ConnexPay’s Anant Patel, president of international markets, discusses the future of payments, highlighting the potential of virtual cards to provide multiple efficiencies and cost savings, while increasing security, reducing fraud risks and increasing cash flow for retailers.
ConnexPay exists because it truly wants to transform and connect payments in the simplest and easiest way. The growing popularity of virtual cards helps ConnexPay to raise the bar by taking the pain and friction out of payments.
Anant Patel talks to The Payments Association’s Editorial Director Anjana Haines about how the popularity of virtual cards is growing globally, particularly among corporations, and how the payment method will evolve to utilise AI technology.
Virtual cards have been growing in popularity. What’s their potential?
Virtual cards have significant advantages over traditional payment methods. They can be created quickly and easily, used for one-time or multiple purchases, offer increased security, and handle high-volume business payments. But they also reduce risk and fraud.
Talking about the popularity of virtual cards, I would go as far as saying that we’re probably in the realm of over $100 billion a year of virtual cards being used globally.
But, in its true sense, when you make a transaction online you are making a virtual payment transaction. What we find is that the popularity of virtual cards is growing because companies like ConnexPay are removing the friction; we simply want to connect payments and we’re doing that for high volumes.
Another benefit is that virtual cards are easily integrated into digital wallets and digital payments – the younger generation don’t utilise any other forms of payment. So, digital payments are growing in popularity and virtual cards are a part of that.
Finally, there are significant amounts of controls you can put on virtual cards like one-time use only, allowing the card to be live only on a certain date, only using it at a certain merchant, or in a specific currency for a certain amount.
So, people are finding that virtual cards are ultimately reducing risk, therefore the popularity is increasing because people feel safer using them. We can do high volumes of transactions and it is fitting into the digital wallet.
Are you seeing global popularity in this payment product, or is it more in the UK and EU?
It’s popular worldwide. I’ve been in virtual payments and virtual cards for many years and I have seen it accelerate and grow by hundreds of percents year-over-year.
It’s growing because of the convenience, security, ease of use, driving out friction, and simply connecting payments. We’re seeing huge adoption within travel in particular, as well as hospitality and e-commerce.
It’s going to continue to grow globally.
So, the UK and the EU have definitely got a significant portion of it but it’s growing massively in the US. It’s growing in Asia Pacific too. So, what you’re finding is virtual cards are a secure way of doing payments and people are far more excited, accepting and receptive of it.
A significant growth area for virtual cards has been among corporations. Do you see this trend continuing?
Yes, I do.
Businesses are there to make profit and add significant value to their customers and their shareholders, and there are many ways of doing that. One of the ways that our customers are doing that is by findings ways to remove the pain in their payments process and drive more efficiency. When you drive more efficiency, you can pass on that benefit to consumers and grow your business.
What we’re finding is that businesses are the biggest adopter of virtual cards in mass. For example, there are global travel companies who are producing multiple virtual cards per second to pay hotels or airlines or ground transportation because they’re seeing the huge benefit of it – to the tune of billions of dollars a year. I don’t see that slowing down in corporates – I see that growing.
Mastercard said the size of the B2B market is over $130 trillion globally and growing at significant pace. With that in mind, if we’re only scratching the surface with a virtual card, which is an efficient way of paying. We want to drive out inefficiencies for the businesses we serve and simply connect payments, reduce costs, make it more efficient and help grow their business.
There could be an unintended consequence of job losses with corporates moving more towards virtual cards because of the automated invoice, expenses and accounting functions. Do you see this being a possibility?
We look at it differently. We see that there’s a huge benefit of putting in more efficient processes.
I’ll give you an example that comes directly from a CFO we work with. He had several people in his finance admin team looking at reconciling statements, connecting people’s flights with the airline, and doing a lot of administrative tasks, which were very manual.
We were able to introduce the platform and our solution that literally drove efficiency, making it seamless for that team. He then redeployed those individuals to do other items which needed to be done in finance. There’s not a single CFO in the world that I know that says I have enough staff.
What CFOs like this one have done is taken the inefficiency, driven it out using our solution, and redeployed people to do other more effective and important projects and tasks.
How popular are virtual cards among retailers?
The way I look at this is the benefits of issuing, paying and receiving a virtual card outweigh the costs related to it.
There is a huge amount of fraud that we know happens globally and companies are trying to drive fraud out of everything because it affects their bottom line. So, we’re finding that we’re having a major impact on reducing fraud because of all the benefits we spoke about earlier, such as having one-time use only cards, set values, currencies and activity periods on the cards, etc.
By accepting virtual card payments, retailers are battling less fraud. We also find that the schemes and the networks have said that if retailers accept virtual cards, they will grow their revenues because more people will buy from them, as well as reduce fraud.
It also increases their cash flow. For example, a lot of retailers wait for payments to settle over a period of days, but virtual cards allow these retailers to receive their money quicker, creating a positive impact on cash flow.
Again, there’s not a single retailer or a CFO I know who doesn’t love a positive impact on cash flow.
The overall value package far outweighs accepting cards in general.
Are retailers aware of the benefits, though? How are they being educated?
We are working with the schemes, retailers, and customers to make sure the value of virtual cards is communicated.
Going back to my original comment, everyone who makes a transaction online is truly making a virtual payment. From an adoption perspective, all these retailers who have an online business, by definition, accept a virtual payment.
