In addition, virtual cards can make thousands of dollars in rebates available to companies that use them often. For example, a firm that earns 0.5 percent cash back on virtual card invoice payments will get $5,000 back for every $1 million spent. Rebates are also a great pull for small companies, which use credit cards heavily, accounting for $430 billion in annual card spend.
Virtual cards and other digital payment options free up AP staff from the cumbersome tasks of printing, signing and mailing paper checks to suppliers and vendors.
Companies can also better manage spend with virtual cards. Each card is valued at a specific amount for individual suppliers, which can process the payments the same way they would for traditional credit cards. Settlement is instantaneous, though, granting AP departments real-time cash flow data, and improving strategic planning. Virtual card numbers (VCNs) make payments easily trackable, and enable reliable data capture, helping merchants to reconcile payments. Quick settlement ultimately helps strengthen relationships with suppliers as well.
How Security Drives Virtual Card Use
The biggest draw of virtual cards is their enhanced security, compared to other credit cards and payment methods. Online fraud is a massive financial headache that could reach $25.6 billion this year. Traditional credit card users expose their personal information whenever they make payments in person or online, and vendors often store this information, which could potentially expose it to hackers. Virtual cards do not have any hard data that can be stolen, and their predetermined limits prevent overcharging.
Virtual cards’ fraud-busting capabilities are especially attractive to subscription companies, which often see recurring charges victimizing customers who did not authorize or no longer need certain services. These cards’ limited time usage eliminates that risk.
Fear Of Higher Merchant Fees Worry Suppliers
Some challenges still remain to swift and smooth virtual card adoption in the B2B space, despite the tangible benefits. Some firms are concerned about the potential disruption to their existing systems, or the creation of one-off processes, but much of the delay comes from the supplier side. Vendors are concerned about the higher merchant fees that come with these electronic AP solutions — charges that can reach 2.5 percent of each transaction.
Suppliers stand to benefit from education around how virtual card adoption will enable faster payment receipt, improve cash flows, and reduce time and money spent on chasing after late or missing funds. Some virtual card solutions enable suppliers to choose how they receive electronic remittance information, too, which can allow for straight-through payment reconciliation.
The shift to virtual cards is critical to the digital payment innovations sweeping the B2B space. Using virtual cards for B2B transactions has tangible benefits for companies and suppliers alike, and those that do not implement them are likely to miss out on ample cash collection and cost-saving opportunities.
