Talk is growing of the potential for virtual card technology to address several key points of friction in business payments, especially in corporate travel. That’s because business travel is often booked online in card-not-present scenarios, which demand heightened security; proponents of virtual cards and their one-time-use nature say the tool offers business payers added protection, while simultaneously providing the benefits of electronic payment, including access to payment data for automated reconciliation and expense management.
But as the virtual card hype builds, some shortcomings have surfaced too. Overall, virtual cards — indeed, commercial cards as a whole — still face adoption barriers. But when it comes to v-card technology specifically, one of its largest pitfalls is the fact that, while they provide businesses with a more automated payment mechanism, oftentimes hotels are forced to receive virtual card information by email or fax and then manually enter that data into their systems.
Christian Gall, vice president of payment solutions at corporate hotel program solutions provider HRS, said that businesses aren’t the only ones that need to get onboard with virtual payment technology: Hotels must embrace the tool to be ready to accept them.
“In the majority of cases, the challenge on the hotel front increasingly is an educational one,” he told PYMNTS in a recent emailed interview. “As more hotel chains see the benefits of virtual cards, we’re confident they will invest in the platform, and that momentum will help the platform’s progress.”
The executive pointed to Omni Hotels, which, last October, announced a partnership with virtual card solutions provider Conferma and the decision to accommodate corporate use of virtual cards to pay for hotel bookings. Gall also pointed to recent initiatives by the Global Business Travel Association (GBTA) and the Hotel Electronic Distribution Network Association (HEDNA) to promote the use of electronic payments and virtual cards in business travel.
Earlier this year, the GBTA formed a task force to explore travel provider adoption of virtual card acceptance.
“To say that hotels were left out of the process by creating these virtual cards solutions would probably be true,” said the task force’s Co-Chair and CSI globalVCard SVP of Travel Juliann Pless in a statement at the time.
But as adoption increases among businesses, hotels are gradually following suit.
“Different countries are at different points on the maturity curve when it comes to use of virtual cards,” explained Gall. “For example, hotels in Germany are very used to accepting corporate cards. This is not yet the case in China or South America.”
Even for business payers themselves, though, virtual card adoption has perhaps been slower than some industry players would like. In a separate interview, Dean M. Leavitt, founder and CEO of Boost Payment Solutions, told PYMNTS that friction remains and holds back v-card adoption.
“We recognize the fact that certain card-based payment processes are cumbersome and that there are valid reasons why virtual card acceptance, while clearly growing, hasn’t seen the uptake one would expect given its value proposition,” said Leavitt, who added that indeed, supplier hesitance to accept virtual cards has hindered payer use of the technology.
An October 2017 survey conducted by the GBTA found that, among 137 U.S.-based travel managers polled, only 16 percent are using virtual card numbers.
That doesn’t mean business travelers and their travel managers are scoffing at virtual payments altogether: Most of those surveyed (81 percent) said they use virtual payments in the form of lodge or ghost cards. But while ghost accounts don’t necessarily come with physical cards, they don’t provide the same security as single-use virtual cards.
“Corporations are looking for payment solutions that combine more security with ease of use for their everyday travelers,” explained Gall, discussing the benefits virtual card technology provides companies. “Virtual cards enable both of these enviable outcomes.”
“On the security front,” he continued, “with pre-authorized dates, amount caps and vendor restrictions, virtual cards limit the company’s exposure to fraud and inappropriate expenditures. For travelers, virtual cards ease both the journey and the post-trip expense reporting.”
Virtual cards also facilitate access to level 3 payment data, which provides greater detail about a transaction that can be key for reconciliation and retroactive spend analysis.
In corporate travel, HRS recently found another, perhaps unexpected, benefit of virtual cards: They can often lead to cheaper rates.
According to Gall, HRS conducted research and compiled case studies from travel managers and found that “in the vast majority of cases, hotels accepting a virtual card are preferred hotels for the company.” Corporate travelers are more likely to choose providers they don’t have to pay themselves — that they are instead able to pay with company funds — which means they are also more likely to book with a hotel that is part of their organization’s preferred vendor list, meaning cheaper negotiated rates.
“One can see how momentum builds,” Gall said. “As more travelers book lower negotiated rates at more preferred hotels, the average rate booked across the entire hotel program goes down.”
For hotels, that means heightened customer loyalty and greater consistency in booking volume, he added.
“Cancellation rates from travelers at companies using a virtual card were shown to be 14 percent lower,” HRS’s data found, according to Gall.
Considering benefits for corporate payers and the hotels themselves, it’s a bit of a conundrum why adoption isn’t higher. But because payer adoption on virtual card technology is directly related to vendor acceptance, it could take greater hotel adoption of v-cards to really propel uptake in the corporate payments space.
In addition to initiatives like those launched by the GBTA and HEDNA, HRS announced last month that it is expanding its Paperless virtual card solution across North America, a solution that addresses the needs of both corporates and hotels.
V-card adoption may be a bit slow, but Gall said he is confident in its inevitable proliferation.
“We are convinced that virtual cards are the way of the future for hotel payments,” he said. “The benefits are overwhelming for every key player in the cycle: the business traveler, the corporate travel manager and hotels.”
“News about data breaches and hacking seems to pop up each month,” the executive continued. “More CFOs increasingly worry about the risk that hackers and other weaknesses present for their travelers on the road. As more companies adopt virtual cards and spread the word about both the savings and security gains they record, others are likely to follow suit.”