Visa and Mastercard disrupt B2B payments with prepaid card expansion in 2023

 

The B2B payments industry has been growing rapidly over the last few years, and the trend is projected to further continue from the medium-term perspective. This has resulted in growing competition in the space, with many new firms entering the market with their innovative business models. In Europe, for instance, buy now pay later providers are turning their focus to the B2B segment. Over the last 12 months, the B2B BNPL scheme has gained popularity not only among businesses, but venture capitalists are also foreseeing strong growth opportunities in the sector.

Going forward, the B2B BNPL market is expected to gain momentum in other regions as well, threatening the growth of traditional payment models. One of the major reasons that the BNPL scheme is making quick rounds in the B2B sector is its ability to offer convenience and flexibility at a time when businesses are facing macroeconomic pressures. Rising inflation and a potential recession are expected to further aid the adoption of such B2B payment solutions among businesses of all sizes.

Amid the growing competitive landscape, Visa and Mastercard are both seeking to disrupt the B2B payments category through the rapid expansion of their innovative prepaid card offerings worldwide.

·         In June 2023, Visa entered into a strategic partnership with Karbon Card, the B2B payment solution provider in India. As part of the collaboration, the two firms launched a prepaid card aimed at small and medium-sized businesses. The prepaid card solution, which provides 1% cashback on all spends, will enable businesses to pay bills on Google, Swiggy, Ola, Amazon, and other platforms. In the first 12 months of the product launch, Karbon Card is expecting 5,000 businesses to sign up for the service in India.

·         Visa, in May 2023, also entered into a collaboration with Arab Financial Services in the Middle East. As part of the alliance, the two firms have launched a prepaid card solution for small and medium-sized businesses in Oman and Bahrain. The collaboration is expected to pave the way for digital merchant settlements through prepaid cards.

Going forward, PayNXT360 expects Visa to enter into more strategic alliances with payment firms worldwide. Notably, Visa is not the only one targeting growth in the B2B prepaid card category. Mastercard, the American payment rival, has also adopted a similar strategy over the last few quarters.

·         In January 2023, Mastercard entered into a strategic partnership with Tradeling, the Middle East and North Africa-focused B2B e-commerce provider. As part of the collaboration, Tradeling customers in the MENA region using Mastercard prepaid, debit, or credit cards are able to redeem a 5% discount on all of their purchases. With around 66% of the Tradeling clients being small and medium-sized enterprises, this collaboration is expected to drive payment volume and value for Mastercard from the short to medium-term perspective.

·         In another collaboration with Malaysia-based payments firm Instapay, Mastercard announced the launch of prepaid cards targeting small and medium-sized businesses. The strategic alliance, announced in October 2022, will enable businesses to better manage their finances by offering real-time updates on budgets. The Glyd Prepaid Corporate Card has been made available in both physical and virtual formats, enabling businesses to distribute the cards among their employees more conveniently and across Malaysia.

In Malaysia, Mastercard also forged alliances with Wibmo and MobilityOne in May 2023. The collaboration led to the launch of another Mastercard-powered prepaid card offering in the Southeast Asian market. However, this prepaid card offering is not just limited to the B2B sector. It also focuses on the consumer market. The rapid strides in the Malaysian prepaid card industry come on the back of high growth. According to PayNXT360 estimates, the market is expected to record a CAGR of 13.5%, increasing from US$6.06 billion in 2022 to reach US$11.63 billion by 2027.

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Going forward - like Visa - Mastercard is also expected to keep expanding its B2B-focused prepaid card offerings in the global market from the short to medium-term perspective. Notably, these payment giants have been launching a number of different payments-related products, including those that are focused on cryptocurrencies.

Mastercard, for instance, forged alliances with Binance, Bit2Me, Bitso, and Bybit to launch crypto-linked prepaid cards in markets like Brazil, Spain, and Dubai. Visa, on the other hand, forged strategic partnerships with Gate Group and Wirex to launch similar offerings in the global market. As the adoption of cryptocurrencies continues to grow in the global market, both Visa and Mastercard are expected to forge more such alliances worldwide going forward in H2 2023.

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The decline in consumer spending owing to higher inflation and subsequent surge in product prices resulted in a significant dent in consumer-focused payment value and volume for both Visa and Mastercard in 2022. As a result, the two payment giants have been on their way to diversify their presence and launch other payment use cases in the global market, to aid their revenue growth. The crypto-linked and B2B-focused products are a part of this strategy, as both firms seek to accelerate their revenue growth over the next three to four years.

Having said that, the rapid strides made by B2B BNPL products in markets like Europe is a worrying sign for other B2B payment providers. The shift towards flexible payment offerings in the form of BNPL is expected to keep continuing in the short to medium-term perspective, as a result, will have an impact on the revenue growth of B2B-focused payment firms going forward.