What are Virtual Cards, and how do they work?
In a personal finance context, virtual cards provide a unique, virtual credit card number that is linked to your credit card account of your choice. This added veneer of security would protect you against fraud from online shopping, or data breaches from banks or third parties.
In a company context, virtual credit cards are still protecting your money and data, but with a little more nuance. For instance, you could generate a unique credit card number that only works for a certain amount, or for use at a specific vendor.
You’d also be able to toggle more general spending limits as well as expiration dates, and manage the unique numbers electronically. Depending on your issuer, a virtual credit card number would also allow you to lock, manage and delete a virtual account.
Okay, makes sense. What are the advantages?
For a newer technology, the advantages of virtual cards are quite extensive. With the ability to set spending limits and toggle expiry, limiting tail spend and overspending in general for employees becomes extremely simple. In most systems, leftover amounts are automatically restored to the main account upon expiry or deactivation of the assigned virtual number.
Visibility into expenses is also enhanced with the usage of virtual cards, as tracking expenses over specific periods of time and generating reports by employee, vendor, and so on comes built in with most providers. You’ll easily be able to spot rogue spend and ballooning budgets.
Virtual cards also have a profound effect on your organization’s spend culture, allowing authorization and permissions to be a proactive experience rather than a reactive one. Team members using their individual cards can make purchases and inform you after. The permission then starts with when that team member is issued a card in the first place, since every card number is linked to the primary account holder, effectively acting as a pre-approved purchasing tool.
Oh, and it’s also considerably cheaper for most companies. When you consider the high fees for small businesses trying to get credit cards. Virtual cards being linked to a checking account or debit card means employees don’t need access to those specific accounts, just the cards you choose to assign them, allowing for ultimate control and spend visibility.
Wow. But How is This Revolutionary?
Making the jump to virtual credit cards protects you from the most prominent sources of fraud, reduces the risk of data breaches and data entry errors, provides full visibility and organization into expenses, and supports true automation for most of the accounts payable tasks. This has never been possible with the usage and implementation of a single tool before.
Risks and pain points related to reimbursements, authorization, and even straight up card theft are completely minimized with the advent of the virtual card. These cards can’t get lost, can’t be duplicated, or stolen. With pre-determined purchasing stipulations and amount limits, the security and comfort that comes with virtual cards for businesses cannot be understated.
Alright – I’m sold! How do I start using them?
While specific providers are dependant on your location, and are only an online search away, the most popular usage seems to be single-use accounts or SUAs and are normal 16-digit account numbers, but they can only be used once. They’re issued right when an employee makes an expense request, and once the finance or operations team approves it, the number is activated and ready for use for the exact predetermined amount.
Now, security, precision and visibility has been emphasized, but don’t forget about how this impacts accounts payable. With the ability to automatically generate and email numbers to vendors as soon as you’ve approved the invoice, the vendor is only allowed to charge the exact amount and only make as many charges as you authorize.
This way, you don’t have to manage vendor mistakes and you can pay much larger expenses without the risk of fees or surcharges. How’s that for a revolution?