Fintech Unicorn Divvy, a Payment and Expense Management Platform, Reveals that Virtual Cards are Becoming Widely-Adopted

Divvy, a modern payment and expense management platform for businesses, which notably secured $165 million through its Series D funding round, notes that as businesses have started moving away from legacy spending methods such as ACH or paper checks, the virtual credit card has become more widely adopted.

Divvy writes in a blog post that it will be reviewing the recent state of virtual cards for businesses in 2020.

The Divvy team explains that when we get a new credit card for our company or business, we usually get a single 16 digit number that’s found on a piece of plastic. With virtual cards, however, you are able to create as many unique or different card numbers as you need and they “exist only digitally,” Divvy noted.

They also mentioned that each unique 16 digit virtual card number may be used for “one-time” or recurring purchases “without exposing the original physical card data.” By creating and issuing a completely new virtual card number, your business “gets better security and control,” Divvy claims.

Although physical credit cards still have their place when it comes to monetary transactions, the trends indicate that virtual cards are rising in popularity, Divvy revealed.

The company pointed out that at the beginning of last year, physical cards were still “favored” or preferred for the majority of financial transactions. But when COVID-19 hit in March 2020, virtual card usage surged to around 50% of business credit card transactions, Divvy noted. Since that time, virtual cards have “maintained the majority usage,” Divvy claims.

Divvy continued:

“Year over year, the use of Divvy virtual cards increased by 283% in 2020. While virtual card usage was already on the rise, the move to remote work necessitated by the coronavirus crisis had a major impact on this shift.”

The Fintech firm further noted:

“When we compared physical vs virtual card data for 2019, we found that the usage varied by the merchant. For example, Google Ads purchases were made almost exclusively with virtual cards, while hotels were still booked more often using physical credit cards. As business travel purchases decreased significantly in 2020, the rise in virtual card usage could also be a result of the changes in the types of purchases that were made (due to budget adjustments). Perhaps businesses were not only making purchases remotely, but were purchasing digital items (like software) more often than they were purchasing things like hotel reservations.”

With Divvy virtual cards, clients are able to create one-time use “burner” cards or recurring subscription cards as well. Burner cards are usually utilized for single-use budgets or those “one-off projects.”

Divvy also mentioned that of the virtual cards created last year, just 1.5% were “one-time” use. The majority of Divvy clients used virtual cards for “ongoing” purchases and managing recurring bills (such as monthly utilities or SaaS subscriptions), the company revealed.

According to Divvy, using virtual cards to make payments to certain vendors or manage subscriptions helps people with planning their spend—tracking each payment in “real-time” and seeing which budgets are actually recurring on a monthly basis.

Divvy research reveals that  virtual card payments “tend to be made to digital vendors, but there are also outliers.”

The company explained that to track down the major vendors for virtual card payments during 2020, they started by grouping “like purchases” under the “cleaned” merchant name and then “ranking them by transaction count.” (For instance, “Amazon” purchases would “include both Amazon Web Services and Amazon Marketplace”).

The top vendors that paid for using virtual cards were what you would typically identify as the leading vendors for any corporate card purchase, Divvy confirmed. As expected, they included Facebook, Amazon, Google, PayPal, and USPS.

Divvy added that given how much (and how often) companies may be spending on Facebook and Google Ads, these contenders did not “surprise” them too much. Divvy did note, however, that they were “surprised” to see USPS in the list—because it’s usually “thought of as a non-digital vendor.”

Divvy also noted that they decided to remove the “cleaned” merchant grouping and “found the results varying a bit more.”

Although the Divvy team had been expecting Amazon and Zoom to be listed in the “top digital vendors from 2020,” USPS was a new contender. Divvy further noted that USPS purchases (which includes stamps, change of address, and Click-N-Ship) showed up on numerous occasions in their top vendors for “virtual card purchases.” In 2019, USPS did not show up “anywhere” on their list of purchases made using virtual cards, Divvy revealed. The company added that “perhaps the post isn’t the first thing you’d think of as being impacted by the Coronavirus, but our data shows that the move to remote work impacted the way businesses manage their mail.”

(Note: for more details on virtual card payments trends, check here.)

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