Managing account payables can be a hassle for most companies, because of the different payment methods used. By using virtual card payments, you can leverage automation to streamline business-to-business ePayments. Let’s explore how virtual cards can provide instant electronic operational efficiency to your accounts payable department.
- What Is a Virtual Card?
- What Is a Virtual Card Payment?
- B2B Virtual Card Payments are increasing
- Why Virtual Card Payments Simplify Accounts Payable?
- Virtual Card Payments Benefits
What Is a Virtual Card?
A virtual card is a 16-digit card number randomly generated for a single transaction between payer and payee. This type of digital payment solution streamlines traditional processes, increases accuracy, and saves time for teams.
Virtual cards bring enhanced security since they don’t have a physical card. The system usually tokenizes the Personally Identifiable Information (PII), thus protecting the payer. An article on Forbes Advisor reviews how virtual cards can offer benefits, like optimizing spending controls and enhancing payable processes.
What Is a Virtual Card Payment?
Virtual card payment is a digital transaction made between account payable departments. The payer can predetermine the amount allowed for the virtual card. Virtual card security is ensured because the virtual credit card number is created for a one-time transaction.
Since the card is not physical, it can be used for several purposes:
- Employee’s expenses
- B2B payments
- Card-less credit card payments
Large credit card companies usually issue them, like Mastercard and American Express. They are often accepted by any entity that takes credit card payments, which may include your vendors.
B2B Virtual Card Payments are increasing
The increase in mobile device usage drove virtual card adoption. Virtual cards are especially suited for mobile purchases since they can be restricted to designated scenarios, for instance, such as account payable payments.
Virtual cards provide a cost-effective and simple way to optimize payment management and more companies are integrating ePayables with virtual cards for B2B payments. According to a report by Accenture, the virtual card market can represent $355 bn by 2022, from $136 bn in 2017.
Why Virtual Card Payments Simplify Accounts Payable?
Traditional ACH and check transactions take a lot of time to process. Many companies still rely on manual processing for accounts payable, for instance, receiving checks to settle B2B invoices. Physical credit cards involve further risks, as they may expose bank account details.
These outdated methods are not efficient and are prone to human error. The lack of automation results in inaccuracies and inefficiencies and some studies have shown that many AP professionals are willing to leave the paper trail.
Companies can integrate virtual cards into the AP payment by implementing solutions that work with accounting and ERP systems. Together, they enable seamless B2B payment processing. Virtual cards can also be used for employee expenses. The employees make the requests to the purchasing manager which issues a virtual card via the platform. The organization can issue multiple cards, track transactions in real-time, and set limits to spending.
All these benefits and more help account payable departments optimize and have more control over company spending.
Virtual Card Payments Benefits
There are more benefits to a virtual card program than optimizing supplier payments. Here are a few of them:
Unlike checks and ACH, virtual payment cards don’t require exposing a supplier’s bank account number. The information is not linked to the bank account, since the token is created specifically for the transaction.
Organizations can limit virtual cards by time, amount, period of time, or the number of transactions. That means that if a malicious actor wants to steal a virtual card number outside the time window, the numbers won’t work. Since there is no physical trail to the card, the risk of theft is greatly reduced.
Improving transaction processing
Typically, virtual cards can only be used once, and they are tied to a specific amount. The account then cannot process a payment for an amount higher or lower than the set amount. This type of control prevents the possibility of mistakes when paying for your vendors. Virtual cards also eliminate manual processing, thus saving processing costs.
Another way virtual cards can optimize accounts payable is by enabling faster payments. When your organization can pay faster, not only for B2B but to reimburse employee’s expenses, it allows AP teams to gain early payment advantages and can reduce processing fees.
Simplified transactions and processes
Transaction details are also simplified by virtual cards. ACH and wire transfers are popular payment alternatives but both methods provide a shorter space to send data. ACH only allows for 80 characters and wire transfers allow 140 characters. On the other hand, virtual cards don’t have space limits for remittance information. This allows organizations to customize the transaction details to your system, simplifying processing and aligning with account payable software.
Virtual cards also simplify manual check processing. Instead of endorse, deposit and entering the data, account payable teams have everything processed by the virtual card system. It frees teams to focus on core business tasks.
Virtual cards can also earn your organization cash-back rebates when you pay invoices. For example, if the virtual card earns.4% for every transaction, you can potentially earn $4,000 in cash rebates for every million you spend.
Businesses these days require technology-based solutions. By using virtual cards to process payments provide organizations with a range of benefits. From increased security to saving processing costs and improving employee experience, organizations of any size should implement virtual card payments to modernize their transactions