Virtual cards ready for SA payment change

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South Africa is lagging behind in the use of virtual cards, but businesses are quickly realizing the benefits. Not only do these cards reduce accounting administration, but they are also a valuable source of revenue for traditional banks and “neo-banks”.

Juniper Research waits the global value of virtual card transactions will grow from $1.9 trillion in 2021 to $6.8 trillion by 2026. A FRI group study commissioned by Visa sees the strongest growth in virtual cards from businesses, reporting that Canadian and US businesses that already use purchasing cards showed strong interest (74% and 93% respectively) in adopting virtual cards.

“The growth opportunity for virtual cards in South Africa is comparatively greater given that we were already lagging slightly behind in adoption,” says Chris Wood, Regional Managing Director for Southern Africa and PALOPS at Network International. “It is not the fault of our banks since the tokenization system required for mobile wallet payments, such as Apple Pay, Samsung Pay and others, was released later than in other global markets.

“Shortly after that we had the launch of Instant EFT and then Covid hit. Demand for payment methods with less contact has been accelerated by the pandemic, with many consumers turning to tapping cards or telephones on the terminals.

“As consumers become more comfortable with using their phones, generating and using virtual cards, this should translate into healthy growth in the coming year.”

Wood says he expects to see continued use of virtual cards in the consumer and business segments, where applying a commercial virtual card based on travel or shopping can give local businesses several advantages. compared to traditional plastic. In particular, it allows to customize how, where and when they can be used.

“The move to increased self-management of payment tools within the commerce space now means that financial or procurement departments can issue, manage, track and reconcile activity on a virtual card within defined parameters. Previously, this all had to be handled centrally by an issuing bank with a lot of back-office administration between the bank and the business client.

“For example, if a team member is traveling, they can ensure that the card can only be used at relevant merchants, designated hotel, Uber, and pre-arranged locations. They can also add settings time or pay-per-view value.Now the employee is freed from collecting receipts and submitting the litany of claim documents upon their return.

The administrative burden is further reduced as virtual card fees are instantly reconciled and give accounting teams a very clear overview. They know who each card was issued to and the parameters of where and when the card can be used.

Unlike their plastic counterparts, virtual cards can also be generated on the go and, once approved, are instantly available on the relevant mobile device, allowing staff to switch between their personal and business cards as needed.

Like all new payment methods, virtual cards are quickly adopted as soon as a user has the ability to transact with one, says Wood.

“You only need to make a successful transaction with a new payment method to overcome user resistance. It’s about overcoming the chicken and egg conundrum. Every time changes are introduced in the In the payments industry, we are seeing a slow burn and then a scaling rarely seen in most industries as users adapt.

“It’s largely because of the interrelationship between the players in the ecosystem. You must have a merchant willing to accept a payment type and a consumer willing to try a new payment type for the first time.

“Change management will be an important part of all new payment technologies. Once your teams understand that they will be freed up to focus on higher value-added functions, they quickly embrace the time-saving aspects of the new technology. »

Like individuals, financial service providers will also need to change their mindset if they hope to benefit from the opportunities presented by emerging payments.

“Big banks have departments that have historically focused on selling cards and point-of-sale devices. It’s easy to see why they may feel threatened by new payment technologies that seem to be disrupting this device-centric, plastic-centric paradigm.

“The future of payments is increased interoperability between payment types, allowing the person making the payment to choose the method that suits them and allowing the merchant, or entity receiving the payment, to accept it from all the ways imaginable.

“It may also require some change management to help them move from what they’ve always known to a much larger payments value chain where the payment itself becomes less important, but the value-added services built around him come to the fore.”

However, any resistance is easily overcome when the trading opportunity is better understood.

Juniper’s projection of global virtual card spending is expected to be driven by B2B spending, which the company predicts will account for 70% of global virtual card spending in 2026. Virtual card adoption appears to be particularly associated with high-powered enterprises. growth.

The study commissioned by Visa indicates that nearly half of US businesses using virtual cards plan to invest more in their business in the coming year, compared to just 27% of businesses not using the technology.

“Not only do virtual cards meet a growing need from the average consumer, but companies that use the technology are clearly attractive customers for investment bankers. It would be foolish for any bank, old or new, to ignore this attractive growth opportunity and this is especially true for banks in Southern Africa which have even more of an avenue ahead of them.

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