Further dispelling the myth that card payments to suppliers will be relegated to small dollar transactions, businesses have big plans to grow the amount of spend they put on virtual cards.
That’s the key takeaway from a new report published by research company Juniper Research.
A virtual card is a “plastic-less” credit card payment that uses a 16-digit computer-generated number to settle a specific supplier transaction issued for a specific dollar amount or specific dollar amount range. A date range also can be set for when a supplier must process a virtual card transaction. Virtual cards can be processed by any supplier that accepts traditional credit card payments.
Virtual card spend by businesses will top $1 trillion by 2022 – an increase of $568 billion from the estimated business spend on virtual cards in 2019, Juniper Research predicts. Financial services firms will lead the way with transactions expected to grow 183 percent between 2019 and 2022.
Undoubtedly, businesses still will put most of their spend on checks. But the amount of spend on virtual cards has come a long way, fast. And that has a lot to do with the benefits of virtual cards.
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The benefits of paying suppliers with virtual cards
Cash-back rebates are a big driver of the growth of virtual card programs. The rebates that businesses earn for supplier payments made via card can fund accounts payable automation projects or offset the operational costs of the department. In some cases, cash-back rebates have helped transformed accounts payable departments from a profit center that delivers value to the business.
Virtual card payments also offer businesses excellent anti-fraud capabilities; even if someone steals the details of a virtual card transaction, they cannot be used by anyone other than the buyer.
But for many finance leaders, the most tantalizing benefit of virtual card programs is the control and visibility over operations, cash and corporate spend that comes from paying suppliers with a card.
Virtual cards offer accounts payable departments greater transparency compared to check payments:
- Tighter management of corporate spend: Seventy nine percent of finance executives seek more accurate cash data and forecasts, according to the 2016 AFP Payments Fraud and Control Survey. Leading virtual card programs allow for configurable invoice approval processes and assigned spending limits.
- Improved expense management: Virtual card programs generate detailed spending reports that help businesses understand exactly where there is money is going and gives businesses the power to monitor spend by geographic location, business unit, supplier or category.
- Better informed business decisions: Virtual card programs provide real-time insights into spend against budget and how payment schedules affect overall working capital.
- Streamlined operations: Traditional manual supplier payments cost an eye-popping $22 more per transaction than virtual card payments, per RPMG’s 2015 Electronic Accounts Payable Benchmark Survey. An effective virtual card program reduces these costs by eliminating paper-based processes and simplifying account management, reconciliation, and reporting.
- Effortless reconciliation and data analysis: Virtual card programs capture important data from individual payments while associating a unique account number to a specific payment.
- Reduced risk of check fraud, wire fraud and ACH debit fraud: Virtual card programs provide businesses with tools and visibility to proactively identify suspicious transactions.
- Seamless integration with legacy systems: Leading virtual card programs can easily integrate with any legacy enterprise resource planning (ERP) or accounting platform. A single file is used to manage all payments to suppliers, including those made via check or ACH.
Together, these benefits offer businesses greater visibility and control over their supplier payments.
There is no question that virtual cards are an important part of a holistic payment strategy. If your business wants to increase the spend it puts on a virtual card, ACOM Solutions wants to speak with you. Our experts can show you how to maximize the potential of virtual card programs.