Virtual cards have become a core part of how enterprises manage spending, reduce fraud, and simplify reconciliation. Yet while many business leaders are aware of the benefits, the practical question often remains: how do they actually work?
In this article we’ll take a closer look at the mechanics behind virtual cards, from generation to settlement, and explore why understanding the process matters for enterprise finance teams.
At their core, virtual cards function much like physical ones. Each is tied to a card network such as Visa or Mastercard and issued by a regulated, authorised financial institution. The difference is that the card exists only in digital form, with no plastic counterpart.
When a business requests a virtual card, the provider generates a unique card number linked to the organisation’s account. Virtual cards can be single-use, therefore designed for a one-off payment, or multi-use cards set up for recurring transactions such as subscriptions.
For a more complete picture, check out our article: What are virtual cards?
Virtual cards come in different forms, each designed for specific business needs. The two most common are:
Single-use virtual cards
Created for one transaction only, these cards automatically expire once used. They are particularly useful for secure online purchases or one-off supplier payments, as they minimise the risk of fraud and unauthorised spending.
Multi-use virtual cards
These cards can be used for multiple payments within a set spending limit or validity period. They are well suited for recurring subscriptions, regular vendor payments, or managing employee expenses, where ongoing use is needed but still controlled.
The process of generating and using virtual cards is designed to be straightforward, while maintaining strong security. Typically, it works like this:
Once issued, the virtual card can be used immediately for online, in-person, or over-the-phone payments. Here’s what happens when a transaction is made:
The process takes seconds, and for the merchant, it looks no different to a standard card payment.
For large organisations, virtual cards are most powerful when integrated with existing systems. They can be embedded within ERP platforms, procurement tools, or digital wallets, allowing payments to slot seamlessly into established workflows.
For example, a procurement team might generate a virtual card directly from their purchasing system to pay a supplier. The transaction data then feeds back automatically into the company’s financial software, cutting down manual reconciliation and reducing errors.
The flexibility and customisation that virtual cards can offer mean cards can be issued with very specific conditions. For example, a business can decide that a card is valid only for one supplier, for a specific amount, for a single transaction, or for a set period of time.
This flexibility makes them particularly useful for expenses such as software subscriptions, travel bookings, or ad-hoc supplier payments. Finance teams retain visibility in real time and can adjust rules instantly if requirements change.
There’s not much difference behind the scenes, in the settlement process, between a physical card and a virtual card; once a transaction is authorised, the funds are transferred from the issuing bank to the merchant’s bank, usually within a couple of days.
Where virtual cards stand out is in reconciliation. Because each card can be tied to a specific purchase or supplier, finance teams can match payments against invoices with ease. This reduces the need for manual checks and speeds up month-end closing.
Ready to get started with virtual cards? Great! But not all virtual card providers are created equal. Here's what to consider:
For maximum efficiency, your virtual card solution should play nicely with your existing financial tech stack. Look for providers that offer robust integrations with:
Seamless integration means less manual work, fewer errors, and a more cohesive financial ecosystem.
Virtual cards may feel simple on the surface, but the mechanics behind them are powerful. From secure generation to precise spend controls and seamless reconciliation, they give enterprises a smarter way to manage payments.
For business leaders, the takeaway is clear: understanding how virtual cards work is the first step to unlocking their full potential. To explore how your organisation can implement them effectively, consider the tailored solutions offered by Edenred Payment Solutions.
Considering how virtual cards could add value in your business? Talk to our team to find out how you can leverage our expertise and tech infrastructure to make simple, secure, and convenient payments using virtual cards.