Virtual credit cards have been slow to take off in the Australian market, but are expected to gain traction as corporates start to understand the benefits, says ANZ Senior Product Manager Nathan Colbron.

A virtual credit (or charge) card is essentially a card number that is issued without the physical plastic card. They are designed for the card not present (CNP) environment, such as for telephone and online transactions.

Currently used by corporates

While they are popular among overseas corporates for the control and visibility they provide over employee spending, as well as the cost savings, they have been slow to take off in Australia.

“There is currently only a small level of uptake in Australia for virtual cards but we do expect to see some growth over time,” says Rob Walls, Visa Head of Product, Australia & New Zealand.

Walls says corporates generally use virtual accounts for booking corporate travel and paying for general supplies such as stationary and IT equipment. “Only the approved suppliers see the actual account numbers and delegations are set on who can sign off on purchases,” he says.

Some virtual cards are offered for one-time use only, with the number expiring after a single purchase for an additional level of security.

ANZ’s Nathan Colbron agrees that so far, take up has been slow.

Often commercial card trends in the Australian market originate from multinationals based in Australia and then spread into the local based companies, he says.

Help with balance sheet management

ANZ offers two types of virtual credit cards.

The first is a travel card, which staff can use when they book a flight. Colbron says the advantage is that all the air travel for a corporation is consolidated through the one virtual card account. The flights are booked online through the travel management company and there is enhanced data attached to the transaction, showing who took the flight, to where and when, making for easier reconciliation.

The second card is a virtual purchasing account for non-travel purchases.

The market, Colbron says, is “an underpenetrated opportunity but will gain traction without a doubt over the years”, particularly as fintechs start building purchasing and payments solutions that complement the virtual card.
You can reduce the bank’s contingent liability, which in turn can be passed on to customers as more competitive rates or kept as profit
Rod Tasker, an associate at Payments Consulting Network, says virtual credit cards can also help with balance sheet management for banks which issue physical cards to corporate clients to large number of staff. For instance, a company with plastic cards for 10,000 staff with a limit of $5,000 each represents a contingency liability of $50 million to the bank, covering the extremely unlikely event that all staff misspend to their credit card limits at the same time, or that all the company’s cards are used in a fraudulent attack.

Instead, these staff could use virtual credit cards with each accessing the same credit facility, and the contingent liability need only be the maximum permitted total daily spend for all the holders combined, such as $5 million, for instance. “You just have one account. Everybody uses a virtual one-time card so you know exactly who’s used it for what and you can reduce the bank’s contingent liability, which in turn can be passed on to customers as more competitive rates or kept as profit,” says Tasker.

Virtual cards for personal use

Virtual cards are available for personal use, but consumer uptake in Australia has also been slow, says Tasker.
He says the tipping point will come when more people adopt mobile wallets. “Another way of thinking of the virtual card is that it’s just your card number typed into your mobile phone and so you’ve virtualized,” says Tasker.

He says that at some point banks will discover that it is more cost effective to just send customers their credit card number rather than making and posting out the actual physical card.
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