Apple Card raises the stakes for rivals' virtual cards

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Apple Card made its public launch last week, and executives at Extend — a virtual card platform provider that has nothing to do with Apple's product — couldn't be more pleased.

Virtual cards are not a new product, but have typically been marketed primarily as tools for businesses to control employee spending. Apple's pitch that its virtual card — and the optional titanium companion card that has almost no customer information printed on it — focuses heavily on the way its product improves security for the end user.

To other companies, this is not just free marketing; it's an entirely new market for a traditionally business-centric product.

"Apple Card is fascinating from our perspective and we are very grateful because Apple has gone down the path of educating consumers about virtual cards," said Andrew Jamison, CEO of New York City-based Extend. "They are doing the work to really bring this mainstream, especially the concept of having one account in three different ways with a physical card, a virtual card number on your phone and a token for tap-and-pay."

Mastercard, the company that developed Apple's "digital first, physical optional" platform, also hopes to benefit from the sudden interest in virtual cards. Mastercard was unable to discuss its platform before Apple Card was announced, but now offers the same technology to other issuers, with a six-month implementation period.

This trend is of vital importance to Extend because the more business owners and consumers are aware of the benefits of virtual cards on their phones, the more likely Extend will be a part of their decision process.

A year ago, Extend was introducing the concept of helping banks offer virtual cards to corporate and business clients to distribute to their employees or freelance workers. Those businesses would benefit from managing employee expenses and placing spending caps on the cards, while eliminating passing around plastic business expense cards, all through a digital system.

Today, the company's platform is integrated into Visa and Mastercard payment rails and is within weeks of adding another major card network, while distributing virtual cards through four issuers. Extend expects to have a total of seven issuers on board by the end of the year, and another five to eight added by this time next year.

"The critical part is we have proved we can integrate with the networks and issuers, which provides good progress with acquisition," said Jamison, referring to Extend allowing the issuers to develop use cases and distribute virtual cards to the proper clients. "We don't require any technology work from the bank or issuer, and therein lies the strength of our business model."

Even though Extend virtual cards fit the mold for businesses, the company is letting its issuers guide the use cases for the platform.

"There are clear use cases in the consumer world that we haven't chosen to address, but we are letting the issuers help drive the agenda," Jamison said. "Parents who want to send money overseas, or have kids in college, but they don't want to use (PayPal's P2P) Venmo, can send a portion of credit on an underlying account in order to monitor spending."

It is better for Extend to simply work through the banks because "they have an abundance of customers and their methods of cross-selling is way more than what it would be if we just took the Extend brand and did our own acquisitions," Jamison added.

Currently, banks find operating through a platform provider to be the best path to a digital offering. It allows them to get into the virtual card game so that other providers cannot dominate that landscape.

"With Extend, it's about open APIs and workarounds," said Brian Riley, director of card services for Mercator Advisory Group. "That is just how it is being done now, and it may not always be smooth, but it gets banks in the digital realm."

Banks like the thought of not having to revamp legacy infrastructure to enter the virtual card world, partly because it is such a new technology and they want to be sure the demand is there for such a product. For businesses, it works well because using virtual cards for employee expenses or paying vendors and freelancers is an efficient process that eliminates paper checks and manual back-office tasks.

"We have chosen to integrate through banks' legacy infrastructure through the partnerships we have with the card networks," Extend's Jamison said. "The networks have already done the integrations with these issuers."

Earlier this year, Extend raised $11 million in a Series A round with investors Point72 Ventures and FinTech Collective, while also firming up a strategic partnership with Royal Bank of Canada, a parent to City National Bank.

Extend has a "strong overlap and close alliance" with City National Bank, which has a strong portfolio in the entertainment industry, a vertical in which more payments go to freelancers than full-time employees, Jamison said.

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