To address the escalating competition for commercial card customers, Citigroup Inc. has enhanced the features of its one-time-use “virtual” cards and has pushed the product into two new international markets.
With the addition of South Africa and the United Arab Emirates, Citi now offers its virtual card accounts in 56 countries, and the issuer is eyeing further expansion in Asia, Chris Chazen, Citi global product manager for commercial cards, tells PaymentsSource. He declined to specify the countries where Citi intends to expand next.
The moves, announced Aug. 4, are a response to increased demand from corporations in both developed and emerging markets seeking to shift more payments from checks and paper invoices to electronic channels, including cards, Chazen says.
“We’re seeing rising demand around the world from multinational corporations that want to shift more [business-to-business] payments to virtual cards from checks and other channels so they can benefit from the (improved) speed, security and detail these transactions offer.”
Network-branded virtual cards enable corporations to initiate B2B payments electronically using just the card information, not the typical plastic itself. Corporations use virtual accounts to set up one-time-use payments with specific identification numbers that accommodate customized controls pertaining to the amount, the recipient and time of payment.
Such transactions are more secure than paper-based payments and are accompanied by rich data corporations may analyze and keep closer tabs on spending, analysts say.
“Commercial cards are a hot growth area within the cards sector as corporations take advantage of these features to make B2B payments more manageable and secure,” Patricia McGinnis, research director for Mercator Advisory Group’s banking group, tells PaymentsSource.
Visa Inc., MasterCard Worldwide and American Express Co. each have broad platforms that enable banks to offer customers commercial cards with robust security and data-tracking features, she notes.
But certain large banks, including Citi and JPMorgan Chase & Co., are among those seeking to differentiate their offerings by building up proprietary commercial card platforms with more-robust features and local-issuing capabilities abroad, McGinnis says.
“Banks pursuing large corporate customers are working to expand their commercial card offerings beyond generic products by adding features and geographic reach,” she says.
Citi offers its virtual card accounts under either the Visa or MasterCard brands. Citi issues the product in the local currency in 28 countries, which helps corporations save money on foreign-transaction fees, Chazen says.
Purchase volume on Citi’s virtual card accounts has tripled within the past 12 months, Citi said in a press release, but executives declined to provide specific figures.
Citi also recently enhanced its virtual card account features. The product now enables users to set the exact amount for a supplier payment, which eliminates time-consuming glitches when invoice amounts sometimes conflict by as little as pennies, Chazen says.
Virtual cards also enable companies to track payments more easily to ensure employees using them are buying from approved suppliers, getting volume discounts and benefiting from other cost-savings tools, he says.
Citi also upgraded its system for sending encrypted transaction data via email.
“We’ve added new features enabling companies to interact more securely with suppliers, which is increasingly important to our customers around the world,” Chazen says.
Chase says it has offered for some time many of the same features for its single-use commercial card accounts issued through the Visa and MasterCard brands, including exact-amount payments and secure, encrypted email transmission of transactions with rich data.
Purchase volume through Chase’s commercial card unit’s single-use accounts “nearly quadrupled” from 2008 to 2010, the company said in a July 13 press release, although it did not provide specific volume figures. The company says it processes more than 25,000 virtual card transactions per day and nearly 1 million per month.
Chase also offers its single-use accounts in dozens of countries, and a spokesperson tells PaymentsSource the issuer has “the broadest acceptance” of any commercial card issuer, but the company did not list specific markets.
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