Businesses are swiftly moving away from cash and physical cards towards virtual cards to make and manage payments and expenses. This transformation isn't just a shift in form - it's a strategic move that brings efficiency, security, and enhanced financial control.
The rise of B2B virtual card payments
The advancement of the digital era has revolutionised the way corporate payments are made, and it’s estimated that up to 80% of all B2B transactions will be digital by 2025.
Card payments have long dominated the B2B payment space, but as businesses make more digital payments, physical cards aren’t the most effective tools for supplier payments and expense management when operating at scale. This is due to the lack of controls, security, and high card fees that are associated.
Businesses face economic uncertainty and with the volume of fraud rising within B2B payments, virtual cards are proving to be a better alternative thanks to their enhanced security, ability to streamline back-office operations, and provide greater control.
A fast-growing number of Online Travel Agencies (OTAs) and companies across industries are taking advantage of the efficiency that virtual cards offer to better manage B2B payments, with less manual interactions. And the rapid adoption of virtual cards shows no signs of stopping with the volume of transactions predicted to reach 175 billion by 2028.
Understanding virtual cards
Virtual cards, also known as VCNs, are generated electronically and can be configured for a one-time use or for a specific timeframe. They function similarly to physical cards and have unique details such as virtual card number (VCN), expiry date, and security code (CVV). These cards are issued by financial institutions or fintech companies, and businesses can easily manage them via web interface or API. Cardholders can use the virtual cards to make payments online or in store, if enrolled in mobile wallets such as Apple Pay or Google Pay.
Practical applications of virtual cards
Businesses, like VINCI and Bouygues, have found a game-changing ally in virtual cards when it comes to making corporate payments. Whether it's settling bills for marketing ads and subscriptions, or to help employees manage their expenses, virtual cards offer the perfect blend of control and convenience. By eliminating the need for constant managerial approval, such as providing one-time passwords (OTPs), employees gain autonomy to work independently. The granular control features allow managers to set specific limits and parameters, preventing overspending and enhancing financial oversight.
In the travel space, OTAs have largely embraced the use of virtual cards. Generally, OTAs make high volumes of payments to their suppliers to book transport and accommodation at the best price on behalf of their clients. As virtual cards are instantly generated, they provide the speed and efficiency OTAs require to make online payments at scale.
Another use of virtual cards is within the buy-now-pay-later (BNPL) market. As a growing number of merchants adopt flexible payments methods, virtual cards can be a powerful tool to facilitate payments between the BNPL provider, such as Oney, and the merchant. The virtual card is generated during the online checkout, for the exact amount of the transaction, and is processed instantly, paying the merchant, while the BNPL provider will collect the money from the consumer in instalments.
Benefits of virtual cards for businesses
Let’s deep dive into the benefits of virtual cards for businesses.
Reduced fraud risk
In 2022 alone, 65% of businesses were victims of payments fraud attacks and attempts. B2B payments can be a goldmine for fraudsters as usually these transactions are for larger amounts, and it can take longer for businesses to locate the attack and take action.
With their digital nature, virtual cards remove the obvious threat of loss and theft. What’s more, virtual cards can be configured to be used for a specific transaction, meaning the card will only be valid once. This eliminates the need to store card details online, which can leave them vulnerable to cyberattacks.
Traditional payment methods, like paper checks and wire transfers, make it challenging for businesses to track payments, monitor cashflow, and promptly identify discrepancies. With virtual cards, businesses have the flexibility to set spending limits for cardholders, specify Merchant Category Codes (MCC – which are authorised merchant types where the funds on the virtual cards can be used at), and amount, providing improved control and better cashflow management.
As businesses continue to embrace virtual cards, they no longer have to keep track of paper receipts and unidentifiable transactions. Virtual cards make reconciliation simple thanks to the information that businesses can append to each transaction, such as Passenger Number Reference (PNR) in the travel space, to easily identify payments. With nearly £320 million worth of employee time spent on reconciliation tasks, virtual cards allow businesses to quickly locate and align payments, while reducing the administrative burden and manual processing for Finance teams.
The rise of digital payments has undoubtedly brought convenience to consumers, who can now pay with a simple tap or click. As people get used to making digital payments in their personal lives, employees seek the same simplicity for corporate payments. Virtual cards are generated instantly, so users don’t need to wait for a physical card to arrive. They can be utilised straight away for online payments and in store, if enrolled within mobile wallets. This helps employees to make purchases conveniently, anytime, anywhere, with maximum productivity.
Implementing virtual cards with Edenred Payment Solutions
Edenred Payment Solutions has long been supporting companies and OTAs with flexible and customisable virtual cards. Our solution is specifically designed for B2B virtual card payments and enables businesses to have a single account that can handle an unlimited number of virtual cards transactions concurrently.
With our solution, the virtual cards draw funds directly from a single corporate account, eliminating the need to prefund cards individually in advance. This provides greater operational efficiency and improved cashflow management as capital is not tied up across different cards. Learn more about our Lean Funding model here.
Working with Edenred Payment Solutions significantly reduces regulatory complexities, meaning businesses can get up and running with this solution quickly. Once the funding account is created, either with a UK Account Number and Sort Code or with an EU IBAN depending on business requirements, companies can top up the funds in their account through the standard banking schemes such as Faster Payments or SEPA.
At this point, businesses can start creating and managing their virtual cards via API or web portal.
This is ideal for businesses that need to make high volumes of transactions and prefer single-use virtual cards to drive efficiencies through automation. Using the API, businesses can make payments, create new cards, and manage them with ease. Developers can test the API in our sandbox environment, and easily integrate virtual card payments into their software with our documentation and guidance. Try our API here.
The web portal
This is useful for businesses that need to further customise card usage behaviours. Through the portal, managers can check the account balance and card activity, issue cards instantly, set spending parameters for each user, manage cards, add new cardholders, or remove existing ones in real time to reduce the risk of funds misuse. Cardholders can work autonomously as payments are automatically validated, provided they meet the preconfigured criteria. Learn more here.
The move towards virtual cards is revolutionising the way payments are made in the B2B space. The multifaceted applications of virtual cards, and their seamless integration within payment flows, position them as the forefront of modern payment technology.
As businesses navigate the complexities of a digital economy, leveraging the benefits of virtual cards becomes imperative for sustained growth, efficiency, and financial agility.
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