Virtual Card Benefits for Buyers and Suppliers

Virtual Card Benefits for Buyers and Suppliers

Author: Maria Line, Head of Commercial Card

The business use of virtual credit cards is on the rise. Total transaction volumes are expected to reach $175 billion by 2028, led by B2B spending.

Virtual cards offer a host of benefits to businesses that pay suppliers or receive funds from customers. Those that use virtual cards to pay suppliers report lower transaction costs, tighter security and enhanced cash flow management, in addition to purchase rebates. In many instances, rebates are offered at higher levels when a business spends more, making virtual cards ideal for large ticket items.

However, suppliers benefit too. Virtual cards eliminate the need to receive paper checks, reducing the instance of late payments associated with lost or stolen mail. Payments by virtual card are also accompanied by specific transaction details, facilitating faster reconciliations with ERP or receivables systems and making it easier to avoid cash flow gaps. Plus, by utilizing a one-time use number, virtual cards offer security that far surpasses other payment types.

Despite the bounty of benefits, some suppliers shy away from the use of virtual cards, often due to erroneous understandings and inaccurate information.

Setting the Record Straight on Receiving Virtual Card Payments

When it comes to accepting virtual credit card payments, suppliers cite different reasons for a continued reliance on more traditional methods, such as check and ACH. Credit card transaction fees are one of the most common concerns.

With interchange fees amounting to 2% of the transaction cost on average, industries that suffer from tight margins will naturally worry about the impact on the bottom line. However, options are available when it comes to selecting a card solution provider, and some offer low or even flexible rates to support businesses on an individual level.

Both customers and suppliers fear that a lack of technology will keep them out of the running when it comes to using virtual cards, or that training staff on complex systems will be a drain on employee time. In reality, the right solution provider will work with your business to design a simple and efficient system that meets your needs and current technology capabilities. With the right provider at your side, setup is fast and easy, with little to no downtime associated with learning new systems.

Finally, businesses that have already established a way to accept electronic payments don’t often feel the need to open a new payment stream. ACH payments, for instance, will already be embedded into existing workflows and automated AP systems. Suppliers may fear that virtual cards will not integrate well with existing technology and instead cause bottlenecks or delays.

Again, the reality associated with virtual card payments and systems should dispels these myths. Since each card is assigned a unique identifier, payments are easily trackable, and settlement is instantaneous.

Customers and Suppliers Work Together to Make Virtual Cards a Reality

Virtual cards can bring a number of advantages to the relationship between suppliers and their customers. By accepting virtual cards, suppliers benefit from on-time or early payments, reducing days sales outstanding rates, while customers have the advantage of floating payments to improve cash flow. However, it takes cooperation from both parties to equally procure results.

Customers need to provide a simplified onboarding environment. This requires that the customer select the right card issuing platform and that they enact some simple due diligence up front. Before inviting suppliers to join a virtual card program, it’s important to ensure that all contact information is up to date and that the correct contacts are listed on the record.

Offering multiple methods for delivering virtual cards can also facilitate a more seamless relationship between customer and supplier. As virtual cards are issued, it’s important that recipients can easily access funds to fulfill invoice requirements. Many prefer an online portal, but others may feel more comfortable processing virtual card payments by phone.

Suppliers should also be clear about their needs. Do they frequently accept one-time payments, or do they primarily rely on recurring payments? Ensuring access to the right attributes is key to success.

Through cooperation, virtual card programs can benefit payers and receivers. Suppliers can collect payment faster and simplify reconciliation. Customers can optimize their days payable outstanding and holding onto cash for longer periods of time.

About the Author
As the Head of Commercial Card, Maria Line optimizes commercial card programs to help organizations streamline their payments processes. She is also responsible for building FNBO’s supplier enablement organization, an initiative designed to provide further value to commercial clients. Her goal is to create a best-in-class experience for each and every customer.