Hotel security attracted WEX to virtualize T&E payments

Virtual cards are starting to gain ground, and WEX sees a big opportunity in hotel chains' need to beef up security.

But there are some logistical challenges to overcome despite a clear need for a security update in the wake of many travel-related data breaches.

"In the corporate travel space, it's harder to source a virtual card and get it to where it needs to go," said Mike Werrell, strategic sales manager for WEX Virtual.

WEX offers virtual cards for leisure travel, and is looking to boost usage for traditional corporate travel. There are differences between the two types of travel, mostly due to the third party enterprise online booking tools that corporate travelers use, which have to communicate with hotels, airlines and other services that receive payments. And within corporate T&E, there are differences between how companies manage payments, with some using corporate cards and others offering reimbursement for personal card use.

Wex hopes the need for more security will boost the visibility of virtual cards for B-to-B travel payments. "Virtual cards have always been in the background for B-to-B but have been slow to develop to get it where it needs to be," Werrell said.

Hotels have been in the news lately for security breaches. InterContinental increased its exposure estimate for its recent breach and Westin, Radisson and Renaissance have also suffered breaches. Hotels are also criticized for having generally dated security systems.

The benefit of a virtual card for both leisure and corporate travel is it dilutes the impact of data breaches by eliminating the customer's exposure since the virtual card number is only usable once. "If you pay that hotel and there's a breach, the virtual card transaction is already done and the card is out of the picture," Werrell said.

The challenge is to allow the temporary tokenized numbers that are part of virtual cards to move from the booking tool to the reservation systems, Werrell said. There are also complications since most corporate cards serving varied travel needs, ranging from sales staff who venture out frequently to less frequent travelers such as job applicants.

WEX has constructed an application programming interface that these portals can use to more easily connect travelers, hotels, airlines and other companies to a corporation's travel manager. Some elements of leisure travel booking were also included to aid the workflow.

In the case of leisure travel, WEX provides virtual cards to booking agents that replace customer's plastic cards after checking into a hotel. The virtual card becomes the acting card number that registers added charges during the stay. WEX, the hotel and the booking portal do not have access to the original card number in this workflow.

"Getting virtual cards seamlessly into reservation systems is the secret sauce," Werrell said.

Beyond reducing exposure to data breaches, the plastic card doesn't have to be replaced if there's a breach, Werrell said.

Virtual cards have become a major part of WEX's diversification strategy following the EMV migration in the U.S., a strategy that also includes examining use cases for blockchain technology.

And there is a race to provide virtual card technology for business payments. Visa has collaborated with Viewpost on a B-to-B virtual card, and Mastercard has also build virtual card technology for corporate use. Among other companies, Billtrust has developed technology to help accounts receivable departments manage virtual cards.

Across consumer and business payments, virtual cards are an old idea, but one that's getting a new look as general mobile and digital commerce activities increase alongside security awareness.

There is still some risk to virtual cards, according to Al Pascual, senior research director at Javelin Strategy & Research, adding there is vulnerability of account fraud tied to the virtual card numbers assigned at the time of an account's opening.

"Criminals are taking advantage of digital account opening and instant access to credit to good effect, from their point of view," Pascual said.