Virtual Cards Could Displace Checks in the Travel Market; WEX Expands in Asia
With the B2B virtual card market estimated at more than $95 billion in gross spending in 2016, payment providers would do well to target the travel sector, which represents the largest single vertical volume of that spending, according to Mercator Advisory Group. One such company, WEX Inc., has found that moving to virtual payments offers travel suppliers, such as hotels, car rental agencies and tour operators, distinct advantages, including getting paid faster, easier reconciliation across borders and improved analytics.
Typically consumers and corporate travelers make purchases directly through a travel company or online travel agent (OTA). The OTA then pays suppliers. Suppliers typically have to send the OTA invoices on a monthly basis and wait to receive a check. Using WEX’s virtual card program, the supplier processes a virtual card number through its point-of-sale system and each transaction is paid through the card network, resulting in suppliers getting paid immediately, instead of waiting weeks. The payment happens in tandem with the booking, with all of the specific transaction information tied to the card number, so invoices don’t need to be issued, according to WEX.
“As more large travel companies tap into virtual card technology for their supplier payments, small businesses such as independent hotels and tour operators, are getting paid more quickly, more accurately and more securely,” says Jim Pratt, WEX senior vice president and general manager of virtual payments. By using single-use credit card numbers with precise controls—matching intended purchase value with set dollar limits, specific dates for payment, and merchant types—virtual payments are inherently more secure, Pratt tells Paybefore.
WEX says its travel suppliers prefer virtual cards for the following reasons:
- Faster receipt of payments. By accepting virtual payments, suppliers can improve their cash flow and free up accounting teams to focus on other initiatives. And, virtual card payments are sent through the major credit card networks, so if suppliers accept plastic card payments, there are no new processes or technology to adopt.
- Fewer complications around foreign currencies. Virtual cards open up a more global reach for smaller suppliers. Virtual cards help suppliers avoid surcharges and currency fluctuation risk, typically saving 3 percent per transaction, according to the company.
- Improved analytics. A virtual payment produces detailed remittance data that goes further than what’s provided through ACH, wire transfer, checks and other legacy methods. Data generated from virtual payments can provide suppliers with access to transaction product codes, quantities, description and tax information, providing businesses information that can be used to optimize processes and better manage relationships with large travel companies.
WEX’s virtual travel product is accepted in more than 200 countries and territories, and can be settled in 21 currencies. Travel and Corporate Solutions purchase volume is growing 39 percent to $6.4 billion in the fourth quarter of last year from $4.6 during the same period in 2015, according to WEX.
The company announced April 2 that its subsidiary, WEX Finance Inc., has received an issuing license in Singapore and the company will begin issuing virtual corporate payment cards there in early May. The move expands the company’s presence in the Asia-Pacific region, which includes Hong Kong and Thailand.