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B2B Payment Challenges Part 2: Demystifying Virtual Cards

We’ve discovered that suppliers are seeing a surge in the number of credit card payments from customers. Taking a deeper look, suppliers have identified that this increased card usage is being driven by a very specific type of commercial credit card called a “virtual card”, which comes with a unique set of acceptance challenges for A/R teams.

Read on for part 2 of our 3 part blog series as our payments expert, Nick Babinsky, explains what virtual cards are and how they’re impacting A/R teams.

QUESTION: What exactly is a virtual card and how does it work?

NICK BABINSKY: Virtual cards, also known as Single Use Accounts (SUA), are one-time use, auto-generated credit card numbers sent by A/P departments to their suppliers. These cards offer buyers a lot of control, convenience, and security. Once an invoice is approved for payment, the buyer’s virtual card platform (which usually lives in their bank or A/P portal)  automatically emails a one-time use credit card number to the supplier for the exact dollar amount of those invoices. After the supplier charges that card number once, it can’t be charged again.

QUESTION: What kind of impact are virtual cards having on A/R teams?

NICK BABINSKY: A pretty large one! Virtual card usage is growing almost 10% annually, and by 2021, virtual card spending is expected to surpass that of traditional purchasing cards. That means more and more A/R departments are going to start seeing this payment method being utilized by customers.

Virtual cards are beneficial for A/P departments, but their A/R counterparts are struggling to see the value on their end. While virtual card payments are 100% automated for A/P teams, the infrastructure that supports virtual card payments does not currently integrate neatly with ERP systems or other A/R technology to enable straight-thru processing. Instead, A/R departments receiving those payments must go through a tedious, manual process: they must open each emailed card payment, click through a link to retrieve the full virtual card number, manually process the card number through a physical or online terminal, and finally, apply the payment to the correct invoice(s) in their ERP system. Most A/R teams normally don’t have the ability to pass Level II/Level III payment data for interchange savings, adding to the frustration.

Want to learn more?

Read our entire interview series on B2B Payment Challenges.

Part 1 – B2B Payment Challenges: Why is payment acceptance so complicated?

Part 3 – B2B Payment Challenges: Demystifying Virtual Cards

And don’t forget to check back next week for another fascinating discussion with the Payments expert, Nick Babinsky. You can message him directly on Twitter @NickBabinsky

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