The benefits of virtual cards are numerous and varied, yet their adoption into the corporate world has been slow. Pat Bermingham, CEO of Adflex, asks whether fear of the unknown is holding firms back.
From workforce expenses to high value transactions between buyers and suppliers, the market that supports the initiating and acceptance of card-based business payments is big and growing. According to Mastercard, Visa and American Express, commercial card payments hit a five year high of US $2 trillion in 2018. Companies that cater to these types of transaction rightly see opportunity and are investing in new solutions, like virtual cards, which simplify the management of a company’s payments, increase usability through mobile apps and online portals and reduce operating costs, all through a range of powerful new digital features.
Yet some businesses remain hesitant to adopt virtual card technology. Why? It’s a problem of perception. Businesses – finance departments in particular – associate change with risk and, fearing technical complexity, often shy away from adopting new tech. This is a mistake; there are big value gains to be had with comparably little cost and disruption.
What are virtual cards and why are they cool?
Essentially, a virtual card functions in the same way as a normal credit or debit card, minus the plastic. Making this leap gives companies far more than a bit of extra space in their staff’s wallets. By going digital, the cards themselves can be endlessly reissued, and the rules that govern them quickly reprogrammed, giving a company almost limitless flexibility to shape its spending power to suit its goals.
This means that, unlike plastic cards, virtual cards can be single use. A new card, with a new card number, can be created for every transaction – and still each maintain a direct link back to a single, central bank account for easy and transparent accounting.
One key business advantage of using virtual cards lies in their ability to significantly reduce the risk of fraud. The creation of a new virtual card for each transaction means that, even if sensitive card data is intercepted, it cannot be used to make further payments. What’s more, when a virtual card is ‘spun up’, it is created for a specific payment – referencing the exact amount, merchant, and date range. Payments outside of these parameters simply won’t be authorised, seamlessly protecting buyers from fraudulent transactions without impacting the user experience.
Furthermore, the authorisation framework of the unique virtual card number (VCN) makes payments easily trackable and provides all of the data needed to help merchants reconcile payments with account receivables – increasing operational efficiency on the supplier side.
Virtual cards are uniquely valuable in B2B contexts. Although consumer products were brought to market, the inability to use them for in-store payments and ATM cash withdrawals limited their adoption, and most issuers eventually stopped offering them. As B2B payments are rarely made via a physical terminal (i.e. face to face), this adoption barrier doesn’t exist in the corporate world, prompting many industry experts to predict that virtual card volumes would snowball. Yet, years later, we’re still awaiting the watershed.
So what’s holding the industry back?
The adoption of new financial processes is often a long-term goal. Not unreasonably, many companies, particularly enterprise-scale firms, perceive integration challenges and downtime as both likely and high-risk.
It’s certainly true that any downtime of internal payments systems would be damaging, but the use of dedicated, cloud-based APIs from specialist digital payment firms dramatically reduces these risks – such firms are solely dedicated to ensuring their digital payment systems seamlessly integrate with a business’s existing systems, and remain continuously available.
There is also a common misconception that while virtual cards benefit buyers, their
impact on the suppliers is broadly negative. An often-cited issue is that of increased interchange fees borne by the company accepting payment, which can be up to 2.5% of each transaction. This perception deserves to be challenged, principally because it discounts the business opportunities that virtual cards bring to suppliers including dramatic process efficiencies and, perhaps most importantly, improved cash flow from instant settlement.
Virtual cards from issuers like Barclays enable buyers to pay suppliers upfront via a line of credit, without affecting their own cash flow – similar to the process of paying off a consumer credit card payment.
These strategic benefits to both buyers and suppliers, while nuanced, stack up to a compelling value proposition for even the most change-resistant of firms.
Are we nearly there yet?
The stars appear to be aligning for corporate virtual card adoption. The only real barrier remaining is that of supplier education. To ensure successful take up, issuers, digital payment integrators and buyers alike must share responsibility for communicating their value to merchants within B2B supply chains. Accomplish this and we will finally start to see the levels of adoption this terrific payment technology deserves.
Britain sets out blueprint to keep fintech ‘crown’ after Brexit
By Huw Jones
LONDON (Reuters) – Brexit, COVID-19 and overseas competition are challenging fintech’s future, and Britain should act to stay competitive for the sector, a government-backed review said on Friday.
Britain’s departure from the European Union has cut the sector’s access to the world’s biggest single market, making the UK less attractive for fintechs wanting to expand cross-border.
The review headed by Ron Kalifa, former CEO of payments fintech Worldpay, sets out a “strategy and delivery model” that includes a new billion pound start-up fund and fast-tracking work visas for hiring the best talent globally.
“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.
Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.
