2020 and Juniper Research found that the value of transactions processed by virtual cards will treble over the next 5 years.
Virtual cards are temporary, random digital card numbers designed to replace core payment details for online transactions, therefore helping to improve security and prevent identity fraud.
Usage on the rise
The virtual card market has been on the rise for a while largely due to the fact that cybercrime, identity fraud and data security have become major issues in recent times. The pandemic has accelerated usage by businesses needing to authorize spend remotely while from a consumer standpoint, people are doing much more shopping online and buying items that they would previously buy in store.
Why businesses should switch
There are many benefits to a business adopting virtual card technology, including greater security, streamlined processes and faster payments. This is particularly important with people working remotely as no-touch payments have become vital and virtual cards can be a great solution, but as with any implementation of new technology, there are inevitably hurdles and challenges that arise.
The verification process is one of the major hurdles as the bank must be able to verify the recipient’s identity and approve the card for use. Proprietary verification technology is one solution, but this is not widely available and instead, third party days and apps are being used to register the card and identity.
Blended payment strategies
As a result of this, many companies are finding that the best strategy is to use a range of payment tools when digitizing their payment strategies. Neal Anderson of a popular AP automation company stated that “we consider a successful adoption rate to be at around 20 to 25 percent of overall accounts payable spend” with other payment tools like physical cards and ACH making up the rest. As the technology improves in the coming years, it is likely that this percentage will grow particularly when you consider the many benefits for businesses.
For businesses, streamlining accounts payable will always be appealing particularly for larger companies along with lower costs, better cash flow management and improved security so it is easy to see many companies looking for virtual prepaid cards in the coming years. From a consumer point of view, virtual cards make a lot of sense because they can offer greater protection when shopping online. In a time where both eCommerce and identity fraud is on the rise, many are anxious about sharing their bank details online but this is not an issue when you use a virtual card that offers no link to the primary bank account.
Virtual card usage is on the rise and has been accelerated greatly by the pandemic. Businesses should always be looking to implement the best digital technologies, especially when they can streamline, reduce cost and improve security so now is a smart time for companies to adopt virtual cards even if they are used with a combination of other financial tech products.