Mobile payments are often described as a problem in search of a solution, but there is one niche that is gaining traction: virtual corporate cards for employees with infrequent business expenses.
Several banks say that corporate clients are embracing single-use virtual cards, as they make it easier for companies to monitor spending, limit the number of physical cards issued and reduce paperwork in expense reporting.
"Virtual will continue to accelerate and will be much more meaningful in terms of total volumes," said Kevin Phalen, head of commercial cards and comprehensive payables at Bank of America Merrill Lynch. "Clients are very interested and are widely adopting virtual accounts."
The increasing adoption of single-use virtual cards is a tangible example of an in-demand mobile payment solution at a time when other mobile wallets' use cases struggle to get users. Banks, card companies and mobile phone companies clearly see mobile payments as the way people will pay for things in the future but are still searching for a catalyst for adoption. Companies like JPMorgan Chase see tying rewards to its mobile wallet as the way to increase usage, for instance.
Observers say the world of corporate mobile payments is perhaps even more uncertain, given the considerably slower pace of innovation at the corporate banking level.
"We're seeing [adoption] happen, but we're seeing it happen very slowly," said Jim McLeod, emerging payments practice lead for Carlisle & Gallagher Consulting Group. "On the retail side there is somewhat of an 'If you build it, they will come' mentality, and in fact we are seeing a slow but nice curve of adoption of digital payments [by retail customers.] I think everyone thinks the same concept holds true for corporates, and I believe it eventually will, but it will take a lot longer."
For now, commercial clients are more interested in these one-time virtual cards rather than a holistic mobile payments solution, Phalen said.
"Mobile payments [for corporate customers] will continue to evolve and many issuers will begin to adopt them for early-adopter clients, but they will not represent a meaningful amount of volume in 2016," he said.
Virtual cards store payment information in a digital format for one-time use, and can be used for a singular need for payment for a business expense, or to give to contractors, consultants or other non-employees on a limited basis. For instance, such a card could be generated to pay for a hotel for someone who rarely travels on behalf of the company.
The 16-digit card number can be accessed via an app on a mobile device by users, or directly by the business where the payment is authorized via the Web. Once the payment is made, the one-time card number generated becomes invalid.
Part of the attraction is the security. In general, digital payments are more secure than physical corporate cards, said Eric Brewer, head of treasury and payment solutions at SunTrust.
"When you eliminate all these physical cards floating around out there, it can definitely reduce the amount of fraud," he said.
Further, virtual or digital payments can be limited for use by a specific employee at a specific place for a specific amount, thus greatly reducing the chance of fraud or theft, he said.
American Express, one of the major providers of corporate payments solutions in the United States, has also noted an increased demand for virtual cards. Its vPayment solution allows companies to set a specific payment amount, date range and other transaction details. Corporate clients like the solution because it helps control spend and streamline the reconciliation process, said Terry Bodensteiner, vice president of global corporate payments for Amex.
"Some of our larger corporate clients have been increasingly interested in single-use virtual cards, particularly to book hotels and air travel," he said.
Global travel, however, does create some problems for virtual cards. For instance, an employee could travel to a place where such technology is not supported and would still need a physical card.
"Given the global nature of [business] travel the reality is that each market is evolving at its own pace," Phalen said. "As such you can expect to see cards in wallets for at least the next three to five years, but the use of physical plastics will continue to diminish."
While digital payments offer such advantages for commercial customers, banks themselves can also realize benefits, such as not having to manage and ship cards. And greater security means less time and resources banks have to dedicate to investigating fraud, and potentially reimbursing customers who were legitimate victims of fraud.
"By digitizing payments, you rid the cost of plastic, and with companies having employee turnover, there's a lot of cards to manage from a security perspective," McLeod of Carlisle & Gallagher said.