While at first glance this headline may seem a bit odd to many readers who follow the commercial payments space, since virtual cards have been in use for more than a decade in the U.S., the piece in The Fintech Times seems to be touting the expansion of virtual card usage into the small business space. Virtual cards have been utilized in the past by larger companies in the accounts payable processes, so creating tokenized cards for small businesses would be an expansion of virtual card functional use cases, to our knowledge not yet widely in use. This development is due to a collaboration between American Express and Extend, the 2017 New York City startup that provides a digital card platform compatible with commercial cards that modernizes payments methods.
‘U.S. companies with an eligible American Express Business Card will be able to enroll and create virtual cards, known as tokens, through Extend’s app or desktop login using their existing American Express Card account….“We have seen more and more businesses ramp up their use of virtual cards since the start of the pandemic as they looked to digitise their payments processes and increase their use of touchless payments,” says Dean Henry, Executive Vice President, Global Commercial Services, American Express. “With today’s announcement, our Business Cards can work even harder for our Card Members through this quick and easy virtual Card option. This gives our Card Members enhanced flexibility and control across their day-to-day business spending, including for B2B purchases and enabling their employees to pay for expenses.”….
“Virtual Cards can help solve timely needs for many businesses, from finding a reliable and enhanced way to control expenses to automating payment processes or capturing enriched data,” says Andrew Jamison, CEO, Extend. “This market is rapidly growing as businesses realize just how versatile and effective virtual Cards can be – whether it’s managing subscription payments, equipping employees with secure company cards, or developing custom payment solutions with our APIs.”’
The release goes on to point out many of the benefits of virtual cards, which include speed and greater security of payment, increased control over the card usage, better expense reporting and project tracking, precise distribution to employees or contractors for specific amounts and uses, and so forth. Again, the pandemic has increased interest in this form of payment, and as most will know, small businesses have been the greatest hit by COVID, along with specific vertical industries. So, another product to create flexibility and ease of use to promote easier financial operations should be a welcome thing.
‘Dr. Sarah Roberts, owner of Crabapple Dental, a full-service dental practice in Georgia, is already seeing the benefits of virtual cards. “Working with American Express and Extend has helped us manage vendor payments using virtual cards. By setting our own spending limit and expiration date on a virtual card, we have more control. We also create specific cards for different expenses, which makes it easier to track spending.”…It’s reported that American Express and Extend plan to offer additional features and functionality over time, including the ability to add American Express virtual Cards to mobile wallets to make in-store purchases.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group