Virtual cards, which function much like traditional credit or debit cards, but are generated for specific transactions or timeframes, offer unique advantages for businesses that accept them, for intermediaries that expand industries like travel, and for buyers who want a fast, secure, payment option.
The global virtual card market is estimated to reach $13.8 trillion in 2028, up 355% from $3.1 trillion in 2023. This growth is fueled, in part, by a demand for digital-first payment options that can be quickly integrated into digital wallets. It’s also driven by the adoption of API-based virtual card issuing.
How Virtual Cards Benefit Intermediaries
Intermediaries such as online travel agencies (OTAs) – which drive significant transaction volume for travel merchants – benefit significantly from using virtual cards to accelerate payments, improve security, reduce fraud and streamline the reconciliation process.
By providing a unique, traceable link from booking and related payments to third-party suppliers, virtual cards enable intermediaries to track and reconcile payments more easily.
Virtual cards transform the merchant of record payment model for intermediaries by reducing payments complexities across the entire value chain. Intermediaries gain significant control over the transaction process, which can reduce fraud and reputational risk as they manage customers’ card details as well as the timing of payments and customer refunds. They also eliminate commission delays from suppliers: commissions can simply be deducted from supplier payments.
This is particularly helpful in the dynamic travel environment where providers, currencies and exchange rates and other market factors can change at a moment’s notice. Agents can lock in an exchange rate at booking and navigate any payment terms or issues with suppliers behind the scenes.
As intermediaries like OTAs optimize management of large transaction volumes, virtual cards create an efficient, secure path. They also offer benefits like flexible pricing, financing options, and card payment guarantees.
By using virtual cards, intermediaries can streamline their operations, enhance financial management, mitigate risks, and innovate their business models.
The Advantages of Virtual Card Transactions
Businesses want to pay with virtual cards because they offer a variety of efficient and affordable features to manage their corporate business expenses, including the ability to proactively manage purchase amounts.
Virtual cards offer a low risk, versatile way to integrate a digital-first payment option through APIs. Because of this flexibility, virtual cards can be used one-time or reloaded for multiple payments.
A payment partner with a global payment platform that supports payment mechanisms and methods of all types is important for supporting intermediaries – particularly OTAs – in a payment environment where speed, scale and flexibility is critical.
Virtual cards also align with how businesses want to pay in today’s digital-first environment. In fact, a recent Phocuswright study reports that 90% of travel planners surveyed said they expect virtual cards to become the dominant approach to booking corporate travel.
The customers that use virtual cards are looking to drive many of the same operational efficiencies as the intermediaries and travel merchants they book through. Virtual cards offer seven key advantages:
- Enhanced security features: Virtual cards significantly reduce the risk of fraud, particularly for international bookings, with advanced fraud controls that automatically generate unique, one-time card numbers for each transaction. This makes them less vulnerable to unauthorized spending.
- Enhanced payment method support: Intermediaries must provide a wide range of payment methods, and in multiple currencies, which adds to the complexity. Virtual cards help optimize those payment options through corporate settlement plans that don’t incur the same transaction charges as physical cards. Virtual payments also allow for more flexible pricing models for different currencies.
- Multi-channel payment options: Virtual cards can be used across various platforms, including online and mobile, providing a versatile payment method that can adapt to different business scenarios.
- Efficient spend management: Virtual cards have built-in risk and spending controls, offer real-time visibility into transaction flow and instant settlement to ensure transactions are accurately recorded and settled. This comprehensive visibility enables travel buyers to generate automated reports and track their spending more easily, which leads to more efficient travel budget
- Process automation and automatic reconciliation: Virtual card programs allow for automatic reconciliation of booking and payment data. This reduces billing issues and eliminates the need for manual reconciliation.
- Implementation and scalability: With the right payment partner, virtual card acceptance is fast and easy to switch on. The digital nature of virtual cards makes it so once integrated, virtual card acceptance can be quickly scaled and adapted to fit different business models.
- Flexibility and ease of use: Virtual cards can be issued quickly and used immediately, providing businesses with a flexible payment solution that can be tailored to specific needs and timeframes without waiting for a physical card to arrive.
The Cost Components of Accepting Virtual Cards
Although the benefits of accepting virtual cards are vast, there are costs that merchants accepting virtual cards should consider. These costs can be reduced by being connected to the UATP network.
- Transaction fees: Online payments typically have higher interchange rates than physical payments. There can be additional fees for processing virtual card transactions, including additional interchange fees and costs related to the complexity of integrating virtual card programs. Interchange and processing fees for virtual cards vary by market but can range from 1.3% to 3.5% of the transaction total.
In comparison, UATP virtual cards are typically less expensive to accept as payment, and the UATP network offers other benefits for merchants, including lower service fees and the opportunities to earn revenue share with each transaction.
- Technology integration and compatibility: For a business, optimizing payment flow is critical. Accepting virtual cards requires integration with existing payment systems, which can bring about added costs. Costs vary depending on the complexity of integration. These costs can be overcome by working with a payment partner that understands the technical complexity of accepting virtual payments.
UATP’s single integration system simplifies virtual card adoption by reducing the need for and costs associated with multiple integrations.
Building Value with Virtual Cards
Working with the right payment partner is essential for the success of a virtual card program. The right partner makes it easier to pay with or accept virtual cards with lower cost and risk. UATP plays a pivotal role in the virtual card market, offering solutions that enhance efficiency, speed to market, fraud controls and simplify reconciliation.
UATP helps facilitate faster, more secure transactions, supporting streamlined payment processes on a global scale. By partnering with providers like UATP, businesses, merchants and intermediaries can collectively navigate the challenges of the payment ecosystem and position themselves for future growth in an increasingly digital marketplace.
