Mastercard Transforms B2B Payments With Virtual Cards

Virtual card networks (VCNs) represent a significant opportunity to revolutionise business-to-business payments, an area that has traditionally lagged behind consumer transactions in terms of digitisation and efficiency. 

Mastercard has identified this technology as a cornerstone of its commercial payments strategy.

The scale of the opportunity is staggering, according to Raj Seshadri, Chief Commercial Payments Officer at Mastercard. "Of the US$80tn commercial payments market, US$77tn does not go on card today," she tells FinTech Magazine in exclusive comments. "It goes through some fairly antiquated processes that use cash and cheque and ACH and wires."

From traditional payment methods to VCNs

These traditional payment methods create friction in business operations. Cash and cheques carry inherent security risks, while ACH transfers and wire payments fail to transmit essential transaction data alongside the payment itself. 

This disconnect creates reconciliation challenges and operational inefficiencies.

VCNs address these problems by embedding payment capabilities directly into the platforms businesses already use. Rather than requiring companies to adopt entirely new systems, Mastercard's approach integrates with existing procurement, ERP and expense management solutions.

"What we're doing is assembling the ecosystem of issuers, acquirers, corporates, platform providers, and bringing them together," says Raj. 

"The goal is to bring that consumer-like simplicity into the commercial world, but the way you have to do it is a little different than in the consumer world."

For businesses of all sizes, the benefits extend well beyond convenience. Operational costs decrease significantly when payment data travels with transactions, eliminating manual reconciliation processes that drain resources and introduce errors.

Security enhancements represent another crucial advantage, particularly for small businesses. 

Traditional approaches to commercial cards often create unnecessary risks when employees need access to company funds.

"Business owners, especially at the smaller end of the spectrum, are reluctant to give cards to their employees," Raj reveals. 

"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—while still getting the efficiency benefits."

Working capital optimisation through digital transformation

Working capital management has become a critical priority for businesses navigating economic uncertainty. Traditional payment methods often lock up capital unnecessarily or fail to optimise payment timing based on contractual terms.

"In addition to reducing expenses and enhancing security, VCNs also free up working capital," Raj explains. "If you can match payment terms better and leverage contractual terms better, you actually can reduce working capital for both buyers and sellers."

This optimisation becomes particularly valuable in industries with complex supply chains or extended payment cycles. By digitising the entire transaction process, companies gain visibility and control that manual systems cannot provide.

The travel sector has been the first major industry to embrace virtual card networks, but adoption is rapidly expanding. Mastercard is strategically targeting industries where payment friction creates significant operational challenges.

"Now we are taking it to other verticals where there might be supply chains," Raj reveals. "In this day and age with supply chains getting disrupted, VCNs add a lot of value to businesses in trade, transportation, CPG and pharmaceutical distribution to small retailers, and B2B marketplaces."

These industries share common characteristics: complex buyer-supplier relationships, high transaction volumes, and significant data requirements for each payment. Virtual cards address these challenges by carrying both payment and essential transaction data.

Mastercard's implementation strategy balances standardisation with customisation. The company has developed a proprietary global platform that generates virtual cards, while allowing for specialised applications tailored to specific industries and regions.

"We have global scale and local relevance," Raj says. "The engine that generates the virtual card is global at scale, but the application is local to a particular use case. That's the beauty of virtual cards and the potential they provide."

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