From gold to paper money to credit cards to virtual payments…money has gradually become less and less tangible over time. In the business world, virtual payments have quickly gained prominence and appear to be the way of the future. But what exactly are virtual payments and how are they going to impact the immediate future?
Understanding Virtual Payments
Virtual payments rely on some pretty sophisticated technology, but the concept can easily be simplified for basic understanding. In essence, virtual payments solve pre-existing security issues that come with having a single number for a credit card. Whereas anyone with access to a traditional credit card’s number can make a purchase with the card, a virtual card payment uses a one-time number for each transaction. Not only does this provide protection against fraud – particularly when it comes to business travel and expense (T&E), but it also allows for transactions to be automatically reconciled after the fact. This saves time and reduces the likelihood of erroneous calculations.
The Reasons Virtual Payment Tech is Thriving
Virtual payment technology has existed for years now, so why is it finally gaining widespread adoption and recognition? There are a number of possible reasons worth analyzing.
“Until recently, virtual payments were rapidly expanding for B2B payments but stagnant for T&E payments. In 2017, we’ve seen a sudden growth in T&E virtual payments due to two reasons,” explains Debra Moss of Acquis Consulting. “First, the technology infrastructure to make a virtual payment seamless for the traveler has caught up with the security, control, and data visibility benefits that are inherent within virtual payments. Second, as more and more millennials enter positions of leadership in these organizations, the overall level of comfort with virtual payment technology increases. All of this points to a future in which virtual payments are commonplace.”
This latter factor is particularly relevant. Millennials are the key drivers of virtual payment adoption and will continue to be for years to come.
“Millennials have some key characteristics that make them especially suited for virtual payments,” brand journalist Nick Vivion says. “This generation went through the Great Recession while facing record levels of student debt. Combine those two events with stagnant wages, and traditional credit-building events such as buying a house are no longer mainstays. This means that many Millennials are not able to qualify for a corporate card – and if they do, many prefer not to carry one.”
From the business perspective, one of the biggest attractions to virtual payments is the tighter control it allows. The buying organization can easily set constraints on single-use, virtual payments that actually limit the specific amount, date, and merchant. This means a business can send a virtual payment to a vendor and the only way the transaction gets processed if it’s filled on the specific request date for the exact amount approved.
From a technology point of view, virtual payments have improved considerably over the past couple of years. Virtual payments provide the ability to capture a wide range of data capture fields. This makes it far easier to understand payments and greatly simplifies reconciliation down the road.
Bright Future Ahead
Thousands of organizations around the world are discovering the benefits of virtual payments, but we’re only at the tip of the proverbial iceberg. It’ll take some more time for peak adoption. The good news is that the future looks bright. Virtual payments have come a long way over the past few months and they’re here to stay. The only question is how the technology will continue to evolve over time. Expectations are high and those in the industry anticipate big things.