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Understanding Virtual Card Payments

Understanding Virtual Card Payments

The use of B2B virtual card payments can have a profound impact on your payments process and your organization’s bottom-line benefits. In fact, the use of virtual credit cards can produce big benefits: cash rebates, stronger internal controls, streamlined accounts payable processes, increased payment visibility, and better cash management. Virtual card payments also add an enhanced level of security and fraud protection to your accounts payable process.

V-cards are a likely replacement for your payments made by ACH and check – methods that are both costly and inefficient when compared to v-card payments. In the consumer world, the use of paper checks has steadily declined, from 46 percent of payments in 2003 to just 13.4 percent of payments in 2015. For consumers. check payments have already largely been replaced by debit and credit cards.

By comparison, the level of business payments made by check remains stubbornly high. A 2018 research survey published by WEX, “checks remain a leading method of payment for businesses in the US”[1]. That means there’s a great opportunity for businesses to migrate check payments to v-card payments. Doing so not only reduces your payment processing costs, but it also generates recurring cash-back revenue for your organization.

How Virtual Payment Card Work

A virtual credit card (v-card) is a credit card number that’s created solely to pay for a single transaction at a predetermined, exact amount, with a specific vendor – without requiring the use of a physical card. V-card payment information can be provided to the supplier utilizing multiple methods including e-mail, interactive voice response (IVR), phone call, or via a web-based portal (web login). In addition, v-card payments can also be appended with payment addenda data to help expedite and ensure payments are applied to the correct invoice. If a supplier attempts to process a v-card transaction for one penny more or one penny less than the amount of the invoice, the transaction will be declined. One-time use, v-card payments combine the benefits of a purchasing card, the functionality of a check, and the efficiencies of ACH.

When paying suppliers, each v-card is funded for the exact amount of the payment and a unique, 16-digit, encrypted, v-card number is generated. The supplier receives the encrypted card number and then submits the transaction with the card issuer and processes the payment for the exact amount of the billing.

V-Card Benefits

For suppliers, v-card payments mean that they get paid sooner enabling better cash flow. In addition, v-card payments streamline the suppliers payment process and it reduces their processing costs.

For corporations, one-time use, v-card cash back programs help transform a cost center into a recurring revenue stream and they drive efficiencies while delivering improved control, benefiting the organization and the bottom line. As an electronic payment method, one-time use, virtual card payments can displace other payment methods (checks, wire, ACH) reducing operating costs, processing time, payment reconciliation time, and supplier payment support calls. V-cards also offer improved payment accuracy and enhanced security by eliminating human interaction, providing data encryption, and ensuring controls and visibility that mitigate the risks of fraud and misuse.

In summary, V-card payments should be considered an important component to your organization’s supplier payment system and when utilized effectively, they can become a source of significant bottom-line benefits for your company.

[1] Payments Pulse, Global Payments Trends Survey Results, WEX Inc., June 2018, Pg. 4