How commercial cards can redefine B2B payments

Over 8 in 10 bank execs believe that virtual cards improve organizational processes.

Commercial cards could be the next frontier of business-to-business (B2B) payments, providing payment services that are both safer and with more benefits, according to a report by Mastercard.

Virtual cards, particularly the creation of single-use virtual card numbers, relieve the burden of having to handle or store sensitive payment credentials, according to Mastercard’s report on commercial cards.

Virtual cards also reportedly offer better spending controls, push provisioning, and real-time tracking, amongst other benefits.

Over 8 in 10 (85%) of bank executives believe that virtual cards improve organizational processes, and 84% believe they enhance cybersecurity, according to RPMG’s 2022 virtual card benchmark survey results.

“The benefits can span both parties: issuers can offer more competitive payment solutions; adopters can function more efficiently as buyers and suppliers. The cards are designed to stand alone by being easily embedded into existing payment flows,” Mastercard said in its report, “Commercial cards address a longstanding payments anomaly,” published on 26 September 2024.

“Still, virtual cards work best when supported by consulting solutions that offer holistic in-market and cross-market perspectives across entire commercial card strategies,” the report said.

Currently, P-cards are the most prevalently used commercial card option in the market.

Through P-cards, companies can defer payments so that they can keep money in their accounts for longer.

They also have access to detailed transaction data; can make cross-border payments via trusted international networks; have payment guarantees without the need for buyers to validate and update the supplier bank with account information; and fraud protection and security, according to Mastercard.

Another emerging solution is straight-through processing (STP), where a card network used by the issuer will provide a virtual card directly to the supplier’s payment acquirer for processing.

With STP, there will be no need to manually input payment information; no need for manual exception handling when a payment fails; and there are reduce compliance challenges, since the payment network rather than the supplier handles the virtual card number.

In the present day, electronic fund transfers (EFTs) and real-time payments (RTPs) remain the most widely used method of commercial payments. 

EFTs account for three-fifths of cardable domestic B2B spending in Australia, China, India, Indonesia, the Philippines, and Singapore.

However, common problems exist for EFTs, include inefficient manual reconciliation if transaction data is not supported by sufficiently detailed information in financial messaging, according to Mastercard.

It also lacks payment reversals for irrevocable RTPs, payment guarantees for ACH transfers, delayed failure notifications, and extra fees for international payments, amongst other issues.

This is where payment cards can come in. Companies can enjoy all card-based benefits whilst using their card for corporate purposes. Mastercard said.