“This review will make an important contribution to our plan to retain the UK’s fintech crown,” finance minister Rishi Sunak said, adding the government will respond in due course.
The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance all mean the sector’s future in Britain is not assured.
Britain increasingly needs to represent itself as a strong fintech scale-up destination as well as one for start-ups, it added.
The review recommends more flexible listing rules for fintechs to catch up with New York.
“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.
The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).
“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.
Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.
“It’s a question of knowing who to call when there’s a problem,” Swinburne said.
($1 = 0.7064 pounds)
(Reporting by Huw Jones; editing by Hugh Lawson and Jason Neely)
Enhancing efficiency in international trade – the time is now
By Carl Wegner, CEO of Contour
Despite significant advances in digital enterprise technology in recent years, international trade remains overwhelmingly manual and fraught with inefficiency.
Financial market participants spend millions of dollars to save fractions of seconds. Central banks are rushing to offer “fast” domestic payments in under three seconds. But cross-border trade relies on payments involving more than one country and bank, with no common central bank to provide cover and currency conversion. It takes at least a day or, in most cases, two – and that’s not even the most inefficient part of cross-border trade.
These processes are lightning quick compared to trade-related finance and risk mitigation products such as Letters of Credit (LCs), which can take over a week to settle. These involve more parties, more complexity, more paper and less trust.
In global trade finance, a bank will agree to pay an overseas seller after receiving proof that the seller has met their obligations. There is no common network for the seller to provide this proof, and no global database of shipments. Sellers rely on the gold standard of banking communication: wet ink-signed paper documents. Collecting, presenting and checking these documents can take days, if not weeks, stalling payments and leaving goods sitting on the dock rather than working through the economy.
The perceived credibility of “wet ink” signatures on documents is holding the industry back even as other areas are embracing new technologies. Unfortunately, it is all the industry has and the highest common denominator of communication. Bringing trade finance into the twenty-first century will need the development of a new gold standard – a common and trusted digital infrastructure. Luckily, the technology to ease this change and inject massive efficiency gains into the industry is now available.
More than a few small tweaks
Banks, buyers, sellers, shipping companies, ports, customs, and so on; the number of parties involved in international trade and the relative lack of trust among them makes any change a significant challenge.
Even before paper documents are involved for proof of shipment, there are trust challenges in communication for trade finance. While banks have a trusted form of communication among themselves, this does not extend to corporates or other parties. These groups are left with paper communication, email and fax – hardly efficient methods of communication. The industry needs a network, a common identity, and a way to share data securely and privately with all participants. This is the first step and can lead to significant increases in efficiency, especially if communication between participants can be synced in real-time.
Building the network
The future of global trade communication is decentralised. With today’s technologies, it is no longer feasible to have the world’s sensitive trade data sitting in one place susceptible to attack or commercial manipulation.
Every bank and corporate must own their own data and share it only with their trading partners where necessary. Decentralised technologies go further than this, allowing data to be synchronised with trading partners, enabling a new level of trust between parties through the deceptively complicated concept of ”what I see, you see”.
The practicalities of title transfer
The problem of paper and wet-ink signatures seems simple to solve once the network is in place. Remove the couriers, upload PDFs of all that paper onto the decentralised and synchronised network built to authenticate the sender, and trade is digitised. However, while this process is easy in theory, the variety of documents involved in a single transaction complicates matters – especially when it comes to the transfer of title.
The bill of lading is a key example of this – issued in triplicate on original letterhead and signed by an authorised party on behalf of the ship’s captain. They represent title to the documents and can be used as a negotiable document much like a bank cheque.
Digitising these documents has come a long way in the last few years, with specialised platforms and digital registries created and new legal standards drafted to allow electronic bills of lading (eBLs) to be used instead. But adoption still lags behind, and for their efficiency to be realised across the majority of global trade, the concept of digital documents such as eBLs needs to be married to decentralised networks for trade finance.
The security issue
For documents not related to title transfer, the long-held argument that an original signed document is more secure than a digital version is extremely outdated. With the right protocols in place, a digital document can present a more private and secure option than its physical counterpart.
Even an uploaded PDF can be a “digital document” with the right controls in place. Using a decentralised network every member will have an immutable audit log for every transaction, with the uploading party taking responsibility for the documents they introduce to the network in the same way a sender can take responsibility through their signature. These security protocols will also enhance the time it takes to manage trade documents, allowing parties to track and match items to real-time data.
There has already been phenomenal success in combining a decentralised network with electronic bill of lading solutions. Rather than seven days, the time from presentation to payment instruction can be reduced to 24 hours. However, for any of this to be achieved at scale, we need coordinated collaboration to ensure a new global digital standard can emerge, rather than a series of disconnected digital islands.
