Mastercard's Marc Pettican on the road to a $17.4 trillion virtual card market

Speaker A: M account payable and account receivable departments have lots of friction. Invoices chase four or five times, payments late more than 30% of the time and credit control teams that can run 20, 30, even 50 people deep and at a mid sized corporate. Virtual cards were built to address exactly that problem and the growth numbers show it spend is projected to hit $17.4 trillion by 2029 according to Juniper Research. Today I'm joined by Mark Pedican, global head of corporate solutions at MasterCard who spent decades working both sides of the payments ecosystem from the merchant acquiring side to leading commercial cards. We get into what's really driving virtual card growth beyond the Macro tailwinds, how MasterCard balances network economics between buyers and suppliers and the build versus partner calculus behind expanding from travel into verticals like fleet and logistics, healthcare, insurance and marketplaces. We also dig into embedded finance and the challenge of staying visible in the stack even as payments become invisible to the uh, end user. Plus, where MasterCard sees its right to win in agentic payments, account to account transfers and stablecoins, Mark closes with his advice for commercial cardheads at mid sized banks over the next 12 months. Here's our show. Great Mark. So who are you and what do you do?

Speaker B: Yeah, hi and thanks for having me. Zach? Uh, yeah, my name's Mark Pettican. I'm the global head of corporate solutions for MasterCard. What does that mean? Uh, my role is to help build out our B2B payment capability. So my customers are the financial institutions but we're helping them solve uh, the challenges, uh, and the problems that their corporate customers face on re engineering their account payable and account receivable processes.

Speaker A: Well, welcome to the tearsheet podcast, Mark.

Speaker B: Thank you, thanks for having me.

Speaker A: So I want to start first with your background. Um, you come Visa, uh, um, not visa obviously, MasterCard but via Barclay, um, card payments and on the issuer side. So I'm curious how that informs your work with your corporate clients now.

Speaker B: Yeah, sure. I mean I've spent uh, many decades in both banking and payments, sort of the last two decades largely in payments, serving on both sides of, of what I call the ecosystem. So I spent a, a uh, high degree of my career in the merchant acquiring side of the ecosystem, representing large retailers, loads, hoteliers, travel firms, airlines, so on and so forth. Uh, and then more recently I led the commercial card business, uh, helping customers uh, re engineer their account payable processes, uh, but with a heavy dependence on the acceptance side of the ecosystem. And that's something that I've brought into MasterCard is to ensure that we build out an equal sided uh, ecosystem where we have buyers and suppliers across our network re engineering the processes that quite often have existed uh, in organizations for 50, 60, 70 years. So I'm um, a bit of a self confessed payments geek unfortunately some of

Speaker A: the best people I know are. So I want to talk about the growth in virtual card volume and I'm curious from your perspective what's driving that? Is that like a rising tide lift all boats type number? Um, or is there cannibalization from existing like plastic?

Speaker B: We look as a mixture and we within MasterCard have been in virtual cards now for over a decade and have been continuing to uh, innovate in that space. Uh, I think when you look at the genesis of virtual cards it largely started in the travel sector but more and more in recent times we've seen the use cases grow into more broader B2B procurement. Virtual card spend now I think is projected to be somewhere in the region about 17.4 trillion by 2029 according to Juniper Research. So we're seeing significant growth. What's it driven by? Um, it's driven by and I think the current climate we're in further exacerbates it. You've got lots of macroeconomic challenges that are hitting corporate clients. That creates working capital and cash flow challenges. You have organizations that have got uh, processes that need to be automated. Uh, if you've ever been into an account payable or account receivable department you will be met with a mountain of paper typically.

Speaker A: I wouldn't wish that on my enemies.

Speaker B: Yeah, yeah. I mean organizations are trying to take cost out. Um, they're trying to get access to working capital. They sometimes have trust in buyer, supplier relationships, sometimes they don't. Obviously the virtual card capability gives you a high degree of control. It certainly helps with fraud. I mean there's not a lot of fraud in non virtual cards in the commercial world. But actually we see five times less fraud in virtual cards. So the control lens is very high. And so I think at the moment we've got a lot of CFOs and heads of procurement teams that are trying to re engineer their business. Uh, and that's increasing the use cases and increasing the take up. And I think that 17.4 trillion predicted flow by 2029 speaks volumes.

Speaker A: And having sat on different sides of the table, I'm curious how you make sure that aligning network economics, uh, align with servicing your customers. Well, like is that an easy thing to how complicated or um, yeah, yeah. Can you unpack that?

