September 15, 2020

Virtual cards for business: Improve spend control & security


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 They’ve been replaced by more convenient digital e-payment methods, which offer several advantages for businesses both large and small.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 team members and give you greater control over where your resources go compared to traditional corporate credit or debit cards. 

Read on to learn how virtual cards can help scale your business. Topics covered in this article:

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 card details and identification information as a physical card, including:

  • Cardholder’s name
  • Credit card number
  • Billing address
  • CVV 
  • Expiration date

When making an online purchase, it functions identically to a Visa, Mastercard, or other 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" 

Virtual cards can be digitally created on-demand and then used on a one-off basis, to settle a specific transaction issued for a set dollar amount, or can be issued for recurring payments. 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 rather than a traditional business credit card. Such as? 

Optimized accounts payable

The goal of any AP department is to optimize and streamline 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 like ACH payments or wire transfers. You shouldn’t have to provide bank details, or manually process invoices and enter them into your AP or ERP software.

Payment settlement happens immediately instead of taking days, giving you and your finance team real-time visibility on your cash flow data, allowing you to make better informed budget decisions going forward. Furthermore, the fast settlement helps fortify the relationship with vendors or suppliers. Put transaction limits in place to avoid surprise fees or surcharges and simplify vendor management.

With the right card that offers integrated accounting tools, you can automate 80% of manual data entry and reconciliation right out of the box. You can create rules that map transactions to your general ledger and chart of accounts to automate the entire workflow.

Improved security 

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. 
  • One-time use and limits – When virtual cards are issued for single-time use, they are more like prepaid corporate cards or single-use cards, as they have a predetermined dollar amount and are tied to a specific invoice. The set spending limits can help prevent an overcharge even if a malicious actor did somehow get control of the unique identifier. Further, you can set an auto-lock date so the card automatically becomes unusable 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 has been compromised. Once deleted, simply request a new card to be generated. In contrast, a physical card can take several days to cancel and reissue.  

Although they’re not free from risk—no digital payment method is—a virtual card can greatly help reduce your overall risk profile.

Simplified vendor management

While the process for generating 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.

If you’re using a modern card provider, you should be able to issue virtual cards to your employees in just a few clicks. Employees simply make the request, stipulate the money limit, the time limit, and whether they want it to be locked to an exclusive merchant, vendor, or account.  

Issue as many cards as you need to track different projects and vendors. Having vendor payments on virtual cards means you can more easily track vendors being used across your team (avoiding subscription creep) and how much you’re spending per vendor. 

Some card companies offer spend tools that let you track total spend across all vendors, when bills are due, and how costs are trending in real time. The best tools even simplify SaaS subscription management, offering automated insights on redundant subscriptions, rising costs, and new partner discounts. No need to juggle different AP software and scattered invoices that make it challenging to get a complete view of your spend.

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 cashback 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, our virtual corporate card is built to help you improve spend management, cut wasteful spending, and find immediate savings. For a large company, that could mean tens of thousands of dollars saved every month (and for small businesses the margin differences can be even more critical). Companies that use Ramp save up to $600k annually on cashback alone.

Most vendors accept credit cards for transactions up to $50k. Some major vendors like Plaid & Microsoft accept credit cards for transactions up to $250k.

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 a business credit card affect personal 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. In fact, it can even help your credit score since it provides greater protection against fraudulent charges.

Ramp: the best virtual card for your business 

Virtual card adoption is skyrocketing—and for good reason. Virtual cards offer heightened security, full integration with your accounting system, greater flexibility, and cash back rebates. If you’re curious for more information on how virtual cards can help scale your business, check out our e-book, Why virtual cards are the future of B2B payments.

While there are several virtual cards to choose from, few can compare to Ramp’s virtual card and spend management automation platform. Ramp’s integrated financial services 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.

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Learn more about Ramp

Streamline approvals.
Review requests, pre-approve expenses, and issue general expense cards in a few clicks – or directly in Slack. Delegate approvals and empower your team leads to spend on the things they need and control their team’s expenses.
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Issue instant cards.
Unlimited virtual and physical cards with built-in spend limits, instantly available for everyone in your team. Define spend rules and let your smart cards enforce your policies automatically. No more surprises or under-the-radar spending.
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See spend as it happens.
Stop waiting on monthly statements or manual spreadsheets. Find, browse, and download real-time transactions from any employee, department, or merchant – on any device.
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Close your books 5x faster.
An accounting experience by finance teams, built for speed and efficiency. Automate manual processes and start enjoying instant reconciliation – Ramp does all the heavy lifting.
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Trim wasteful spend.
Ramp analyses every transaction and identifies hundreds of actionable ways your company can cut expenses and alerts your team via email, SMS, or Slack. It’s like having a second finance team, laser-focused on cutting costs.
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Consolidate reimbursements.
Ramp makes it easy to reimburse your employees for any incidental out-of-pocket expenses. Review, approve, and pay employees back for anything that didn’t make it onto a card with the rest of your Ramp transactions.
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