Fortunately, the industry is well on its way. The Asian Development Bank recently reported that 85% of banks are gearing up to serve the trade finance needs of more businesses through technology, addressing concerns such as inefficiencies and KYC, showing a clear demand for more efficient processes to be established in the sector.
While removing a few hours from overseas payments is a worthwhile goal, reducing a week from trade finance processes can have an even greater impact on businesses’ working capital efficiency and accelerating growth in the wider global economy.
How to open up with a current account with bad credit
At times, through no fault of your own, you may find yourself in a difficult financial position – like many people have throughout the pandemic. What’s worse is when you need to create a current account but find yourself being refused due to bad credit.
However, there are options for people out there. To help, Jonny Sabinsky, Head of Communications at budgeting fintech, thinkmoney, has answered the most common questions about opening up a current account whilst having bad credit.
“Can I get a current account with bad credit?”
Many banks may refuse a person with bad credit’s application for a standard current account with an overdraft facility or a rewards scheme. This is because a bank may see you as more of a risk to lend to.
However, they’re still likely to accept you for a basic account as these are designed to help those who have a bad credit rating. They provide a safe place to store your incomings, deposit cash and cheques, withdraw money, and set up direct debits and standing orders. They also allow you to build your credit rating up by showing you can handle money responsibly.
“Am I eligible for a basic account?”
As long as you’re over the age of 18, have a form of ID and can show proof of address, the option of a basic bank account should be available to you. However, this can depend on the bank and the specific account.
Six unexpected tips to boost your credit score
As soon as you have opened your basic bank account, you can begin to improve your credit score. However, there are six other unexpected ways in which you can improve your credit score in the meantime:
1. Ask your landlord to put you on the Rental Exchange Initiative
The Rental Exchange Initiative gives you the credit you deserve for paying your rent on time, whether you rent privately or through the council. It’s really simple to do, too. Just ask your landlord or social housing customer service team to add you to the initiative.
2. Always stay 50% below your credit limit
What does this even mean? Well, it basically means that you shouldn’t be maxing out your credit cards. You may think that as long as you pay off your credit card on time then it doesn’t matter how much is on there, right? Wrong. If you’re constantly reaching your limit, then this can look like you need your credit card to survive and that you’re not financially secure. If you can remain at least 50%, preferably lower, below your limit, then this will help to improve your score.
3. Pay money off your credit card twice a month
So, you pay off your credit card every month – great! But the only problem is that your creditors only report to the credit reference agencies once a month. If you haven’t paid off your bill before that report is sent, and if you run up a big bill, then it can look like you’re overusing your credit. How to tackle this? Just pay twice a month!
4. When applying for credit, add a landline number
When applying for credit, the reference agencies like to see stability. With this in mind, even the smallest of things can make a big difference. Having a landline ties you to a fixed address, so some lenders may be willing to offer you a loan, mortgage or credit card if you have one.
5. Don’t open a new credit account for six months
One of the easiest ways to boost your credit score is by refraining from opening up a new form of credit six months after you last created credit. This shows future lenders that you don’t rely on credit regularly and can strengthen your case. This will also help you refrain from possibly being rejected from credit, and, therefore, damaging your credit score.
6. Know what doesn’t affect your credit score
There are a lot of myths about what does and does not affect your credit score, so it’s important to be able to understand the most common misconceptions. For example, previous occupants at your home address do not affect your credit score. Instead, credit companies are only interested in those that you’re linked to financially, such as a joint bank account.
Another misconception is that your credit history is stored forever. However, the truth is that most of the information in your credit report is only stored for around six years, and in most instances, credit companies are most interested in your most recent history.
Finally, there’s a myth that checking your credit score or credit report impacts your score. This is not true – you can check your report as many times as you like.
How retailers can deliver in the social commerce boom
By Sian Hopwood, EVP, Local Business Units at BluJay Solutions E-commerce may have made waves across the supply chain over the...
Britain sets out blueprint to keep fintech ‘crown’ after Brexit
By Huw Jones LONDON (Reuters) – Brexit, COVID-19 and overseas competition are challenging fintech’s future, and Britain should act to...
BFI: More Than Just a Service Provider
Banco de Fomento Internacional, S.A. (BFI) is an investment bank in Santiago, Cape Verde, that has been providing its clients...
Rightmove portal sees strong UK housing activity in 2021, reinstates dividend
(Reuters) – Rightmove, which runs Britain’s largest online real estate portal, on Friday said it expected continued robust market activity...
Enhancing efficiency in international trade – the time is now
By Carl Wegner, CEO of Contour Despite significant advances in digital enterprise technology in recent years, international trade remains overwhelmingly...