Citi Launches Multicurrency Virtual Card With MasterCard

Citi (New York) has partnered with MasterCard (Purchase, N.Y.) to launch a virtual card product for its treasury clients.

Citi Virtual Card Accounts is designed to provide institutions with greater security, flexibility and control. The new service generates unique "virtual" card numbers for transactions, allowing administrators to dynamically set spending and reconciliation controls on each virtual card account.

Paul Simpson, Citi's global head of treasury and trade solutions, says this can all be done in real time. "Corporates are able to control procurement on a real-time basis," he tells BS&T. "That one-time number can have specific details associated with it. For example, someone might have transaction approval to buy an item, but only from an approved merchant."

The key with a virtual card account is that businesses are enacting these spending controls before a transaction is made, versus after-the-fact, as is the case with physical purchasing cards. "[Virtual Card Accounts] provides a more centralized approach for managing procurement," he explains. "It's a more efficient means to monitor what you can buy and how much. You do this all before the fact."

But what really makes Citi Virtual Card Accounts stand out is its global, multicurrency capabilities, something made possible due to Citi's large footprint in the card space. "This is a huge differentiator for us," Simpson says. "There are some similar products available but they are usually for an individual currency. We can issue cards in 48 countries. This is like an extension product for us."

Aite Group's (Boston) Nancy Atkinson, a senior analyst, agrees that Citi has an edge with its multicurrency approach to a virtual card. "What is unique about Citi's offering is the ability to issue and settle in local currency," she says. "Generally, virtual card offerings are based on USD transactions. For multinational companies, being able to make purchases in local currency in nearly 50 countries is very useful."

What's also different about Citi Virtual Card Accounts is the role of MasterCard in this current venture. It will be running in part on the card company's inControl platform, technology gained through its acquisition of Orbiscom this January, says Michael Fiore, VP, emerging solutions development, with MasterCard. "inControl is powering the virtual card number and controls but it is integrated with Citi's MIS tools."

Simpson emphasizes that Citi is a dual card issuer, working with Visa as well. However, it chose MasterCard for the virtual card product because Citi felt its technology was a perfect fit, according to Simpson. "It gave us the ability to do this quickly and globally," he says. "MasterCard has been a great partner."

The system is Web-based and operates via the same front end Citi uses for its card business. "It ties in with our overall treasury/cash management offering," Simpson explains.

Clients generate a unique virtual card number and assign custom reference data for each transaction to facilitate the reconciliation process. According to a release, Citi Virtual Card Accounts are a secure, electronic solution for post-invoice payments and "card-not-present transactions" made via the Internet, phone or mail order. They can complement an organization's existing commercial card program to better manage recurring business.

MasterCard's Fiore says these numbers don't necessarily need to be unique every time either. The solution gives corporates the ability to assign the numbers based on particular departments, merchants or transactions.

"Virtual cards are the future for commercial 'cards,'" notes Aite Group's Atkinson. "Their flexibility and controls for corporate procurement managers make them extremely appealing in helping to enforce consistent procurement policies. Again, multinational companies will find this offering convenient, secure and a great assist in managing companywide spend."

MasterCard has engaged in other virtual card ventures, such as one with Edinburgh-based Royal Bank of Scotland that is targeted for use in the UK market. Citi's approach is different in that it is taking the multicurrency route, says MasterCard's Fiore. "Overall, there is a movement to virtual cards. The traditional legacy approach to corporate spending with cards has been limited in that you can't control the spending beforehand. The purchase size for things put on P-cards has barely been tapped into because of limitations on preauthorization. It didn't always make sense to use plastic."

Another challenge with commercial cards is whether they are a liability for the company or the employee, notes Aite's Atkinson. "A benefit of virtual cards is that they are definitely a liability of the company, but with the advanced controls to prevent fraudulent use," she says.

Plus, virtual cards open new capabilities to capture corporate spend, Fiore comments. "Financial institutions will have more relevance to corporates than they did with traditional P-cards."

Citi is banking on the success of this product. "Virtual Card Accounts will be one of our most prominent new products and should grow significantly over the next three to five years," says Simpson. "A key for our clients is the real-time ability to control and deploy this globally and consistently. This is what we've heard from them as something that can be a differentiator for Citi."