The travel and expense reimbursement process is a common pain point for many organizations—an issue American Express and Emburse aim to solve with virtual cards.

Within Emburse’s expense management platform, Amex is introducing virtual card issuance capabilities, coupled with real-time transaction data that give organizations visibility into card activity.

For example, a customer could issue an Amex virtual card for a business trip. Once issued, expense entries would automatically be created, and the organization would receive card live updates on card spending as they occur.

Self-Evident Applications

Many industries are only now realizing the benefits of using virtual cards for enterprise payments. Each virtual card is issued with a unique card number, expiration date, and security code—details that not only protect sensitive data, but can be leveraged for reporting.

The advantages of virtual cards in travel and expense management are clear, especially compared with the traditional process where employees pay out of pocket and later submit receipts for reimbursement.

Beyond that, virtual cards also offer distinct benefits over company-issued physical cards. They are far less likely to be lost or stolen, and organizations can set precise spending controls. These may include transaction limits or restrictions that confine a virtual card’s use to specific vendors or sectors.

Furthering the Use Case

While travel expenses are a common use case for commercial virtual cards, their potential extends much further. In fact, virtual cards are often much more efficient for any employee-initiated purchase. This allows employees to make indirect yet essential purchases, including maintenance items or event supplies, without having to go through the purchase order process.

While the benefits of virtual cards are significant, many companies remain unsure about how to deploy them effectively.

“It’s only good to be used to make payment to that one supplier, conceivably on that day,” Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research told PaymentsJournal. “It’s got all the benefits of a card wrapped on top of it, the recourse to charge back if you don’t get what you said you were ordering, and so forth.”

“Now you have a solution that has a bunch of benefits to it, but also a bunch of costs to it where you need to be conscious of where the thing is best applied—and that is not something that’s immediately intuitive,” he said.

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The payments and expense process in fleet operations has long been a pain point—one that Visa aims to solve with its Fleet 2.0 platform.

For companies managing large-scale fleets, lost or misused cards can be a significant financial drain. What’s more, the reporting process—often-manual—has been a constant source of frustration for drivers. According to Visa, roughly two-thirds of drivers are unhappy with the complexity of their existing payment solutions, while 84% express frustration with fragmented systems.

With Visa Fleet 2.0, the goal was to create a unified digital solution that alleviates the issues for both managers and drivers. The platform is set to launch in Europe with 15 partners on board.

Unifying Credentials

For managers, Fleet 2.0 provides configurable spending controls that can be adjusted based on time and location. Fleet managers can also track purchase data to reduce misuse and improve decision-making.

For drivers, the platform simplifies payments by reducing the need for multiple credentials. Drivers are digitally onboarded and instantly issued a virtual card, which is available in their digital wallet.

Virtual cards are a key technology transforming business payments. They enable faster, more efficient transactions with stronger guardrails. For example, a virtual card could be issued as a one-time payment for a single driver on a single day, while still giving fleet managers the recourse to issue chargebacks if conditions aren’t fulfilled.

Measurable Revenue Impacts

Fleet management has traditionally been encumbered by expense forms, delays, and manual errors. Digitizing this process can have measurable revenue impacts for those companies who modernize their systems.

“There’s something to be said for digital payments and reducing friction at the point of sale,” Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research told PaymentsJournal. “All of this is controlled in a unified mobile experience without having to reach in your wallet and fumble and look around for that physical card. Everything is going into this digital world and that goes a long way toward reducing friction.”

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When a traveler books a hotel through an online travel agency (OTA) like Expedia, the OTA pays the hotel some or all of the value of the booking, but the OTA may or may not have been paid the full value of the booking by the traveler. The amount the traveler is willing to pay upfront to secure the booking, and the amount the hotel will insist on receiving upfront from the OTA to hold the room, are functions of their perceived potential risks and rewards at the time of booking. By pricing based on certainty of travel, OTAs have become a tool for travelers and travel providers to hedge risk, in part through payment authorization and payment timing.  

This need for variable timing and commitment of funds has created a durable use case for virtual cards as the instrument OTAs use to push funds to travel providers. Their ability to authorize for one amount and settle for another, as well as pay suppliers on day 1, then pay card providers on day 45, allows OTAS to manage final payment amounts automatically and bridge gaps in working capital.

However, as Hugh Thomas, Commercial & Enterprise Lead Analyst at Javelin Strategy & Research, sets out in the report The Virtual Economy: Measuring Buyer Industry Receptiveness to Using Virtual Cards, these sorts of cash management and automation challenges are not unique to online travel agencies, suggesting use cases for virtual cards in B2B payments in many other industries.

In this report, and its companion, The Virtual Economy: Identifying Supplier Industries Receptive to Virtual Cards, Thomas offers perspectives on other industries where virtual cards may be poised for a breakthrough based on factors like cash management, the need for automation, and vendors that already accept cards, setting out a new way for banks and networks to uncover use cases.

