In the same way that keys are still relevant to opening doors, credit cards are still a valuable payment method to have in your pocket—even in the mobile-wallet world we’re living in today. But as innovation quickly transforms the way we pay, our idea of plastic will shift from being the credit card to being just one of the ways we access our credit.
The payments space has been undergoing rapid evolution and while the consumer market has reached a point where technology is fundamentally changing human behavior, the corporate market has started to look archaic in comparison. Of course there are many reasons for this; managing the household finances with a personal credit card looks a lot different than managing the payment needs of an entire organization. But this means there’s a lot of room for innovation when it comes to operational efficiency and how that can drive financial value. When we dissect the innumerable challenges of corporate credit, it ultimately comes down to three things: access, control, and data.
Recently we’ve seen a number of fintech startups coming to market with flashy alternatives to corporate credit cards. Each with their own raisons d’être, they’ve designed solutions to mitigate some of these pain points—and all offer virtual card capabilities.
Traditionally, a company gets approved for a line of credit and they’re essentially granted some working capital—whether it’s a central bill account or a physical card in their wallet—that is then inaccessible and inefficient to use across the organization. Not everyone is going to have a company card and when they do, there are security concerns and misuse to be monitored. As a result, you miss out on rebates when employees front the bill with their personal cards and request reimbursement (not to mention the time spent on those tedious, manual expense processes). When credit cards are shared between employees, there’s no way to control who’s spending what and there’s hardly any data that can be used to decipher lengthy monthly statements or gain meaningful insight into spending. All of this leads to retroactive bookkeeping and likely some unwelcome surprises.
The magic of virtual cards is their ability to address all of these issues and drive that operational efficiency and financial value previously mentioned. They can be fully controlled by the account holder, or a designated admin, and securely and instantly distributed to anyone who needs to make a payment on behalf of the company. Like anything digital, you can extract the data you need to analyze spending and automate expense tracking and reconciliation, and they can even help you maximize your credit card rebates. The need for such a comprehensive solution is already being reflected in commercial card forecasts. According to a recent Accenture report, virtual card spend is expected to be double that of physical corporate cards with an estimated growth rate of 21% over the next four years—that’s twice the industry average and more than 5x the growth rate of physical cards.
With the influx of disruptor fintechs offering “new-wave” corporate cards that are enticing companies to switch bank partners and open new accounts, legacy banks are racing to catch up. If we’re analogizing credit cards to keys, we can compare the infrastructure that supports traditional corporate credit offerings to the doors we haven’t been able to open.
In order to democratize digital card capabilities, Extend is a fintech that has developed a solution agnostic of bank, issuer, and network. By creating a virtual card distribution platform that integrates with the existing technology that banks have been using for the last twenty years, issuers can be up and running with a competitive product in a matter of minutes and with no technical development on their part. For a bank to replicate this kind of offering, it would take millions of dollars and years to get to market. For businesses, the ability to keep their bank partner, and even the same account, means there’s no cost of changing all the doors. With this technology and the vast benefits that come with it, companies can start to leverage their credit in entirely new ways. And then we can start to rethink how plastic cards are distributed now that there’s a digital remote to control them.
All of this adds up to a modern payment solution on par with the innovation we see in the consumer space. Companies can now optimize the entire expense management process and even earn more rewards as a result. For banks and card issuers who want to serve as true financial partners and meet the expectations of their business clients, having these offerings at the ready will serve to deepen those relationships. Plus, they can look forward to incremental lift when new spend is captured on their credit cards—it’s really a huge win-win for the corporate payments space.
Andrew Jamison is CEO and Co-Founder of Extend, a virtual card distribution platform that partners with banks to bring capabilities to corporate credit. Prior to starting Extend, Andrew was the head of B2B Corporate Payments Products at American Express with a mandate to drive digital payment innovation and adoption. Over the course of six years he doubled B2B payment volumes by launching and scaling new capabilities and platforms. Prior to American Express, Andrew spent eight years managing global SAP deployments for large multinational corporations.