Since they have existed for twenty years, virtual cards have evolved naturally from ordinary physical payment methods like credit, debit, and cash. The demand for contactless payment options brought on by the pandemic has only increased their appeal. B2B vendors use virtual cards to speed up payment digitalization as a quick yet safe payment method.
Companies can offer virtual cards to workers, vendors, and contractors for one-time or recurring use in place of a physical and static credit card. Virtual cards conceal credit card information with a randomly generated credit card number. They can also include spending controls for more versatility when paired with current card systems.
Virtual card transactions totalled $1.9 trillion in 2021. Forecasts indicate that by 2026, this value will rise to $6.8 trillion, of which 71% will be in B2B transactions.
Here are the advantages of using virtual cards for business-to-business payments:
1. Boost security and reduce fraud
Payment fraud, including credit card fraud, is frequently aggravated by economic uncertainty. Credit card theft will cause losses of around $11 billion in 2020.
A virtual card is the best for online purchases since they automatically fight fraud. In addition, sensitive information is with virtual cards using a payment technique called tokenization. As a result, account information is less likely to be compromised even if the card is compromised.
Additional security limits the number of transactions per card or sets expiration dates. You can change Virtual cards quickly, shut them down, and get them again promptly if required.
2. Simplify payments and enhance relationships with vendors
One advantage of virtual cards’ increased ability to make fast payments to businesses is considerable. Virtual cards are accepted everywhere and don’t require extensive onboarding procedures. For example, when an invoice needs to be submitted through procurement systems, paper statements need to be cut and mailed, and then the actual invoice needs to be received and deposited; traditional payment methods frequently cause delays.
Losing payments in the administrative process can harm a business’s reputation and supplier relationships. According to a survey, 39% of participants said receiving discounts after the due date was reduced or eliminated.
Teams in charge of accounts payable can save time and money by reconciling payments more quickly and easily. As a result, processing costs drop, but vendors and consumers can also better manage their cash flows and working capital.
3. Cut Back on Needless Purchases
Companies have more control over spending with virtual credit cards than they do with conventional credit cards. In addition, as more businesses use remote workers, employees need quick access to money for home-based tools and subscriptions.
Before the outbreak, American businesses were already squandering an average of $259 per desktop on idle software. The increased corporate spending on computer equipment and accessories fosters a culture open to irrational purchasing. As spending limits are set on virtual credit cards, overspending is discouraged.
4. Boost Spending Visibility
End-to-end spend management is via virtual corporate cards and spending management software. The finance department and outside software can automatically notify of every expense charged to the card, receipt uploaded, and detail input.
You can use virtual cards to group expenses as well. For instance, utilizing a single virtual card to pay for expenditures associated with a particular trip or project helps to identify the applicable charges, which facilitates the calculation of return on investment.
The ability to see spending in real time gives finance professionals the knowledge they need to produce accurate financial reports and make wiser choices.