Therefore, accepting a virtual card, which has simply never been a plastic card, to accepting a plastic card that’s now making a virtual payment, there is no difference for the retailer.
The education part is mostly already there because people want to accept online payments. For those that question the payment method or don’t recognise this type of card, the networks – like Visa, Mastercard and Amex — do the really good job of explaining why retailers should accept virtual cards.
It also seems sustainable. When you think about plastic usage and how the schemes are trying to reduce their environmental carbon footprint, this seems like a no-brainer. Would you agree?
You’re absolutely right. Another benefit of virtual cards is obviously the impact on the environment, which will make a massive impact in a positive way.
You’ve touched on financial crime briefly, but it’s one of the key areas of concern for online purchases. Virtual cards can be utilised for most online purchases, but can they mask personal financial information? Do they pose a financial crime risk?
I think it does the opposite. Virtual cards actually protect and allow real customers to make transactions.
Let’s say you went to a new website to buy something that you never heard of before. Rather than provide your plastic 16-digit card number and all the credentials, you could create a virtual card with all the parameters being customisable, including one-time transaction, payment amount, expiry dates and all the different credentials that go with it; this way, with a virtual card, you’re reducing the financial crime risk.
If we look at it the other way – if bad people want to create a virtual card to make a payment that is somewhere else within the process. For example, if you’re part of a big retail bank, they would be the ones that will be issuing the virtual card on behalf of their customers. They need to know their customers under the KYC process. So, there are many points within the value chain where they’ll be able to reduce the risk on financial crime, but the virtual card payment at the end is the winner across all that because you’re not sharing any of your data with potentially bad actors.
Our businesses are making those customisable virtual card payments because they don’t want to pass on their customers’ cards or details.
Could it be used by a fraudster to make a one-time payment without trace or how that card’s been issued?
The thing is you don’t get away from knowing your customer and that’s what’s really key here. The risk and compliance checks with KYC.
In our case, we onboard all of our customers post knowing them. We know your business, know your customers, pass the underwriting and we’ve got to know details about the ownership. Then we start allowing them to do transactions and the transaction monitoring that goes with it.
So, if a person off the street, who was a criminal, wanted to create a virtual card, they’d have to be onboarded somewhere first to be able to then create the virtual card to make the payment. Therefore, there are a significant number of checkpoints upfront that reduce the risk.
In terms of where the liability lies when the fraud does happen, is it the same as any traditional card?
Yeah, it’s a traditional card model and the liability lies with the issuer, which is us when we do those elements as well.
What about the future of virtual cards? How could they work with crypto assets, Web3, Metaverse, etc.?
Our virtual cards can work with crypto assets, Web3 and the Metaverse.
On crypto assets, we can link a virtual card with a crypto wallet. When we link to a crypto or a decentralised finance platform, we allow that card to be stored and you can trade and transfer cryptocurrencies. The connection allows users to convert crypto assets to fiat currencies.
When it comes to Web3, it can work with Web3 applications as well, which are decentralised applications that operate on blockchain-based platforms and it allows users to earn crypto assets and then, by completing tasks, they can use a virtual card to spend those assets. We can see that happening online a lot.
On the Metaverse, virtual cards can be used to make payments in the Metaverse. A virtual world that operates on a blockchain platform or blockchain-based platform, which is the Metaverse, allows you to purchase virtual goods services and assets.
Ultimately, a virtual card acts as the bridge between the traditional finance systems that we know, and the new blockchain-based ecosystems. Things are evolving.
How could virtual cards work with AI?
We are looking into what AI can do for us and we’re looking to implement certain things. So, let me give you some ideas where I think virtual cards could coexist and have AI involved with them.
One way is just to analyse spending patterns. For example, say I spend most of my money at food places. The AI could provide a list of recommendations on restaurants based on where I’ve eaten. My wife maybe likes a bit more shopping for shoes, so she might get a different view of what the actual patterns tell her about her spending needs.
The other thing AI can do is help with the security features of virtual cards, because being able to learn, detect and prevent fraudulent transactions in real time would help reduce fraud. Sometimes it takes a few times before fraud is caught but if you’re able to reduce it, even by one transaction, you’re saving significant money.
Then, there’s automatic expense tracking. We’ve been able to use AI in a transaction and populate expense systems with the AI information that’s pushed through.
I believe that integrating AI and virtual cards can provide significant financial solutions, but also add value to the whole ecosystem of payments around reducing fraud and making things faster.
As an organisation, we’re always thinking about what the future holds. We talk about our vision being simply connecting payments and we do that through virtual cards.
What about virtual cards versus biometric payments? Obviously, there’s an argument that you don’t even need any type of card, whether that’s virtual or physical, because your iris, fingerprint, etc. is enough to pay. What do you think will win out in the long term?
Virtual cards are far more discreet and invisible in the payment process and are there for mass transactions. So, where biometrics requires some level of secondary authentication, that already inherently puts in a process. With virtual cards, we make them as frictionless as possible.
Our customers want us to ‘drive out the friction’, ‘become invisible’, and that’s what we do because we’re processing a mass volume of card transactions all the way through.
I think there’s a massive home for biometrics, but they can coexist with virtual cards. I think biometrics are for some payments and virtual cards for others, but the huge opportunity in front of us is everything coming down to digital.
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