Using Virtual Credit Cards in the Real World

Sending checks to your suppliers can be a painful process – printer jams, hunting down executives for signatures, and getting payments out the door on time is a challenge even for the best Accounts Payable departments.

A recent survey by the Association for Financial Professionals showed that 51% of all B2B payments are still made by paper check. But the tide is turning – roughly 73% of organizations report they are planning to transition from checks to electronic payments over the next few years.

One of the electronic payment types you may have on your radar is virtual credit cards, often shortened to virtual card or “vcard.” Vcards are most often part of a payment outsourcing program, in partnership with either a third-party provider or your bank.

Are you tilting your head wondering what a vcard is? And whether it’s a payment type you and your vendors can trust?

What is a Virtual Card?

A vcard is a temporary, single use credit card – sometimes known as a “single swipe” credit card. They’re meant to pay a fixed amount to a specific supplier for an outstanding invoice or invoices.

Vcards are not physical objects you can carry around in your wallet – they are digital representations of traditional credit cards.

How Do Virtual Cards Work?

When a business or payment provider sends a virtual card payment, a unique 16-digit card number is transmitted to the supplier via email. They provided with a pin and need to enter a pin to access the funds. It’s kind of like calling a store to give your credit card so you can pay for a purchase, but instead it’s handled electronically.

The supplier then processes the payment just as they would any other credit card payment, making the entire transaction simple and seamless.

Vcards are separate from purchasing cards (pcard). Pcards can be used over and over again for corporate purchases, depending on the fixed spending limit. Instead, this single use card number expires right after the supplier accepts it.

Benefits of Paying by Virtual Card

There are several benefits to paying supplier invoices with virtual cards.

1. A single use vcard helps protect your business from overcharges.

2. Digital transmission ensures the payment is correctly – and securely - received by the supplier.

3. Your efforts to make payments are greatly reduced.

4. Very often virtual card programs offer rebate sharing – which can add up over time! Rebates are often significant enough to completely pay for an outsourcing program, and even to bring in additional revenue, making your AP department less costly to run.

5. From the supplier’s perspective, they get paid more quickly and with a digital trail.

Are Virtual Cards Secure?

Providers will tell you that vcards are one of the safest ways to pay, but why?

1. The generation of the payment information often includes a remittance document that ensures the vcard is tied correctly to the payment voucher – there is no opportunity to modify it between the creation of the voucher and the sending of the payment.

2. The supplier email address selected for receipt can be designated for vcard payments only, and IT departments often put extra security on that account.

3. The cards are single use and the amount cannot be altered. You don’t have to worry about an extra digit being added to defraud your business (a common method for check fraud).

4. The card cannot be “swiped” for a lesser amount, just to be used again later. Once used, its locked!

What’s the Catch?

Does this sound too good to be true? I know - money back, less work from your team, and a streamlined payment process sounds ideal. But there are a few things to be aware of:

• Suppliers who don’t accept credit cards likely won’t accept vcards, so you won’t earn rebates on those payments.

• In some cases, suppliers won’t accept vcard payments for large dollar amount purchases – to avoid paying the fees.

• Suppliers might lose the information or miss the email, requiring payment to be re-issued – rare, but it can happen.

We’ve found that usually 10-30% of suppliers will accept vcards. It’s not a catch-all payment method, but it can have a profound impact on your overall digital transformation initiatives.

Should You Adopt a Virtual Card Program?

If you are implementing automation in your AP department, virtual card payments can be a valuable addition to your payment strategy. Relieving your team of even a percentage of check printing allows you to focus on activities that may have gone neglected, like capturing more vendor discounts, addressing invoice issues, or other one-off problems!

Virtual credit cards are not new on the scene and continue to gain acceptance from AP teams and their suppliers. They provide an advanced level of protection. And while the card is virtual, the payment is very, very real - so, enjoy the ease of virtual credit cards in today’s world of expanded payment options!