Reshaping Commercial Payments for B2B and Business Travel: Discovering Insights

In the era of borderless commerce, commercial payments are undergoing a profound transformation, influenced by factors such as the fusion of personal and professional payment experiences, the digitization of payment methods, and the need for faster, more efficient transactions, as highlighted by The Fintech Times. Global commercial payment transactions soared past the $108 trillion mark in 2022, with a projected compound annual growth rate of 7.5 percent, setting the stage for a staggering $135 trillion market by 2025. As businesses prepare for a post-pandemic resurgence in travel, there is growing recognition of the necessity to modernize business travel payments for greater efficiency and control in the new world of corporate mobility.

Traditional payment methods, including cash and checks, continue to maintain a stronghold, accounting for more than 20 percent of total commercial payments in various regions. Surprisingly, 73 percent of small and medium-sized enterprises (SMEs) still rely on cash to settle their business expenses, highlighting a noteworthy contrast in payment methods.

Discover® Global Network, a global payments brand, and Euromonitor International, a research company, have jointly unveiled crucial insights into the commercial payments industry. Their research, comprising 30 interviews with upper management at large businesses across 16 countries and feedback from 1,800 B2B survey respondents, reveals a spectrum of challenges faced by large corporations in managing commercial payments.

One of the most pressing challenges for large businesses is the management, payment, tracking, and reconciliation of supplier payments, which significantly impacts various aspects of organizations, including procurement, accounts payable, and travel expense functions. Decision-makers are actively seeking improved commercial payment solutions capable of delivering operational efficiencies, seamless integration, cost savings, and enhanced peace of mind.

A key catalyst for change has been the convergence of personal and business payment experiences. Younger, digitally native business managers are bringing their consumer-oriented expectations into the B2B realm, leading to a demand for more efficient, streamlined, and intuitive digital payment management tools.

Virtual Card Numbers (VCNs), single or multi-use digital payment forms tied to a spend account or line of credit with specific spend controls, have emerged as a crucial component in addressing the demands of both business travel and B2B payments. VCNs offer multiple benefits, including enhanced security and the ability to create rules for usage tied to date, merchant category codes, or fixed amounts, providing better control over spending.

Over the past year, VCNs have solidified their position in the market, primarily due to API integrations between networks, issuers, and commercial VCN management providers. This transformation offers significant advantages, such as simplified reconciliation processes, improved expenditure visibility, and greater control over spending, empowering businesses and their traveling employees to conduct transactions with increased efficiency and effectiveness, streamlining financial operations, and facilitating smarter financial decision-making.

Dan McKenzie, senior product manager at Discover Global Network, stated that VCNs are at the forefront of «consumerizing commercial payments.» He emphasized the trend of minimizing the gap between personal and work-related payment expectations, particularly in the travel space, where VCN usage has seen steady growth, modernizing quickly in partnership with fintechs and travel management companies.

In the past year, VCNs have become more user-friendly, offering businesses and travelers greater control over seamless business-related purchases, rivaling or even surpassing personal payment experiences in terms of ease and convenience. VCNs also present an opportunity to streamline and enhance the payment experience within the complex world of hotel bookings, pre-authorizations, additional charges, and check-in processes.

Looking ahead, the future of business travel holds exciting prospects, not only for large organizations but also for small and medium-sized businesses (SMEs). While 73 percent of SMEs still rely on cash for business expenses, 49 percent plan to invest in commercial payment solutions in the future. A similar trend is observed among large businesses, with 53 percent planning to increase their use of digital payment methods, including VCNs, for managing business travel in the next 12-24 months.

According to McKenzie, the concept of virtual card numbers is becoming more mainstream due to their user-friendly nature, reporting and reconciliation assistance, and advanced integration capabilities. As the VCN product continues to evolve, there will be a growing focus on specific verticals, such as the hotel industry, where opportunities abound for enhancing the VCN experience due to the fragmented nature of booking hotel rooms, pre-authorizations, additional charges, and check-in processes.