What Is a Virtual Card Payment? Benefits, Uses, & Next Steps

Businesses can lose an average of 5 percent of their annual gross revenue to fraud. What’s more, small businesses seem to be the victim the most often. There are many types of fraud your organization could fall victim to, and many of them prey on the Accounts Payable (AP) department.

Luckily, as technology advances, so do defenses against many types of fraud. Virtual card payments are intended to do just that. The benefits of these virtual cards don’t stop with security; once you discover how they can help your business, you’ll definitely want to switch to the most secure form of payment out there.

If you’re interested in how virtual cards for your business can help protect you and how to use them to your advantage, check out our guide below.

What Is a Virtual Card?

A virtual card is a relatively new form of payment that is increasing in popularity in B2B transactions that uses the same aspects of a traditional credit card: a 16-digit code, CVV, and expiration date, for online transactions. The main difference between virtual credit cards and conventional credit cards is that they’re usually only valid for one use and can have tighter controls.

There are many benefits to using virtual cards instead of more traditional forms of payment. They first came on the scene a few years ago, but with the pandemic increasing remote workers and AP automation on the rise, they’ve recently skyrocketed in usage.

How Virtual Payments Work

A virtual credit card is typically connected to your traditional account. Most major credit card issuers now offer virtual credit cards as a free perk for using their services; however, businesses may have their virtual cards issued by their payment providers as well.

First, a new 16-digit credit card number is generated upon request. This number is usually only valid for single use, although there are reusable options. At the time of creation, you can dictate how long the number is valid, the amount the charge can go through for, a specific vendor, and even the type of purchase.

Next, virtual credit card payments are processed to your regular account but without compromising your sensitive information. While they can only be used for online purchases, they can be processed by any business that accepts traditional credit cards. In addition, many third-party companies offer virtual credit cards with cash rebates, which can benefit businesses that make many transactions.

Benefits of Using Virtual Card Payments

As with most new financial technology, the main goal of virtual credit cards is increased safety in an ever more digitized world. But the advanced technology linked to virtual card payments doesn’t end with security. In fact, there are many additional benefits to going virtual for your Accounts Payable card.

  • Security: As we mentioned, security is one of the most significant benefits. Because the numbers are single-use, it isn’t tied directly to your bank account. You have complete control over the entire payment process, from dictating a specific dollar amount, a time limit for usage, and even a particular vendor. This means that it’s nearly impossible for someone to misuse the card. In addition, virtual cards leave absolutely no numerical trail, making them unlikely to be susceptible to cybercrime.
  • Control: With full control over all the aspects of the payment, like the specific vendor, time limit, and dollar amount, there is no chance of short-paying or overpaying vendors. This improves internal control and visibility, making managing cash flow more straightforward for the Accounts Payable department.
  • Virtual card rebates: Many virtual cards offer rewards and rebates. Every time you pay your vendors using virtual payments, you can potentially earn cash back for your business.
  • Easy to use: Any vendor that accepts traditional credit cards will be able to accept a virtual credit card. No special software or technology is required on their end.
  • Touchless: More and more companies are striving for touchless business processes, meaning that no human actions are needed to complete a transaction except for decision making. Virtual card payments align perfectly with Accounts Payable automation software.
  • No open line of credit with vendors: Avoid giving vendors direct access to your credit cards and the ability to charge you at any time. You can create a specific virtual card for each vendor and implement spending limits.
  • Cost-effective: Save money by further automating accounting processes and save on employees’ salaries and physical supplies like checks, envelopes, and postage.
  • Ideal for remote businesses: For fully remote teams, paying vendors through checks is challenging. Virtual cards for business allow you to provide employees with virtual expense cards.

Benefits for Your Vendors

Clearly, there are endless benefits and reasons for your business to switch to virtual payments, but your vendors will appreciate it too. Improving your relationships with suppliers may help you get better service, pricing, and discounts.

  • Faster payments: Cash will be directly deposited into their bank accounts.
  • No checks: No paper check means no wasted time on deposits or bank fees.
  • Early payment: Automated payments mean invoices will be paid on time or early.
  • Detailed remittance: No limits on remittance characters help keep payments organized.

Virtual Cards vs. Other Payment Methods

Virtual credit card payments are arguably the most secure payment method out there. When you compare them with other forms of payment, you see much less risk for chances of fraud, saving your company money and hassle.

  • Checks: Have some of the highest instances of fraudulent activity. The risk of checks being stolen or lost in the mail also is a risk for businesses.
  • Wire transfers: Subject to high fraud rates, especially if you have remote workers using sensitive financial information without network security.
  • Company cards: One of the least secure payment methods available. Anyone with temporary access to the card can use the numbers for purchases, whereas a virtual credit card has no information that can be tied back to your bank account.

Virtual Card Payments and AP Automation

Many businesses are also moving towards AP automation, which uses software to help simplify the Accounts Payable process. Virtual card payments can easily be synced into the automation system, streamlining the system even further. In addition, virtual payments can be coded as the card is created, which helps manage invoices and prevent duplicate payments.

Managing and analyzing data is more manageable with virtual payments as well. Each virtual card number is attached to one specific payment and vendor. This makes it easier to pinpoint one specific transaction, create reports, and analyze spending trends.

Virtual cards for business also help eliminate payment processing steps such as manually inputting invoices or writing checks. With fewer hands-on steps for employees, there is less room for human error. As these AP processes are automated further, employees will have more time and effort to focus on strategizing and growing the business.

Maximize Your Virtual Card Rebates

While virtual cards can make automation easier, the relationship goes both ways. A lot of AP automation software is designed to maximize monthly rebates from virtual card spending.

For example, many virtual payment providers offer businesses up to a 1.5% percent rebate on every dollar they spend through virtual credit cards. You can think of it like earning points with your personal credit card but at scale for your business. While that number might seem small, it can really add up to over thousands of transactions.

P3 Cost Analysts’ Vendor Payment and Automation Service offers virtual card rebate maximization along with other AP automation tools. You don’t even need to learn how to implement virtual cards – we’ll do all the hard work for you. Let us start earning cash back for your business today.

Virtual Credit Cards Are Here to Stay

As a more secure form of payment that functions seamlessly with AP automation, there’s no doubt that virtual card payments are here to stay. For B2B transactions, an Accounts Payable card’s simplicity, safety, and speed simply make sense.

The endless benefits may attract you to virtual payments, but the fact that you can earn your business virtual card rebates only makes the deal even sweeter.

If you’re looking for help streamlining your vendor payments and automating Accounts Payable with virtual cards, contact P3 Cost Analysts for a free consultation today.

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