As business travel continues its long road back to pre-pandemic spending volume, businesses are increasingly pivoting from corporate credit cards to virtual credit cards. With the ongoing digitalization of business-to-business (B2B) payments, virtual card products can be embedded within an organization’s travel software, enterprise resource planning software, and B2B payment platforms.
That said, physical cards are not obsolete. In fact, travel-and-expense (T&E) corporate cards are expected to see general growth. Procurement cards will see the weakest area of growth among corporate cards.
In the report, International Commercial Credit Cards: Market Review and Forecast, 2022-2027, Ben Danner, Senior Analyst of Credit & Commercial at Javelin Strategy & Research, delves into the latest trends in commercial credit card spending on an international level, why virtual cards are growing in popularity, and the latest innovations affecting the commercial credit card industry.
Latest International Trends on Commercial Credit Card Spending
Several factors informed Danner’s findings, such as business travel spending, the gross domestic product of the various regions covered, and conversations with industry stakeholders.
The Western Europe (including the EU and the UK) and Asia-Pacific regions have seen corporate cards drive much of the spending. Due to increased digitalization, the highest growth will be seen in virtual card use, beginning with Western Europe, followed by the Asia-Pacific region.
Instant payments could pose a threat to commercial cards in the future, Danner believes, particularly when instant payments systems become connected in a true cross border payments scenario.
Corporate cards have been a steady fixture in the Latin American and Caribbean (LATAC) region and that continues to make up the majority of spending, followed by purchase cards. Virtual cards make up the smallest portion, with a lack of supplier acceptance remaining a problem.
Danner noted that for last year’s report, the estimated overall commercial card spending growth rate for Central and Eastern Europe, the Middle East, and Africa was 15.3%. However, that was lowered to 10.1% overall from 2022 to 2027. This can be tied to the ongoing conflicts: between Russia and Ukraine, in Sudan, and in the Middle East between Israel and Hamas. These conflicts will directly affect business travel to those areas of the world and subsequently card spending.
Although overall virtual card growth rates are high in Eastern Europe and the Middle East, the volume is still lower than in other regions. This was also the case with the LATAC region.
In contrast, virtual card growth rates in Asia Pacific and Western Europe were estimated to be lower than other regions, however, these regions hold most of the virtual card volume.
The growth in virtual cards, Danner explains, can be attributed to growth in online B2B marketplaces, trends in digitalization, and fraud prevention capabilities.
Why Virtual Cards?
Why are more businesses adopting the use of virtual cards? Virtual cards offer businesses more security, more control over spending, and a seamless integration within their accounting and expense management systems.
“Virtual cards are not a copy of a physical card. They create their own unique virtual number, and so the card is something that only exists for whatever parameters you set it for,” Danner said.
“If I’m a program administrator, sending out five employees to the UK, I can set their virtual cards to have a certain spend limit, and the card itself will just turn off in a day. I could even set it to only function with certain merchants.”
This, Danner says, can also mitigate against internal fraud.
Although virtual cards provide the ultimate in spending management card controls, the reality is that many suppliers are not equipped to accept this form of payment. The cost and complication of setting up virtual cards for suppliers can be extensive.
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.
The Latest Innovations Affecting the Commercial Credit Card Industry
Convenience and security continue to be the driving forces behind the adoption of the latest in B2B innovations. One of the most prevalent trends is the uploading of corporate travel cards into employees’ mobile wallets. Without having to worry about losing a physical credit card, employees can travel with ease and simply tap their phones at checkout, saving time and without a hassle.
Finally, with card tokenization embedded in mobile wallets, employees can rest assured that fraudsters will not steal their credit card information through traditional card skimmers.
Given these and other perks of usage, Danner believes that this trend will only continue to grow internationally.