AmEx (AXP) and Coupa Pay Extend Virtual Cards Usage in U.S.

American Express Co. AXP is extending the usage of virtual cards in the United States, in collaboration with Coupa Pay. Both the companies have been in partnership since 2019, and have been providing virtual card services in the U.K. and Australia.

The easy acceptance of these cards in these regions has prompted the companies to tap the U.S market. Unlike a physical card that can be used over and over again, a virtual card is a unique 16-digit card number that's created solely for a single use between a payer and a payee.

The numerous benefits that it provides over physical cards make it an attractive option for easy payment. It can replace out-dated and cumbersome paper checks and the associated manual-process inefficiencies. These cards provide much more security than physical cards, since the 16-digit card number is unique for each payment and is for single use only. Since the card is not physical, it cannot be stolen or re-used. The card also expires once the maximum amount available on it has been spent.

The payment space was already shifting to digitization and the outbreak of COVID-19 has only accelerated the whole process, with e-commerce gaining prominence.

Via the virtual card, American Express will be addressing the easy payment need for businesses that have suffered huge business hit due to drying up of demand from consumers on account of the coronavirus outbreak. This has left the businesses cash strapped and therefore, instant payment settlement with the help of virtual cards can get the wheels of their businesses moving once again, with operating conditions improving gradually.

Either paying to their suppliers or employees, the virtual cards can replace the existing fragmented and manual business payment process of businesses. This can make every transactional step in the business spend management process smarter and simpler. Also, businesses are eager to adopt these cards and thus, the number of companies making the move to virtual cards for payment processing will only increase in the times to come.

A new report from Juniper Research found that the value of transactions processed by virtual cards will more than treble over the next five years, increasing from an anticipated $1.6 trillion in 2020.

American Express’ expanded partnership with Coupa reflects its strategy to deepen its footprint in the B2B payments space to better serve customers and offer the best possible digital payment solutions. The global B2B payments market value was $125 trillion in 2019. According to ResearchAndMarkets.com, the global digital B2B payments market has observed stable growth in the past few years and the market is further expected to rise at a staggering rate during the 2020-2024 forecast period.

Growth in the global digital B2B payments market will be bolstered by a host of factors like expanding real-time payments, increasing adoption of cloud-based solutions, escalating smartphone penetration, emerging B2B e-commerce industry, swelling business process automation, rising urbanization, growing cross-border payments, etc.

This expanding B2B payment market has caught the attention of other companies such as Mastercard Inc. MA, which is trying to get a market share via the Mastercard Track program, and Visa Inc. V, which is also trying the same via the Visa B2B Connect payment network.

American Express carries a Zacks Rank #4 (Sell), currently. The stock has gained 22% in six months’ time compared with the industry’s growth of 24.8%.

A better-ranked stock in the same space is Envestnet Inc. ENV, which holds a Zacks Rank #2 (Buy), at present. The company surpassed earnings estimates in the last reported quarter by 25.5%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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