Not as Intuitive as Its Predecessors

Early card applications for B2B payments were fairly straightforward. Products like travel and expense (T&E) cards had a clear purpose and use, enabling staff to travel on business without reaching into their own funds. As the notion of spending with a card issued to a company became more broadly accepted, use expanded to indirect spending on things like maintenance, repairs, and operations, areas where purchasing cards, with strict controls on purchase amounts and locations, empowered other employees to pay on behalf of the company without raising purchase orders.

“You’ve got people on your staff that you need to go visit a customer, or you need to pick up some tools and cleaning materials,” Thomas said. “You don’t want them to go out of pocket, you don’t want to spend employee time raising purchase orders, and you’d like to manage those expenses and gain whatever benefit you can gain—from some chunk of whatever the bank itself is gaining by issuing the cards—in the form of things like rebates. So these things are fairly intuitive.”

With the emergence of virtual cards, businesses are now looking at card networks for making all kinds of payments, up to and including direct purchases of goods and supplier payments, leveraging card networks’ ability to message that a transaction is authorized, then later settle it. Cards also allow buyers to pay suppliers faster, then use card cycles to hang on to funds longer before they pay the card provider. Virtual cards also come with controls; such cards have maximum transaction limits, set within the parameters of what the business estimates the purchase order will cost, and virtual card numbers can also be set to work only for a given vendor or vendor industry.

“It’s only good to be used to make payment to that one supplier, conceivably on that day,” Thomas said. “It’s got all the benefits of a card wrapped on top of it, the recourse to charge back if you don’t get what you said you were ordering, and so forth. Now you have a solution that has a bunch of benefits to it, but also a bunch of costs to it where you need to be conscious of where the thing is best applied—and that is not something that’s immediately intuitive.“

Shortening the Payment Cycle

Delving deeper into using virtual cards as purchasing cards uncovers more use cases.

For example, a business may have a vendor it doesn’t plan to work with on a long-term basis. Instead of going through the typical know-your-supplier or know-your-customer checks, the company could simply pay the vendor with a virtual card.

This way, the business doesn’t give the vendor any banking information, avoids creating purchase orders, and eliminates significant costs in the process.

“The business case for cards begins to expand, and as that happens, you come to realize it shortens the payment cycle time and thus begins to get used even more broadly,” Thomas said.

Everyone Has Exigencies

As the B2B use case expands, it becomes clear that virtual cards are not simply an X-that-does-Y product.

To identify some of the best fits for virtual cards, Thomas used the OTA industry as a blueprint. He identified the defining traits of the target market for virtual cards. One characteristic he discovered: a high number of potential vendors.

“There’s a vast number of vendors for any OTA business,” Thomas said. “The number of vendors is basically equal to the number of hotels, car rental companies, airlines, and train companies in the world. Whatever they book, that’s a potential vendor to them, so the numbers are obviously in the millions. High volume seems to be something that drives this use case.”

Another characteristic of virtual card candidates is they require flexible and potentially slow incoming payments or, conversely, high days payable outstanding.

Taking the criteria gleaned from the OTA model into account, Thomas began to focus on the industries where virtual cards could make the most impact. What he found was these were often sectors which have complex supply chains, such as home centers, food manufacturers, or general merchandise stores.

“Another is the healthcare business,” Thomas said. “Healthcare payments have to go through so many different parties, and everybody’s got their own, ‘I want to be paid sooner exigencies’ or ‘I want to pay later exigencies.’ It’s obviously a data intensive payment process in healthcare, so it’s a great tool in that respect.”

Selling Opportunistically

For all the promise of virtual cards, businesses have very few resources they can rely on to guide them through the usage of virtual cards. This was the impetus for the Javelin report—to analyze the landscape and predict where virtual cards might emerge next as a solution.

“In all my time working with banks data, what I found was that the characteristics of suppliers being paid with virtual cards was vastly different from bank to bank,” Thomas said. “There were no two banks that looked alike. Now, if you made that comparison for a T&E product or a purchasing card product, the patterns would be very much largely the same.

Thomas notes that with virtual cards, there are some financial institutions that heavily over-indexed in healthcare, some in auto, others that are heavily indexed in utilities, and still others in OTA.

“That, to me, says there’s no uniformity among the banks for a product where everybody’s product is by and large pretty much the same,” Thomas said. “That suggests this is something that water has just begun to find its level on in terms of use cases for virtual cards—and that it’s being sold opportunistically, rather than with an eye to the typical exigencies of the industry in question

“It says that there just is not a common awareness of where it’s best used and how to determine the circumstances of where it’s best used,” he said.

