Virtual cards: A complete guide to business payments

Virtual cards are changing the way businesses handle payments. Companies today need payment solutions that are secure, efficient, and flexible to stay ahead. Virtual cards offer a smarter alternative to traditional methods, helping businesses save money, reduce fraud, and simplify their back-end processes. This guide breaks down everything you need to know about virtual cards and how they can benefit your business.

Introduction to virtual cards

What are virtual cards?

Virtual cards are unique electronically generated card numbers specifically designed for a single purchase or a set of invoices. Unlike traditional plastic cards, they exist only in digital form, allowing for better security and flexibility. These numbers are linked to a specific spending limit and can be single or multi-use with controls to specify timeframes, where it is used, and how. This reduces the risk of fraud and unauthorized transactions. They are typically used for online purchases, vendor payments, or any scenario where secure, efficient transactions are needed.

For example, a company might use virtual cards to pay a marketing agency for a one-time project. Instead of sharing a physical corporate card number, the company generates a virtual card number for the exact amount of the invoice. This ensures the card cannot be reused or misused.

How virtual cards work

Virtual cards work by creating a unique, temporary card number tied to a specific transaction or vendor. This number is generated through a secure platform provided by the card issuer.

When a business makes a payment, the virtual card is processed like a regular credit card. However, since it’s designed for one-time use or limited purposes, it minimizes the risk of unauthorized charges.

Benefits of virtual cards for businesses

Security and fraud prevention

One of the most significant advantages of virtual cards is their security. Each virtual card number is unique and often limited to a single transaction or vendor. This makes payment fraud much more difficult.

For instance, if a supplier’s payment system is compromised, the virtual card number used for that payment cannot be used elsewhere. This protects the business’s primary account and reduces the risk of financial loss.

Cost savings and efficiency

Virtual cards streamline payment processes by automating tasks like invoice reconciliation and payment tracking. Businesses save time and money by reducing manual labor and minimizing errors.

For example, a construction company using virtual cards can automate payments to subcontractors. Instead of writing checks and tracking them manually, they generate virtual cards for each payment, ensuring accurate records and faster processing.

Faster payments

Traditional payment methods, like checks, can take days or even weeks to process. Virtual cards enable faster payments, improving cash flow and strengthening supplier relationships. Suppliers appreciate quick payments, which can give you the opportunity to negotiate better terms and discounts.

Rebates and revenue opportunities

When you use a virtual card to make a payment, the issuing bank typically rebates a portion of the interchange fee back to your business. Interchange fees are the fees that merchants pay to banks whenever a customer makes a purchase using a credit or debit card.

For example, receiving 1 percent cash back on virtual card invoice payments means you will get $10,000 back for every $1 million spent.

Comparing virtual cards to traditional payments

Key differences

Traditional payment methods, such as checks and ACH transfers, often involve manual processes and higher fraud risks. Checks can be lost or stolen, and ACH transfers lack the flexibility of card payments. Virtual cards, on the other hand, are digital, secure, and customizable.

How virtual cards can help improve your bottom line

Optimized cash flow

Rebates can help improve your cash flow by providing you with a source of immediate income. This can be helpful for businesses that are looking to improve their working capital.

Eliminating manual payment processes

Manual payment processes, such as issuing checks, require more labor and are vulnerable to errors. Virtual cards automate these processes, saving time and reducing the risk of mistakes. For instance, a business using virtual cards for recurring vendor payments can set up automated transactions, ensuring timely and accurate payments.

Engaging your suppliers

Benefits of supplier enablement

Talk to your suppliers about the benefits of accepting virtual card payments. Highlight the immediate and guaranteed funds that come with virtual card transactions. Some suppliers may even offer additional discounts for payments made via virtual cards.

Maximizing rebates with high-volume suppliers

To maximize your rebates, focus on using virtual cards to pay your high-volume suppliers – the ones you make the largest payments to each month. This strategy should help you earn the most rebates, providing significant cost savings and enhancing your overall financial efficiency.

WEX’s supplier enablement can help you onboard and educate your suppliers about the advantages of virtual card payments, making the transition smoother and more beneficial for both parties. By using WEX supplier enablement, you can help ensure that more of your suppliers are equipped to accept virtual cards, further maximizing your rebate potential.

Choosing the right virtual card provider

Key features to look for

When selecting a virtual card provider, businesses should prioritize the following features:

• Security: Advanced encryption and fraud detection tools.

• Integration: Compatibility with existing accounting and enterprise resource planning (ERP) systems.

• Flexibility: Customizable card settings and spending controls.

Tips for selecting a provider

• Research providers with strong industry reputations and proven track records.

• Evaluate customer support services to ensure quick resolution of issues.

• Compare rebate rates and fee structures to maximize savings.

Implementing virtual cards in your business

Steps to get started

• Assess current payment processes: Identify inefficiencies and pain points in your current system.

• Choose a provider: Select a virtual card provider that aligns with your business needs.

• Train your team: Provide training to ensure employees understand how to use the new system.

• Integrate systems: Work with your provider to integrate virtual cards with your existing accounting software.

Resistance to change and how to overcome it

Resistance to change is one of the most common hurdles when introducing any new technology into a business. Employees may worry about learning a new system or disrupting their workflow. For example, an employee accustomed to processing checks might be concerned about how virtual cards fit into existing accounting practices. Similarly, a supplier may hesitate to accept virtual cards due to unfamiliarity with the technology. 

In this case, information is key. Educate your employees on virtual cards – the way they work and their benefits. Take advantage of your payment solutions provider’s supplier enablement services. 

Conclusion

Virtual cards offer a secure, efficient, and cost-effective solution for B2B payments. By adopting this technology, businesses can improve cash flow, reduce fraud, strengthen their supplier relationships, and access new revenue generating opportunities.

Therefore, virtual cards are a smart choice for modern businesses looking to stay competitive in an increasingly digital world.

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The information in this blog post is for educational purposes only. It is not legal, tax or investment advice. For legal, tax, or investment advice, you should consult your own legal counsel, tax, and investment advisers.