In the world of business, checks and cash are simply inefficient. They’ve been replaced by more convenient digital e-payment methods, which offer several advantages for businesses both large and small.
Virtual cards, for example, make it easier to manage distributed spend across remote offices and give you greater control over where your resources go.
What are Virtual Cards?
A virtual card is no different from a credit card—except for the fact that you don’t have a physical copy of it on hand.
A virtual card has all of the same identification information as a physical card, including:
- Cardholder’s name
- Card number
- Billing address
When paying for an item, it functions identically to a physical card. This ease of use, among other factors, has quickly led virtual cards to become one of the most cost-efficient, convenient, and secure e-payment methods, particularly for online transactions. A study by Accenture discovered that:
“Virtual card spend for purchasing activities is projected to grow at 19 percent (from $207 Bn to $251 Bn) annually due to buyer commitment, improved connectivity and enhanced supplier acceptance, with further growth potential as traditional boundaries blur.”
Virtual cards can be digitally created on demand and then used to settle a specific transaction issued for a set dollar amount or can be issued for recurring use. In the latter case, the employee could continue to use the card until they hit the set monthly spend limit.
Getting approved for a virtual card and a physical card typically follows the exact same process. The only difference tends to be the card company offering the card program as well as the underwriting requirements.
What are the Benefits of a Virtual Card?
There are a variety of reasons why more companies than ever have turned to virtual cards as their e-payment solution.
Optimized Accounts Payable
The goal of any AP department is to optimize their accounting workflows.
Virtual cards are ideal substitutes for dated and insecure paper checks, particularly since they eliminate the slow and error-prone manual accounting processes associated with traditional payment methods.
Integrating virtual cards with the AP payment mix is fairly straightforward. Once implemented, it can create several efficiencies that enable smooth payments. In addition, companies can have a better control over their expenses since each card has a specific amount that can’t be overdrawn.
Payment settlement happens immediately, allowing AP departments real-time visibility on their cash flow data, allowing them to make better informed decisions going forward. Furthermore, the fast settlement helps fortify the relationship with vendors or suppliers.
Although virtual cards are still susceptible to fraud, they provide greater security than a traditional card. Why? There are several reasons, including:
- They can’t be physically stolen – Since the card isn’t physical, it’s not subject to theft or loss.
- The personal information isn’t stored – Vendors tend to store the personal information contained in physical cards. That information is then potentially subject to being exposed via a hack or data breach.
- Single-time use and limits – When virtual cards are issued for single-time use, they have a predetermined dollar amount and are tied to a specific invoice. The set limits can help prevent an overcharge even if a malicious actor did somehow get control of the unique identifier. Further, the card automatically expires once the maximum dollar amount has been spent.
- Virtual cards are easy to cancel – You can instantly freeze or delete a virtual card if you fear that the information is unsafe. This saves you from the hassle of having to cancel and then reissue a physical card. Instead, simply delete and request a new one.
Although they’re not free from risk—no e-payment method is—a virtual card can greatly help reduce your overall risk profile.
Ease of Use and Flexibility
While the process for making a virtual credit card may vary among issuers, it tends to be relatively simple. This makes it easy to quickly add a virtual card (or several) to your existing accounts.
With a top-tier company, you can obtain a virtual card in but a few clicks. You simply make the request, stipulate the money limit, the time limit, and whether you want it to be locked to an exclusive merchant, vendor, or account.
This means that you can issue multiple cards to multiple employees to use for whatever they need. Or you can issue specific cards for vendors in order to more easily keep track of your expenses.
Cash Back and Savings
You might not consider accounts payable to be a revenue-generating accounting activity, however, virtual cards make it simple to get money back via cash rebate programs. Unlike with other cards that offer points, cash rebates empower your business to instantly earn back money each month.
Ramp, for instance, has a 1.5% cash back on every single expense. On top of that, the virtual corporate card is built to help you cut wasteful spending and find immediate savings. For a large company, that could mean tens of thousands of dollars saved every month.
Virtual Credit Cards and Credit Score
The term “virtual credit card” can be confusing for some. A virtual card doesn’t replace any credit cards that you currently own. It’s merely an added layer of protection.
So, if you’re wondering, “Does company credit card affect credit?” The answer is—it depends.
If you have a corporate credit card separate from your personal bank account, then this virtual credit card won’t affect your credit score. Though with a regular virtual card, you can protect yourself from fraudulent charges when making purchases online, but the card purchases and payments will reflect in changes in credit.
Ramp: The Best Virtual Card for Your Business
The virtual card market is booming—and for good reason. Virtual cards offer heightened security, full integration with your accounting system, greater flexibility, and cash back rebates.
While there are several virtual credit cards to choose from, few can compare to Ramp’s virtual charge card and automated expense management platform. Ramp’s integrated solutions offer a variety of ways to manage and protect every transaction, while saving you money in the long run.
Contact us today and find out how Ramp can partner with your business.
Accenture. A slice of $700+B in US commercial card spend up for grabs. https://bankingblog.accenture.com/slice-700b-us-commercial-card-spend-up-for-grabs?lang=en_US
Nerdwallet. What Is Visa Checkout? Its a Digital Wallet, but Not Just for Visa Cards https://www.nerdwallet.com/article/credit-cards/what-is-visa-checkout
Business Insider. Visa is transitioning Visa Checkout merchants to its SRC product next week. https://www.businessinsider.com/visa-checkout-merchants-move-to-new-buy-button-2020-1
Wallethub. Virtual Credit Cards: What They Are & How to Get Them. https://wallethub.com/edu/cc/virtual-credit-card/65981/#:~:text=A%20virtual%20credit%20card%20is,a%20traditional%20credit%20card%20account.