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Virtual cards have been a popular option for consumers for years, but they’re just now gaining traction among businesses. With an increasingly globalized economy, corporate entities are seeking efficient ways to move money across borders, and virtual cards are filling that role—maximizing efficiency while reducing costs.

Mark Anthony Spiteri, Global Head of Card Business at Nium, sat down with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, during a PaymentsJournal podcast to discuss the growing demand for B2B cross-border payments and the emerging use cases driving their adoption in industries like insurance and travel.

The Pandemic Effect

B2B payments have been a cornerstone of commerce for decades, but like many other aspects of business, the pandemic brought significant changes. For one, companies had to grapple with the possibility of their suppliers going out of business. This created an urgent need for processes that could move funds quickly between merchants and suppliers, ensuring payments were delivered reliably.

Post-pandemic, many companies diversified their supply chains to reduce risk and work with multiple global suppliers The challenge, however, is that the payment rails in some of these countries may have not been tried and tested. Fundamentally, businesses need assurance that they can pay and get paid quickly, cost-effectively, and reliably across borders.

Volatility and Regulation

Since the pandemic, two additional factors have been changing the fundamental nature of B2B payments. The first is the impact of volatility.

”At the moment there’s a lot of volatility across the political landscape,” said Spiteri. “We saw what happened in the U.S. election and how the Asian market reacted, with significant impact to the Chinese Yuan. Suddenly, there was a lot of fluctuation in FX. If that happens, you need to be able to control those payments in a way that you can predict exactly what’s going to happen. It needs to be accurate, reliable, and in real-time.”

The second is the increasingly complex regulatory landscape. Given the heightened scrutiny from regulators, it has become more difficult for businesses to rely on a single payment method for global transactions.

The immediacy of virtual cards has helped alleviate many of these concerns.

“Something I’ve always liked is how quickly you could settle real-time payments across borders,” said Riley. “The Eurozone was a leader in real-time payments, but now it’s moving through many different countries, and it’s finally in the U.S. These payments settle once they hit the books, and they clear very quickly and safely.”

Advantages of Virtual Cards

As a self-confessed ‘cards guy’, in Spiteri’s opinion the biggest challenge with real-time cross-border payments is how you connect a fragmented landscape of localized, regional networks around the world. In addition to global real-time payment networks like that offered by Nium, this is where virtual cards come into play. Being able to move money quickly and securely across borders with virtual cards is a powerful way for businesses to improve liquidity and cash flow management.

“Before it was like, pay in 30 days, or pay in 60 days, right?” said Spiteri. “Now, you can pay now. And one of the best ways to do that effectively and guarantee when the payment will arrive is with a virtual card.”

One key difference between virtual cards and other real-time payment methods is the chargeback protection that cards offer. If a supplier or merchant goes bankrupt, buyers are guaranteed to recover their funds.

Virtual cards also offer better controls. When employees use corporate cards, for example, it can be difficult to reconcile transactions and track where payments are going. Overall, they offer more flexibility. They can be configured as single-use or multi-use cards. A virtual card might be restricted to a specific merchant, set for a particular spending limit, or designated for use only at restaurants. This level of customization gives finance and procurement teams more control and granularity—and provides real-time transaction information to the employer.

“From the use cases I’m familiar with, where most cards are single-use, it simplifies reconciliation dramatically,” said Spiteri. “You can match the card to the original transaction, automatically plug the information into your ERP or accounting system, and you have end-to-end matching.”

Industry Use Cases

The travel industry was among the first to adopt this technology, primarily due to the immediate need for liquid cash flow and guaranteed payment protection. For every online booking, travel agencies and other intermediaries  must make payments to their airline and hotel suppliers around the world. Travel companies of all kinds also face sizable expenses, such as fuel purchases, often in cross-border locations. For instance, when planes require maintenance, businesses need the ability to quickly and securely transfer funds to cover repair costs.

Nium is also seeing strong demand in the B2B insurance sector, working with leading insurance firms to deliver innovative virtual card solutions. In one use case, Nium is the global issuer behind the launch of a new healthcare payment card, enabling members to pay for eligible outpatient treatment without using their funds, needing to submit a claim, or contacting their insurer to pre-authorise their treatment before they pay it.

“If I’m travelling and have an accident abroad, I need to find the hospital and get treatment urgently,” said Spiteri. “I pay with my own credit card, then I have to fill out some forms, then claim it back, then send it to my insurer, and so forth. Even then, I may not be reimbursed if my claim doesn’t meet the criteria of my cover plan. It’s a complicated process that is very time consuming, both for the customer and the businesses involved as money can take time to flow between the insurer and the hospital.”

“With the real-time healthcare payment card, now when I’m travelling and something happens, I can generate a virtual card on the insurance app in my Apple Pay or Google Pay wallet. When I pay for the treatment, it’s actually the insurer paying the medical facility immediately. No reimbursement headaches. All I have to do is upload an image of the treatment invoice to the app to be processed.”

