Mastercard Drives Digital Transformation With Virtual Cards

In an era where consumer payments have become increasingly seamless, commercial payments have lagged behind, creating inefficiencies for businesses worldwide. 

Mastercard is tackling this challenge through its virtual card networks (VCNs), according to Raj Seshadri, Chief Commercial Payments Officer at Mastercard.

The stakes are substantial, with Mastercard targeting a US$120tn serviceable addressable market for commercial and new payment flows. 

This strategy extends far beyond consumer transactions, with rapid expansion into commercial payments, money movement and bill pay services.

“Virtual cards are very versatile and they're actually core to driving secular shift,” says Raj, who has been with Mastercard for nine years and previously headed the company’s data and services franchise. 

Digital transformation through virtual cards faces significant hurdles in the commercial space. An astonishing 95% of business-to-business transactions still don’t use card networks, instead relying on outdated payment methods.

“We’re targeting that 95% in B2B payments that need to be digitised, streamlined and automated so the data travels with the payment,” says Raj.

A significant portion of these non-card transactions still use cash and cheques. These physical payment methods introduce delays, security concerns and reconciliation challenges for businesses of all sizes.

The remaining transactions occur through ACH and wire transfers, which present their own limitations. “ACH and wires, it's only the money that moves. The data doesn’t move with the money,” Raj notes, highlighting a fundamental problem these legacy systems create.

“The reason we’re so focused on making these payments smarter is because they make businesses stronger,” Raj explains. 

“When you think about a consumer experience today in payments, it's often what you're used to - digital, seamless, secure. That level of ease has not come into commercial payments nearly as much.”

The complexity of business payment workflows creates significant barriers to digitisation. Commercial transactions involve multiple departments, complicated approval processes and various risk management protocols not required by consumer payments.

“In commercial payments, you have a more complicated workflow, processes, different teams involved,” Raj observes. “You’ve got to think about the operations, the various components of risk, more controls, more visibility.”

To overcome these challenges, Mastercard embeds virtual cards into platforms businesses already use, creating an ecosystem connecting issuers, acquirers, corporates and technology providers.

“What we’re doing is assembling the ecosystem and embedding virtual cards into the procurement systems,” Raj reveals. 

“This meets employees where they’re working and ensures the data and payment travel together, bringing that consumer-like simplicity into the commercial world in a way that's appropriate for business needs.”

The business case for virtual card networks

For businesses implementing VCNs, Raj identifies four key benefits that extend well beyond simple workflow improvements. These advantages are driving adoption across companies of various sizes and industries.

First, VCNs significantly reduce processing expenses through automation. When invoices, payments and orders are processed manually, reconciliation becomes error-prone and resource-intensive, especially for high-volume businesses.

With VCNs, finance departments can streamline reconciliation processes since the payment data and transaction information travel together, eliminating much of the manual matching work that traditionally consumes significant resources.

“At the end of the day, the value comes from several sources,” Raj explains. “The more the data and the payment can travel together, the more efficiency you get. You’re not just reducing expenses but fundamentally transforming how finance departments operate.”

Second, virtual cards enhance security through programmable controls that traditional payment methods cannot match. 

This capability addresses a critical pain point for many businesses, particularly small enterprises.

These business payment controls allow companies to set limitations on card usage, providing a level of security that physical cards simply cannot match.

“Business owners, especially at the smaller end of the spectrum, are reluctant to give cards to their employees,” says Raj. 

“With business payment controls, I can put constraints on where employees might use it, what they might use it for, when they might use it – all while still getting the efficiency benefits of digital payments.”

Third, VCNs help organisations optimise working capital by better aligning payment timing with contractual terms. In today’s volatile economic environment, this benefit has become increasingly significant.

“If you can match payment terms better and leverage contractual terms better, you actually can reduce working capital for buyers and sellers,” Raj continues. 

“Given today’s rate environment, working capital is precious for everyone from small businesses to large corporates.”

Finally, virtual cards deliver a more intuitive experience for employees, addressing the growing expectations gap between consumer and business payment systems. 

