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B2B spending with virtual cards expected to skyrocket

The latest research conducted by Juniper, shows that there will be an impressive increase in the use of virtual payment cards. According to the report, the system will be increasingly appreciated also in the B2B area if we consider that, again based on value, B2B transactions will represent 80% of the total. North America remains on the first place, with 60% of the market share.

Isaac Atwood

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This picture represent online banking.

In the next five years, the value of transactions carried out with the use of virtual payment cards (virtual cards) will reach the figure of $5 trillion, practically tripling in five years, compared to the value of “just” $1.6 trillion planned for 2020. That is the first evidence expressed in the Juniper Research Virtual Cards Consumer & Business Adoption, Competitive Analysis & Market Size 2020-2025 report.

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How do virtual cards function

The mechanism behind the functioning of this exquisitely fintech payment system is well known: instead of always using the same sequence of digits as with traditional credit cards, virtual cards generate random temporary sequences. For this reason they are particularly suitable for online transactions, reducing risks.

For all intents and purposes, it is a digital payment system that works by exploiting tokenization technologies that automatically generate usage credentials and information for integrated financial controls to “finance the card” for single-use or multi-purpose transactions.

With virtual credit cards, also known as online credit cards, customers can make secure payments online, even if they do not have a physical card. Virtual cards only include a card number, an expiration date and a security code. These cards do not have “physical characteristics” such as a magnetic strip or an Emv chip, and therefore cannot be used in most physical stores (unlike prepaid cards).

B2B will represent 80% of the total market

The system, as the report pointed out, will be increasingly appreciated also in the B2B area if we consider that, again based on value, B2B transactions will represent 80% of the total. 

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As far as geography is concerned, the lion’s share for the next few years will remain North America (over 60% of the total). However, Europe is the second largest market in terms of value, also greater overall than that of all other geographical areas.

The report showed that, only in the lockdown phase, the volume of virtual B2B transactions grew by 11% in 2020. At the same time, it underlines that transactions generated through virtual consumer cards will not exceed one billion dollars between now and 2025.

For 2020, the report predicts a drop in spending levels of around 4%, largely due to a reduction in business travel and online bookings. However, at the same time, the number of transactions is expected to grow by around 11%, related to companies’ need to authorize spending remotely.

Just as the percentage of companies using virtual cards remains low (just 3%) because of the high processing costs, many suppliers still refuse payments on these circuits.

What Accenture predicts

Research author James Moar, lead analyst at Juniper Research, commented: “Virtual cards still require the use of additional software in many cases, and the average user operating on e-commerce platforms does not perceive the benefits. From this point of view, we can no doubt expect fintech technology to mature further, while waiting for it to gain traction across multiple product segments, and also conquer the consumer market.”

In this same area, only a year ago Accenture predicted growth in spending for virtual cards at a compound annual growth rate of 21% over five years, confirming that virtual cards is a sector of absolute interest for fintech companies. As issuers will be able to improve their card issuance solutions and the market will gain more confidence, Accenture anticipates that the development of the sector will be linked primarily to the B2B market.

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(Featured image by Tumisu via Pixabay)

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Isaac Atwood is a PR and marketing consultant who has worked with respected names in the financial industry. He has also sat down in many sessions with startups aiming to become the next unicorn. Isaac loves working with CEOs, business executives, and entrepreneurs who wish to enter the following markets: artificial intelligence, cannabis, virtual reality, cryptocurrencies, robotics, wearable and smart tech, and even the much-hyped space race. He is currently managing the brand portfolio of an Asian firm planning for its IPO by the end of the year. While his engagements have taken him around the world, Isaac is proud to call Toronto his home.