Corporate Payments Go mobile through Tokenization-as-a-Service Model
Business travel lulls do not mean a slowdown in commercial card innovation. Corporate T&E spend may be down due to the reduced amount of travel this year, but that does not mean card activity overall has waned nor has business card innovation. In this article, we examine the evolution of the virtual card and how tokenization-as-a-service unleashes the benefits of mobile corporate payments.
The evolution of the virtual card
Virtual cards are expected to reach $740 billion by 2025. That's a predicted compound annual growth rate of 22%, according to The World Payments Report 2020. They're gaining fast in appeal from corporate users for several reasons:
- They are more secure: When a virtual card is issued, a virtual account number (VAN) is assigned. The VAN is linked to the commercial card's main, or primary account number (PAN). Because virtual cards replace primary account numbers on physical purchasing cards, the risk of exposing the underlying card details to the vendor, or any chance of cloning, is low.
- Optimized expense management: Companies can place strict limits on what each virtual account can be used for and a variety of other spending parameters can be attached to it, such as when the card can be used, what types of merchants can accept it, and when it will expire. Companies can issue single-use virtual accounts or recurring-use cards for ongoing payments. All company spending is monitored from a centralized spend management platform.
Historically, the only downside of a virtual card was not having the ability to use the account at the physical point of sale —think of someone paying by writing down a 16-digit number and handing it to a cashier. That doesn't work so well when trying to check into a hotel room, pay for lunch, or buy supplies for the office.
Folding in mobile
And now, mobile wallets will give them a turbo boost. Mobile wallets will likely increase commercial card volume in the coming years, as the trend of provisioning virtual cards out to people's smartphones becomes the norm. According to corporate executives surveyed for The World Payments Report 2020, they anticipate mobile payments to be their second digital payments initiative, behind virtual cards. To be sure, mobile payments have skyrocketed among global consumers and will continue to do so. Digital wallets are expected to increase from 2.3 billion users in 2019 to nearly 4 billion by 2024, representing 50% of the world's population, projected by The World Payments Report 2020. Fueled by contactless technology: cell phones from brands such as Apple, Samsung and Google, all have near-field communication chips, which allow for contactless acceptance at the point of sale. And merchant capability to accept contactless payments keeps rising each year.
Innovation: Instant issuing into mobile wallets with tokenization-as-a-service
Today, through a collaboration between TSYS, Mastercard, and mobile wallet technology provider Extend, businesses can issue virtual cards directly into mobile wallets.
The solution, that can be either white-labeled or directly integrated into a bank's mobile app, is made possible in conjunction with Extend, who offers issuers full mobile app functionality and encrypted payloads for virtual card mobile app provisioning, Mastercard, who supports Extend with their Mastercard Digital Enablement Service (MDES), and TSYS, who generates the virtual card numbers and provides a single authorization platform and tokenization-as-a-service solutions to secure them — reducing the chance of fraud.
This innovation opens up a whole range of use cases. Some new possibilities include:
Travel and entertainment. While virtual cards could previously be used for booking hotels and airline reservations, now users can pay in person at restaurants, and for taxis and ride shares. This is especially convenient for companies that are considering hiring and need to pay for the candidate's travel to the office.
Office supplies. Employees at a company using the Extend app can now receive a virtual card instantly on their phone and make purchases at the point of sale at retail stores. This makes it easy to buy last-minute items.
Onboarding. For new-hires who have yet to receive a corporate card, virtual cards in a mobile wallet allow for immediate spending. Receiving a traditional plastic card can take several days or longer.
On the corporate side, expense reports don't have to be processed, which can cost as much as $58 for a first-pass and $52 for corrections, according to the Global Business Travel Association.
For issuers, TSYS's work behind the scenes minimizes the potential for fraud. Extend's mobile wallet technology relies on TSYS' Virtual Payment Precept (VPP), a payables solution that enables the generation of secure, virtual, single-use account information in real-time with more control over account and transaction parameters. VPP allows issuers to broaden their virtual card issuer solutions through the payments networks.
With VPP, a virtual card number — or token — is created to represent a permanent card number. The tokenization process substitutes a series of unrelated characters for the actual account number in order to thwart fraudsters. Yet with Extend, VPP takes it one step further. With the provisioning to the Extend app, the token that was created initially, actually has another token created for it. Think of it as encrypting a data set that already has a layer of encryption. This “tokenizing" of the token adds another layer of security that takes a low chance of fraud and reduces it further.
Future-proofing corporate payments
In mobile payments, TSYS is the only processor that has developed the ability to tokenize tokens for virtual cards. So not only is TSYS working to expand payment possibilities, but it's also making them more secure, as the world continues its migration to mobile ways to pay. It's a sign of the times, and issuers need this type of capability to keep ahead of change.