As new generations enter the workforce, this user experience factor becomes increasingly important.

“With another generation of employees entering the workforce that are used to incredibly seamless consumer experiences in their personal lives, they come to work and the expectation is that they’ll get the same thing,” Raj notes. “Meeting their expectations is another key benefit.”

Mastercard’s approach: Global platform, local solutions

Mastercard delivers VCN technology through a strategy that balances standardisation with customisation. The company develops global platforms that can be adapted to specific regional and industry requirements.

“The way I describe Mastercard is we have global scale and local relevance,” Raj says. “We build at scale, but then we deliver it locally through partnerships and relationships that bring ecosystems together.”

The virtual card platform is a prime example of this approach, providing consistent core functionality while accommodating the varying needs of different markets and industries. 

This flexibility allows Mastercard to serve diverse business environments effectively.

This strategy becomes particularly powerful when applied to complex situations with multiple stakeholders. 

In one notable example, Mastercard has developed a solution for consumer packaged goods (CPG) distribution to small and medium-sized enterprises (SMEs) in cash-dependent economies.

“A good example might be CPG distribution to SMEs,” she explains. “We provide a virtual card in an app to the SME so that when the truck with the beverages pulls up, they can actually use the app to pay. Even if they don't have cash, the bank can lend to them so the inventory is unloaded.”

This solution involves coordinating multiple participants: the CPG company, distributors, small retailers, financial institutions, and technology providers. Mastercard’s platform connects these diverse players into a functioning ecosystem.

For the small retailer, maintaining consistent inventory is critical to business success. For the distributor, reducing failed deliveries improves operational efficiency. 

For the bank, it creates lending opportunities with clear repayment paths.

“You've brought that SME into the financial ecosystem while also digitising the process,” Raj continues. “And the secret sauce there is a virtual card in a digital environment that makes all of that happen.”

The future of virtual card networks across industries

The travel sector has led VCN adoption, but Mastercard’s vision extends much further. The company is strategically expanding into industries where complex payment flows and supply chain relationships create friction that virtual cards can address.

“Travel is a clear first mover,” Raj reveals. “We have a pretty good share of the travel industry because of our innovation. But now we’re targeting other verticals where there might be supply chains. In this day and age with supply chains getting disrupted, this adds a lot of value to any business that has supply chains or logistics.”

The focus on supply chain-intensive industries is strategic. These sectors typically involve numerous payment transactions between multiple parties, often with specific documentation requirements for each payment.

Beyond travel, Raj specifically mentions several industries beginning to adopt VCN solutions: “Trade, transportation, CPG and pharmaceutical distribution to small retailers, and B2B marketplaces.” Each presents unique challenges that can benefit from the technology’s flexibility.

As supply chains face increasing disruptions, the ability to maintain visibility into payments and their associated data becomes increasingly valuable. 

Virtual cards provide this visibility while streamlining processes across complex business ecosystems.

The data generated through these transactions provides another layer of value. Mastercard has invested significantly in AI capabilities to enhance its payment services.

“We say VCNs are like a secret weapon,” Raj explains. “Mastercard has been in the AI space for a couple of decades now, and we have amazing data – really clean, really good datasets. We are already using a lot of data and AI, whether it’s traditional machine learning or agentic AI or Gen AI.”

This combination of payment functionality and data analytics creates opportunities for future innovation. As AI capabilities advance, Mastercard can extend the capabilities of its virtual card platform to address evolving business needs.

The company’s pilots and implementations are already generating significant interest across industries. As businesses recognise the efficiency gains, cost reductions and working capital improvements, adoption is expected to accelerate.

“We have a number of pilots that are up and running and some use cases that are in production,” Raj shares. 

“When you think about the control VCNs provide to buyers and suppliers, when you think about liquidity management and real-time data transport – it’s one of these situations where the folks using it see immediate benefits. Embedded finance is the way to go, and embedded payments is key to that. And the VCN is key to embedded payments.”

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