New ways to pay – digital wallets, virtual cards, tokenized cards, and more – are giving organizations a way to control and manage expenses and cut costs, especially account payables. These solutions can help manage the lack of transaction visibility and traceability that often happens with physical cards. In this post, we’ll explain how using virtual cards for B2B payments can help you control costs, prevent fraud and ultimately improve your bottom line.
What’s a virtual card?
Virtual cards are digital alternatives to physical bank cards. They are also known as e-cards and consist of a unique 16-digit virtual card number stored in a digital wallet via an application. The vcard number authorizes the payment only for a designated supplier and a set amount.
Virtual cards can make the same transactions as standard physical cards, including online purchases, paying contactless at stores, and even ATM withdrawals. In B2B payments, vcards are often integrated into expense management platforms, which reconcile the transaction with the purchase order when payment is processed.
Despite many companies still using checks and account checks to manage account payables, virtual cards are becoming increasingly popular. A well-known Juniper Research report projects the annual value of vcards for business use will reach $1trillion by 2022.
According to the same research, pandemic-driven remote working resulted in an 11% growth in transactions in 2020. Virtual cards provide key benefits for companies with remote workforces:
- Reduce payment costs: virtual cards don’t have issuing costs besides the virtual card service fee. Moreover, most issuers offer monthly rebates as an incentive.
- Improve employees’ user experience: the company can send the virtual card directly to the employee’s smartphone via an application.
- Allow the company to monitor and project their cash flow spending: Virtual cards systems usually integrate with company ERP and spending management company software. This allows for end-to-end visibility into the payment workflows.
As virtual cards help companies solve challenges created by the COVID-19 pandemic, it also addresses issues stemming from the use of outdated physical cards.
Why are virtual cards more secure than traditional bank cards?
For starters, you don’t need to carry the actual physical card so there is no risk of loss or theft. Second, virtual card numbers can be set to expire after a few transactions, set as single-use, or have a spending limit.
For B2B payments, virtual cards often work as Single-Use Accounts (SUA). These are one-time use, automatically generated credit card numbers that Accounts Payable departments send to suppliers for making payments and purchasers. Thus, the number works only for that transaction, that specific supplier, and a set amount.
Traditional payment methods risks and challenges
Many companies are still using checks and bank transfers for B2B payments. These methods are costly (the average cost to process a single check can reach $10), don’t provide visibility, and require manual processing.
Manual account payable processing involves a high risk of fraud. It is fairly easy to tamper with a bill or a paper check. In fact, billing fraud and check tampering account for over half of accounting fraud cases, according to a 2020 report on occupational fraud and abuse by the Association of Certified Fraud Examiners (ACFE).
Traditional physical cards are risky too. Cards can be shared by multiple employees and typically are not pre-approved. This means that they need to be manually reconciled by accounting. This leads to a lack of visibility and control overspending.
Benefits of B2B payments with virtual cards
The benefits of using virtual cards for B2B payments go beyond security and practicality. Here are some advantages of implementing a vcard solution for your accounts payable:
1) Pay suppliers faster and improve cash flow
Vcards enable companies to extend the days payable outstanding because of the time between the purchase being made and when you need to pay the bank statement. Similarly, on the supplier side, they increase their cash flow by reducing their days sales outstanding (DSO). Vcards thus strengthen the relationship between suppliers and buyers.
2) Increase process efficiencies
Virtual cards reduce the time and costs required to process payments. They effectively eliminate the need for check reconciliation, supplier onboarding, manual expense processing and more. Moreover, when virtual cards are integrated by a spending management system, every payment is automatically registered and reconciled so managing accounts payable is much easier.
3) Reduce fraud risks
You can set specific parameters for virtual card’s purchases. For instance, you can limit the amount, payment date range, and merchant type. You can control your employee’s spending on corporate accounts by setting spending limits. Since each number is unique, the vcard minimizes the risk of fraud. Vcards provide strict controls at the point of purchase and don’t have any hard data that can be exploited or misused even when stolen.
Tips and best practices
1) Integrate your virtual card to a business expense management solution
Integrating your vcards to a business expense management solution allows a company to maximize the benefits of implementing vcards for B2B payments. Meshpayments.com, for example, connects spending processes, streamlining the use of vcards. You can get full control and customize your card settings for your business’s needs. Define limits and expiration dates, set the card to be a one-time or multiple-use card. This can help you streamline and scale up your payments with ease.
2) Address supplier concerns and onboarding
When implementing vcards, you should take into account your supplier’s requirements to ensure successful onboarding. Let your suppliers know in advance that you are transitioning to an automated payment processing solution. Help suppliers understand how it works and all the benefits involved with implementing vcards.
3) Cut costs with rebates
The obvious benefit of using a virtual card is that they replace the need for issuing checks. Since the process is paperless, eliminates the headaches of check reconciliation, along with reducing the chance of human error. Still, there is an added and often overlooked benefit: cash rebates. Some platforms offer monthly cash rebates, directly tied to the volume of payments you make. The more payments, the more you earn. This can improve your monthly cash flow.
This is the right time to jump on the vcard trend and leverage the many benefits virtual cards offer both for buyers and suppliers. Virtual cards are secure and customizable and can overhaul your account payable management. Save costs and time while enhancing the security of payments by implementing a virtual card system.