How virtual cards are transforming B2B trade

In recent years, the increasing adoption of mobile wallets and contactless payments has made consumers more comfortable with paying without the need for a physical card. In B2B trade, virtual cards work in a similar way whereby businesses issue credit cards to their customers as an additional payment option. Not only do virtual cards help companies expand their offerings by integrating financial services, but they also offer a range of benefits to suppliers and buyers. Below, we outline how the uptake of virtual cards is accelerating and why your business should consider adopting this payment method in 2024 and beyond.

What are virtual cards, and how do they work?

As the name suggests, virtual cards are a digital version of a credit card. It’s typically stored on the provider’s app or the user’s digital wallet. A virtual card gets linked to a credit card or bank account and has its own unique card number, expiry date, and CVV.

The key difference between physical credit cards and virtual cards is how the card details are stored and shared with vendors and merchants to process transactions. Unlike a physical credit card, a virtual card stores an encrypted version of the card details  — usually a series of randomly generated numbers. The user’s information and full card details are only ever stored privately on the card issuer’s network, making virtual cards more secure than traditional cards. Some virtual cards are also created for single use. These cards are used for predetermined transactions and have preset limits on where and what they can be used for.

The uptake of virtual cards is growing

The global virtual cards market was valued at USD 13.31 billion in 2022. It’s expected to grow at a compound annual growth rate of 20.9 per cent from 2023 to 2030. The growth in digital transactions in recent years has been driven by the demand for different types of virtual cards, from one-use cards to more traditional options such as a digital credit card. Further, Mastercard’s recent Payment Index Report found that 93 per cent of customers surveyed preferred using emerging payment methods, including biometrics, digital currencies, QR codes, and contactless payments. The businesses that adopt these emerging payment methods will remain ahead of the curve in payment innovation and gain a competitive advantage, amongst other benefits.

What are the benefits of virtual cards?

One of the biggest benefits of virtual cards is the added layer of security they offer to the card provider, the user, and the merchants that the buyer transacts with. There are many other benefits for suppliers and buyers who use virtual cards to make payments.

Supplier benefits of issuing virtual cards

From an added layer of security to accessing cash-back offers, suppliers can gain many benefits and realise efficiencies by using virtual cards to transact. These benefits include:

• More robust security: The payment information used in virtual card payments is encrypted, so you don’t need to store the customer’s personal bank account or credit card details when accepting payments. This reduces the amount of sensitive data your business needs to store and provides protection in case of a data breach.
• Lower processing costs: Virtual cards don’t need manual workflows that can cause bottlenecks or errors. By reducing the time spent on processing the transaction, eliminating data entry errors, and making reconciliation easier, the overall processing costs for payments are reduced.
• More transaction details: The character limit on ACH and bank transfers is between 80 and 140 characters. Virtual cards don’t have space limits for remittance information, making it easier to customise and provide full transaction details to make integration with your existing systems more efficient and error-free.
• Improved accountability: If you assign virtual cards to specific employees and suppliers, expenses can be tracked more accurately. And when your payment channels are integrated with your accounting system, the need for manual tracking and reconciling payments is eliminated.
• Staff empowerment: Employees get instant access to a payment method by using virtual cards. This allows employees to buy what they need without compromising the company’s data security or keeping track of receipts and expense reports.
• Stronger customer retention: Expanding your payment methods to accept digital payments can help you become a preferred supplier for customers, which increases retention by creating a positive customer experience.

Buyer benefits of using virtual cards

Buyers who use virtual cards enjoy a range of benefits, including:

• Convenience: The ability to pay anywhere, anytime is available on something people carry with them all the time: their phones. And when a customer can pay their invoices without manually typing out their card details, this adds another layer of convenience.
• Extended trade terms: Virtual credit cards offer extended payment terms, giving businesses the ability to optimise their working capital. This means they can keep their cash on hand for longer to invest in growth opportunities, all while staying on top of their bills.
• Better security: Making payments without sharing sensitive personal data provides peace of mind that the customer’s details are secure. If there is a data breach, the encrypted data is of no value to cybercriminals and won’t compromise a customer’s privacy.
• Stronger supplier relationships: When it’s easy to transact with a supplier, the relationship grows stronger. Transacting with suppliers that offer virtual card payments sets a standard to ensure that other suppliers keep up with advancements in payment processing methods.

Offer more payment options with Spenda

Virtual cards help suppliers and buyers to transact easier and faster with an added layer of security that isn’t offered through traditional cards and payment channels. Expanding your payment methods to include virtual cards allows businesses to enjoy faster payments and access richer payment data, allowing businesses to track and analyse their spending more effectively, leading to better financial decision making.

Spenda offers a virtual credit facility as an integrated payment method. Provided through our virtual card issuer, this service can provide an additional and unsecured credit line to allow businesses to better manage their cash flow.

This article is for general information purposes only. Consult a qualified financial advisor regarding any changes to or decisions about your business’s finances.