Speaker B: The value case is really strong on both sides of the ecosystem. You know, from a, from a buyer perspective and the, and the financial institutions that we work with, you know, that access to affordable working capital is highly valuable to the buying community because if you think about the way buyers typically want to make payments to suppliers, they typically want some kind of credit capability. Either the suppliers affording that or the virtual card supplying that. And that enables them to access early payment discounts or perhaps spend to a greater degree with that supplier than they would normally if they were using their own cash. On the supplier side, there's a lot of cost associated with account receivables. You know, if you go into any mid sized corporate, you will quite often see that they've got uh, 20, 30, 40, 50 credit controllers who are uh, chasing payment on a very regular basis. You know, we talk to some customers and they'll tell us that they're chasing each invoice up to four or five times. They'll tell you that payments can be late on average over 30% of the time. You know, bad debt then can be material in basis points terms. And so by taking a card up front, uh, you actually compress that. You reduce the need on those credit control, you're getting the money in quicker. And therefore if you're an organization that's got high margins, you can make that work. You can make that money work for you. So we can solve on both sides. What we are doing though is we recognize that the economics don't work in every vertical each and every time. So we've created uh, a model where we have flexible economic models where buyers and suppliers can basically agree the terms and then can transact accordingly. And that's getting some really interesting pickups. So I think the message I would say to you is flexibility is key because we operate in many, many industry verticals, uh, and it cannot be one size fits all.

Speaker A: Got it. And one of the things we talk about on this podcast a lot is embedded finance. Um, the fact that they call it invisible payments or embedded payments. And I was thinking as I was preparing to talk to you today that I guess you similar issue that banks have. Banks typically, um, are afraid of becoming what we used to call like dumb pipes and being relegated to the background. Um, but when you have a virtual card in some way that becomes also invisible within an ERP system or whatever, I guess, how do you ensure that MasterCard for sure gets the value that it provides in the relationship, but also stays visible enough where it's clear that uh, you are playing in that market.

Speaker B: Yeah, I mean embedded finance is about ensuring we're uh, enabling our capabilities to be an ingredient in the overarching technology stack that our customers, customers the incorporates are using. Uh, and for us to sort of reach any kind of scale, it's important that we're in that workflow and our customers have told us that. I think the value that we add is the enhanced controls is significant, the enhanced data that we can bring to uh, a discussion and therefore the overlay of insights. And so we really create value through that fraud controls, data and insight capability. And then look, frankly, our network, the MasterCard franchise, is built on that. We create a network where we connect parties and we're that trusted layer in the middle where people know their money's safe. Uh, and we're that known brand. And obviously, you know, the MasterCard brand is one that travels to many, many countries. You know, we're in many countries from a consumer brand, but you know, in my business we operate in 43 countries, 174 currencies. That's what you get with a MasterCard brand.

Speaker A: Uh, and you just mentioned the word travel. That was going to be my next question. Like you have expanded beyond the travel category. Can you talk about, I guess, how you determin like a horizontal expansion and where you decide to build versus partner?

Speaker B: Yeah, sure. Look, partnering is critical. Uh, I'll come back to that in a moment. I mean what we've done is we continue to put a lot of effort into the travel vertical and we will continue to do so. That is an incredibly important vertical for MasterCard and long may that continue. What we've then done is we've stepped back and said which are the verticals that we believe have um, the most pain points when it comes to an AP and ar? Where is there people that are often chasing payments or they're needing to make payments before they've had the money in themselves? Where are we seeing big friction in the ecosystem, lots of reconciliation challenges. Uh, and there are a number that are beginning to emerge into our foresight. One is fleet transport logistics, which has a lot of similarities to the travel vertical itself. But we are putting a significant amount of effort, energy and money and resource into the fleet transport logistics vertical. Healthcare is another one. There's a lot of money movement within the vertical of health care. Whether that's between, uh, you know, medical providers, insurers that are operating in that space. So that's another one that we're leaning in heavily to. Uh, another would be insurance. Uh, you'll probably know the insurance vertical there still remains a lot of paper and checks in that system. Uh, and the insurance industry is calling out to us to help re engineer the ecosystem. Uh, and then things like marketplaces is another, obviously a growing vertical generally, but there's a lot of movement when you think about, um, how does the marketplace pay its end suppliers, how does it play? Maybe the gig economy that's operating around the marketplace, how do they think about paying their own suppliers? So those are some of the verticals that we're really digging into. And we've done that analysis by understanding the vertical at a deep level. We've often actually hired people from those industries to really get under the bonnet of the pain points. And I think that's the thing we're trying to make sure that we're doing in the products that we build. We're solving real customer pain points. Uh, ah, And I think that's what we're trying to make sure is that the products we take out to the market, that we've got a high residency with our customers and their customers in turn.

Speaker A: As you look to expand beyond travel, um, did you look for these other verticals that you just described as ones that maybe had certain shared characteristics that travel had? Do you think of it in the sense?

Speaker B: I think we started there fleet transport logistic was undoubtedly a natural extension. I think what's really interesting in this ecosystem, and you mentioned partners. Partners are critical, uh, in this. We can't do all of this ourselves. As MasterCard, we are very clear where we play the role we have, where we have a right to win, I call it. But there are very specific software as a service solutions that operate in industry verticals. Um, if you take the travel, you have very big players who I won't mention by name, but who operate in the travel vertical. It's important that again, we have partnerships with these organizations where we embed our capability into their overarching technology stack that is relevant for the travel sector. But I think what's been interesting, as you pull the threads on verticals, you start to see opportunities. And look, my, my friends will tell you I bore them sometimes down, uh, the local restaurant, old pub, where I tell them that, you know, the beauty of the role that I have is I can talk to pretty much every industry because everybody has an account payable and everybody has an account receivable. Even Tearsheet will have people that owe them money. Uh, and therefore you should be a customer of ours.

