17 Jan What is a virtual card and how can they help business?
Virtual cards are temporary credit card numbers that can be used to make purchases. They are designed to protect your actual account number from fraud.
Virtual cards can be requested through your credit card issuer and are a great way to protect your identity when shopping online. The credit card issuer will give you a randomly generated card number, with a unique expiration date and security code. With the shift to online shopping due to covid, virtual cards are a great option for safe online shopping.
When you use the virtual card to make a purchase the transaction will show up on your account statement. If the card number was to get in the wrong hands, you can simply cancel the virtual card and get a new one without affecting your account. In addition, some virtual cards can only be used once so if someone were to access your virtual card information it would be useless to them. Paypal, Capital One and Citi are offering virtual credit cards to their users for online payments.
Why would you need a virtual card if you’re not liable for unauthorized charges? Well, you may want to use a virtual card to protect your identity if you are buying from a new ecommerce site or a merchant that seems questionable, just as a second layer of protection.
How can this help businesses?
More recently virtual cards have gotten more popular with business to business payments. Over the next two years independent industry forecasts suggest that US commercial card spending will increase by 20%. Virtual cards are expected to account for half of that increase.
Virtual cards currently make up 40% of the commercial card spending market and will grow to 50% over the next two years. This increase is due to replacement of non-carded payments rather than traditional plastic cards.
The key benefits to virtual commercial cards are improved control of payments, increased efficiency for accounts payable and cash flow optimization.
With virtual commercial cards, remote workers can pay safely without using their own credit card information or a single corporate credit card that is shared among employees.
Business owners can control employee purchases to ensure preferred vendors are used. This can help improve reconciliation and provide purchase transparency for the business.
Virtual cards are efficient and safe solutions for employee use. Purchases are transacted immediately instead of waiting for a cheque to go through. This in turn, helps with cash flow as businesses will know exactly how much cash they have on hand.
Looking ahead we expect to see the commercial virtual card trend to continue as businesses look to improve their purchase and reconciliation practices.