Smart, secure and streamlined payments convert your AP department from a cost center to a revenue generator.
Virtual card acceptance is an ongoing topic among businesses and suppliers. Virtual cards play a significant role in the AP automation space. And there are many misconceptions, particularly regarding whether suppliers accept virtual credit card payments.
The truth is the number of suppliers that now accept virtual card payments has increased since 2020. A September 2022 PYMNTS article noted that virtual cards are growing by more than 20% annually, making them the fastest-growing segment of the commercial card market.
Much of the resistance to virtual cards is based on a lack of education about the benefits to suppliers. While buyer benefits are usually the main focus, suppliers also have significant advantages.
Suppliers have payment pain points just like buyers do. The demands of an increasingly remote workforce, fraud, the general lack of details in most forms of payment, compatibility with supplier ERPs, and the time needed to review and reconcile payments manually are just a few of the AP issues that suppliers face. Virtual card acceptance can resolve many of these issues.
The top five supplier benefits of accepting virtual cards
Over the last two years, suppliers have had to endure a lot of drawbacks. There were supply shortages, ongoing job vacancies due to employee shortages, the rise of digital transactions, and late payments. While these issues are all vital to business, late payments are a supplier sore spot.
Buyers regularly made late payments to suppliers long before the pandemic, but the frequency has increased over the last two years. Buyers’ manual payment processes, particularly paper check payments, were time-consuming and prone to errors. Adding to that, when USPS changed its service standards in October 2021, increasing delivery times, it exacerbated late payments to suppliers.
Suppliers help to guarantee on-time payments when they accept buyer’s payments by virtual card. It means there’s no lengthy process of routing checks and waiting for signatures before they’re sent out on the buyer’s end. And it ensures that suppliers won’t have to wait weeks for payment delivery by mail or longer if the check is lost or stolen. Instead, the supplier receives payment deposited into their bank account quickly without the inconvenience of bank deposits and check processing fees.
Eliminating manual processes for the buyer also helps the supplier reduce the time manually processing their payments. Virtual card payments resolve the need to call buyers to track down late payments. Suppliers could also skip manually sending out reminders and late notices.
A QuickBooks survey found that 65% of 2,000 mid-sized businesses spent an average of 14 hours a week on administrative payment collection tasks. That is almost two full workdays spent on trying to get paid, usually after the invoice due date has passed.
The money available to the business is limited while suppliers wait for payment. And limited cash flow means less opportunity for growth. The time that suppliers spend tracking down payments could be better spent pursuing activities that increase the business’ potential to expand. And the supplier needs money to invest in growth activities. So, accepting virtual cards to get paid faster with less manual work helps the supplier save time and money for more critical business-related functions.
Another way virtual card payments save time is through the detailed remittance information they provide. Instead of suppliers having to sort through invoices sent to match them with payments received, virtual card payments include that information.
Electronic payment information can be customized for your business, making payment tracking and reconciliation much easier. The detailed payment data can be emailed or imported directly into the suppliers’ ERP for automated reconciliation. It also allows suppliers to have real-time updates of their payments with precise transaction details.
By receiving payment and transaction information early in the AR process, suppliers reduce the amount of time manually tracking payments.
Virtual cards are one of the most secure forms of payment. The 16-digit virtual card number acts in the same way as a physical credit card. But, the virtual card has pre-set limitations that most physical cards do not have.
The VC number is generated by tokenization, which creates a single-use number for each transaction. This protects the buyer’s account information because it is not transmitted during the transaction. The purchase amount is set, so additional purchases cannot be made with that virtual card number. After the transaction is processed, the card expires.
The one-time payment limited to a specific purchase makes it nearly impossible to steal or use for purposes outside the buyer’s intention. The random virtual card numbers generated for each transaction are very difficult to steal or be compromised by hackers. There is no physical card to lose or be stolen. Unlike checks, virtual cards cannot be lost in the mail or accidentally left behind.
The enhanced security of virtual cards prevents fraud and keeps buyers and suppliers from having to deal with payments lost in the mail, stolen checks, or compromised accounts.
Suppliers often have issues with buyers who pay late. The time they spend issuing late payment reminders and late fees puts a strain on the business. When late payments from a specific buyer become incessant, the supplier may end the business relationship to avoid the continued loss of funds.
For the buyer, having to send manual payments to suppliers that do not accept automated payments or virtual cards is equally stressful. Because they have to proceed with the time-consuming manual process of printing and having checks signed and then mailed, it is much slower and depends on several people to complete. When buyers receive late fees for mail delays, or other issues out of their control, they feel the strain as much as the supplier.
The back and forth between suppliers and buyers regarding missing payments after goods have been delivered, or requests for a payment that is late but has already been mailed, is troubling for both parties. The friction this creates negatively affects business relationships and may eventually become a deal-breaker.
When suppliers accept virtual card payments, it makes the payment process much more manageable. They enjoy faster payments that help with cash flow. Following up on payments is a more straightforward process with a lot less friction. And suppliers that do accept virtual card payments tend to have preferred supplier status over those that do not. Overall, accepting virtual card payments helps maintain satisfying and lucrative business relationships.
Virtual cards are quickly becoming the B2B payment of choice. The VC automated payment process is one of the easiest to employ, with more security than most other forms of payment. Buyers have understood the benefits of virtual cards for a while. Now, suppliers are starting to appreciate the benefits that virtual cards provide for them as well. They can receive secure payments faster, save time and money, have an easier reconciliation process, and maintain buyer relationships simply by accepting virtual card payments.
A Gartner report predicts that 80% of buyer and supplier B2B sales will be digital by 2025. Suppliers that do not think virtual cards are a good idea should reconsider. The ones that don’t risk future business with buyers who have chosen to automate their payments with virtual cards. Don’t get left behind.
Corporate Spending Innovations (CSI) is a global FinTech leader providing innovative payment solutions to world-leading brands across all industries. CSI automates and digitizes B2B payments with a safe and highly secure cloud-based payments platform. For a more efficient way to manage payables, including virtual credit card, B2B Payments Network, ACH, and check, book a demo here.
CSI is an Edenred Company, the global leader in payment solutions for the working world.