Speaker A: Zach, we're busy Chasing that invoices as well.

Speaker B: There you go.

Speaker A: Um, I want to switch to Agentic. It's a topic that's cut across a lot of our coverage over the past year. Um, and I'm curious, one of the issues, And I think MasterCard is in the thick of it here, um, when you begin to think about Agentic, a lot of the early discussions are like, well, who's responsible for the payment at the end of the day? Um, can you at least I guess maybe start with what you guys are doing in Agentic, how you're thinking about it from a virtual card perspective? Um, yeah. And maybe how you think about working some of those details out.

Speaker B: Yeah, sure. So you'll see, uh, well, you'd have seen that obviously MasterCard we announced over a year ago now, Agentic pay, Agent Pay rather, which you know, obviously enables our cards to uh, to be used, uh, you know, in the context of agents. I'm pleased to say that we've done all of the testing and deployment of our commercial cards which are all Agent Pay ready. So that's, you know, what we have been doing for us within MasterCard, it's about building the, you know, the rules, the trusted layer for basically two parties still to have, you know, the trust in the integrity of how, you know, the agents are working and the payments that they're making. We see this as a very exciting part of the ecosystem. Uh, and what we need to do is help our customers, the FIs to navigate through that, ensure there's interoperability, but most important, ensure that we provide the network and the trust layer that, you know, our customers have enjoyed for the last 60 years, you know, with, with the business as usual business. But how do we adapt and evolve and, and certainly in the conversations I've been having with uh, financial institutions, I would say every single conversation is ultimately coming back to the role that AI will play, the role that AgentIQ will play and how we help our customers embrace it. Another area, not so much AgentIQ, but where we're using AI. We've launched uh, a new capability around, um, data analytics where uh, we can ingest account payable files, um, and actually play that back to the buying community. And we're using AI to inform that data set, uh, and actually refine it and actually giving our customers better results. So um, look, it's a very exciting part of the ecosystem. We continue to identify new use cases and look, it's no doubt that AI is pushing the boundaries of uh, the way our network operates and we need to continue to Evolve, uh, as we see things develop.

Speaker A: And where do you think, uh, mastercards, um, like you said, your right to win, um, exist in a couple other sub, uh, sectors I guess that we're also seeing a lot of interest in which is like account to account payments, um, and stablecoins, um, because it's not necessarily a substitute. Right. A virtual car can work on different types of Rails, I guess.

Speaker B: Um, yep.

Speaker A: Yeah. How do you see them stacking up I guess in terms of the substitutions or different options out there?

Speaker B: Yeah, look, um, and you would have heard our CEO Michael talk about this very openly and publicly. Um, you know, obviously, clearly MasterCard is very much known as being associated with cards and we will continue in that vein. But we do believe heavily in a multi rail strategy. You know, the way I think about it is you have a funding source and then you have a disbursement method. And I think our role as MasterCard is to connect the dots of those. There's no doubt the cards have a very valid place to play because of the working capital and the credit that is afforded with that solution. But obviously not everybody wants to accept that card payment, albeit there are very strong economic reasons for wanting to do so. But if a customer wanted to be able to get a faster payment, how do we facilitate that transaction? So the transaction might start as a card, might end as a different form factor. I think the same goes through for things like stablecoins. So what we're working very hard at uh, is ensuring that we're that orchestration layer, uh, in the middle that enables different funding sources to interact with different disbursement methods. And so you will hear more and more from MasterCard in terms of our uh, desire to help our customers in a multi rail strategy.

Speaker A: Got it. That makes a lot of sense. And before we go Mark, I have one last question for you. Thank you, you've been a great guest. Um, if you're ah, head of commercial payments at a mid sized bank right now, listening to this podcast, uh, what would you advise them as the most important thing they should be working on the next 12 months?

Speaker B: That's a fantastic question. What would I say if uh, and when? Just to qualify your question, you're saying a financial institution I'm talking to as opposed to a corporate financial institution. Look, um, what I would say to commercial credit is you have a fantastic opportunity to re engineer the processes, the working capital, cash flow positions, to embed your capabilities into the DNA of your end customers with the solutions that you have within your grasp within Mastercard Uh, and that will enable you to do two things. One is to truly deepen the relationship you have with that customer and really get into the inner workings of how their organization flows. Um, let's not forget that corporate doesn't really want to worry about payments. They want to sell whatever the widget is or buy whatever is the widget that they want to buy. The payments is secondary. So you have a real opportunity to deepen the relationships that you have. And I think if you're an fi, you have the opportunity materially improve, you know, the economics around your interactions with those customers would be how I would position it.

Speaker A: Mark, thanks for joining us from the TIEC podcast today.

Speaker B: Thank you, Zach. Thanks for having me.