Expect to see consolidation in the B2B payments industry in the coming years. The focus will likely shift toward addressing challenges like those in the insurance sector—a need that forward-thinking companies like Nium are already anticipating and solving.

“With consumer payments, you make a solution work,” said Spiteri. “You don’t throw everything at it and hope that it works, or else no one will use it. And that’s what’s going to happen in the B2B space. This will drive consolidation and increase the focus on solving tangible business problems with innovative payment solutions.”

The post What’s Driving the Adoption of Virtual Cards? appeared first on PaymentsJournal.

Virtual cards—digital versions of physical credit or debit cards typically used for online transactions or recurring payments—offer a powerful opportunity to streamline operations while enhancing security. When combined with the power of AI, virtual cards provide a safe way for individuals both inside and outside of the organization to purchase the goods and services they need.

Enhanced Internal Control

The success of virtual cards lies in their ability to provide targeted, controlled spending. Unlike traditional company-paid credit cards, virtual cards are issued with a specific intended use or purchase scenario. This could be for a single purchase or a series of purchases.

When a virtual card is issued, it is configured with built-in internal controls tailored to its specific purpose. Any purchase made with this card must adhere to these controls; if it doesn’t, the transaction is declined at the point of sale. Controls can include spending limits, effective date ranges, and merchant restrictions based on the merchant’s name or category.

For example, Mike, a construction manager at a commercial construction company may need to buy materials or tools while on-site. Mike could be issued a virtual card with a merchant category control that limits purchases to suppliers of construction materials or tools. To maintain budget control, the card might also have a spending limit and an effective date range specific to a particular job. These enhanced internal controls reduce the risk of fraudulent spending, as cardholders are restricted by more than just the company’s overall credit limit—they’re bound by targeted constraints that align with the card’s purpose.

AI Helps Further Reduce Fraud Exposure

While enhanced internal controls significantly reduce fraud risk, certain vulnerabilities remain. AI plays a crucial role in addressing these gaps.

Take Mike’s virtual card purchase, for example. He might buy thousands of dollars’ worth of materials from a home improvement store but hidden among the legitimate items is a $500 gift card for himself. The transaction meets all the internal controls: It’s at a valid merchant, within the spending limit and occurs during the allowed date range. However, the fraudulent purchase is concealed within the receipt’s line-item details. This is why receipts must be submitted with full line-item details. Only by auditing these details can fraudulent spending be detected. AI can be instrumental in discovering potential fraud like this. The methods it uses depend on whether the receipt is submitted as an image or as data.

Detecting Fraud in Receipt Images

Fraudsters sometimes create fake or altered receipt images. For this type of situation, AI uses several methods to detect fraud:

Pixel-level analysis: AI can analyze individual pixels to identify inconsistencies in texture, lighting, or noise patterns. Edited portions of an image often have different pixel characteristics compared to unaltered parts.

Machine learning: Machine learning algorithms can be trained on a large dataset of authentic and altered receipts to recognize patterns specific to genuine receipts from specific merchants.

Deep learning and convolutional neural networks (CNN): Deep learning models, particularly CNN, are highly effective in detecting image alterations by identifying patterns invisible to the human eye.

Shadow and reflection analysis: AI can analyze the natural shadows, reflections, and lighting present in a receipt image. When a receipt is digitally altered, these features may become inconsistent with the rest of the image.

Detecting Fraud in Receipt Data

Receipts can also be submitted as data, either directly from online purchases or converted from images using AI-powered optical character recognition (OCR). AI analyzes this data for potential fraud by:

Anomaly detection in spending patterns: AI systems can analyze large volumes of receipt data to detect unusual or unexpected spending patterns.

Duplicate receipt submission detection: AI can detect when the same receipt is submitted multiple times, either accidentally or fraudulently.

Cross-referencing with external data: AI can verify the authenticity of receipt data by cross-referencing it with external databases.

Fraudulent modifications in amounts or items: AI can detect subtle changes in amounts or item descriptions that may indicate fraud. In our gift card example, AI can identify when expensive items are falsely itemized under allowable categories, such as labeling personal electronics as office supplies.

A Safer Path Forward

The combination of virtual cards, which inherently provide enhanced internal controls, and AI-driven receipt fraud detection offers operational managers a powerful tool for safeguarding purchases. Built-in safeguards like transaction limits, vendor restrictions and real-time monitoring make it harder for unauthorized expenses to go unnoticed. In an environment of ever-increasing ways in which bad actors are committing fraud, AI-powered virtual cards not only reduce the risk of fraudulent spending, they also allow organizations to modernize their financial operations in new and secure ways.

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