What Are Virtual Credit Cards & Why You Should Care About Them
If you’re in a B2B finance team in this day and age, you’re probably familiar with virtual credit cards. There have always been a wide array of options for companies to pay their supplier invoices, such as check, telephone, the physical credit or debit card, and most recently, the virtual credit card.
What are virtual credit cards?
Virtual credit cards are one-time use, auto-generated credit card numbers sent by AP departments to their suppliers. Also referred to as “ghost cards” or “purchasing cards,” these cards offer buyers a lot of control, convenience, and security due to their one-time use.
Over the past few years, virtual cards have skyrocketed so much in popularity that the Mercator Advisory Group projects that by 2021, there will be $315.1 billion dollars a year in commercial purchasing with virtual cards. This burst of popularity has to do with the facts that they serve as a disposable version of your static company debit or credit card and work to reduce the chances of fraud.
How do virtual credit cards work?
When buyers use a credit card or debit card to make online purchases, they are required to share a few specific details pertaining to the card. This includes the card’s actual credit card number, the expiration date, and security code. If this card is frequently being used for multiple purchases for your business – and in some industries and businesses, a buyer could be making hundreds of purchases a month from a supplier – companies will store or save this card’s information online, putting the card’s information at the risk of fraud.
Virtual credit cards mitigate that risk. They provide card holders with dynamic information, or a virtual credit card number, that connects back to their card that is unique to every transaction. In other words, virtual cards provide buyers with safer, one-time-use information to lower the risk of fraud.
Why do AR departments hate virtual cards?
While virtual cards are a great tool for buyers, they can be a bit of a headache for supplier AR departments. But why?
- Typically, suppliers have to manually retrieve card numbers and remittance information from emails
- Suppliers then have to manually key these payments, which takes time
- Suppliers have to then look up open invoices in their ERP to apply every payment
- Then suppliers need to store each virtual card’s credentials for each buyer in their system – this introduces PCI concerns
- Suppliers will also have to repeat this process for every payment that comes in, even when the payments are from the same buyer
- On top of all of this, virtual cards carry the highest effective rate of acceptance at around 3% per transaction
Maybe these issues sound minor in the grand scheme of day-to-day business problems, but when your AR team is sorting through hundreds of payments each day, trying to process them in order to keep your company cash flow in the green, these manual tasks can bring things to a crawl.
What can AR departments do about virtual credit cards?
This is where A/R automation comes to the rescue. The assimilation of automated processes in all facets is rapidly changing the way companies do business. Gone are the days of workers being bogged down by manual, outdated tasks that chew through valuable resources and time.
This evolution is directly responsible for the rise in popularity of virtual credit cards. Automated solutions like Virtual Card Capture tackle this problem head on, working to bridge the gap between buyer preferences and supplier headaches. What this solution does is offer flexible payment options to customers without the burden of the time and frustration that comes with manual processing, while also lowering those costly interchange fees.
- First, our solution extracts the virtual payment instructions from email and A/P platforms
- The payments are then authorized and processed automatically
- The settlement of payments also includes Level 3 data
- Finally, the remittance information is then consolidated and delivered right into the supplier’s ERP
As virtual credit cards continue to rise in popularity, especially in the B2B space, solutions such as this provide a method to madness for those AR teams dealing with an influx of emailed credit card payments. Ultimately, once this solution is up and running, your AR team can reallocate their time to focus on more strategic initiatives while supplier company cash flows flourish.
About the author:
Morgan Balog is a writer at Billtrust. He can be reached on LinkedIn.