Since February, COVID-19 has rattled every aspect of life as we knew it. Amid the start of a global pandemic, everyone everywhere stopped what they were doing to make health and safety a number one priority. The ripple effect this had not only put our economy in a state of frenzy but it forced businesses to quickly respond and plan for the new normal that we’re living in today.
Over the last several years, there’s been rising interest in a number of financial technologies. When you look at consumer trends, appetite for digital products and services were met with rapid innovation. For the commercial sector however, innovation had been much slower despite arguably more benefits for doing so. That is, until coronavirus happened.
So far in 2020, we’ve seen an unprecedented focus on digital financial trends. COVID has forced businesses to modernize. It started with a big boom in e-commerce, with a 68% YoY revenue growth for US retailers -- an obvious outcome of the population quarantining and conducting any and all shopping needs from the safety of their own homes.
Contactless payments have also finally taken off in the U.S. market, putting demand on merchants to upgrade their systems. Two years ago, only 3% of cards in use were contactless, compared to 64% in the U.K. and 96% in South Korea. Now consumers and merchants don’t have to worry about handling cash or touching POS systems and the seamlessness of tap-to-pay that users have finally experienced will stick around long after a cure has been discovered.
This has put extreme pressure on financial institutions to handle the influx of digital transactions and related activity. However, migrating legacy infrastructure to the cloud has been such a daunting task that banks have been slow to make the shift over the last few years. The current crisis has put a spotlight on this challenge, forcing banks to quickly pivot and focus more of their time and budgets on upgrading infrastructure and implementing solutions that meet the evolving digital needs of their clients — especially business customers — as digital adoption is undoubtedly here to stay.
Then there’s businesses’ internal financial challenges themselves. By mid-May, an estimated 68% of employed adults in the U.S. were working from home and that means employers have had to rethink how to cater to their remote workforce: digital communication tools, home office setups, and most imperatively (and likely most painstakingly) remote financial processes.
Less than a year ago, the Association for Financial Professionals reported that 42% of B2B payments in the U.S. were still made by paper checks with 97% paying at least some major suppliers with checks. The primary reason for such an archaic process is that it serves as one last point of control. Since the start of this pandemic, I’ve heard a number of anecdotes where finance staff have had to leave their quarantine and trek to their closed offices to either pick up or make check payments. An absolutely unnecessary risk and not something any employer should ask their employees to do.
Not only that, but with a distributed workforce comes a need for distributed payments. You have employees who still need to get work done, who need access to a company payment method, who are unable to submit paper reimbursements, and are likely accumulating more reimbursements when you factor in things like those work-from-home setups and digital communication tools that needed to be purchased.
This is where virtual cards really shine. Now more than ever they are proving just how much value they can bring to any organization. Over the years virtual cards have become an increasingly popular topic due to the added security they provide, but the enriched data and flexibility that come with a digital payment mechanism can reshape a company’s entire approach to spend management. Not only can you instantly distribute virtual cards to your remote workforce, you can gain incredible oversight and even improve the level of control you have over company spending.
As a result, I believe virtual cards will become a digital backbone to corporate payment processes, reshaping the way payments are made and managed across the board. The data is already there to support it and COVID will only accelerate that transformation. While Accenture reported virtual card spend to grow an estimated 21% over the next four years, Juniper has already reported an 11% increase in virtual card transactions this year—a consequence of needing to authorize spend remotely, no doubt.
My suggestion to companies who are still figuring out how to modernize their finance department for a more permanent remote future is to speak to their banks and their technology service providers about the different tools that are available to them. Virtual cards will, in my mind, be an essential part of any solution to facilitating controlled employee spending and vendor payments.
Op-ed by Andrew Jamison, Co-founder and CEO of Extend. Extend is transforming the $1.6 trillion U.S. corporate card industry with its payment technology that plugs seamlessly into existing bank infrastructure. Extend is a partner of Mastercard, Visa, City National Bank, Silicon Valley Bank, and many more.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.