The Complete Guide to Virtual Cards for B2B Payments

March 15, 2022

9 min read

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After years of cutting paper checks, your AP team may be looking for a more efficient method to pay vendors. But they may have some questions about virtual card payments and how they work.

Here’s a complete guide to some of the most common questions about this secure and growing B2B payment method. It’s particularly well suited for real-estate and other industries paying lots of vendors each month.

What is a Virtual Card?

A virtual card is a randomly generated, 16-digit credit card number that exists electronically, rather than on a physical card. Suppliers receive the card via email, and use it to pay a specific invoice or set of invoices. Each virtual card number is unique. Plus, it’s only valid for pre-designated expenses.

Thanks to their security and ease-of-use (among other things), virtual card payments are increasingly popular. This is especially true for corporates who regularly need to issue many payments every month. In fact, PYMNTS reported in 2022 that the “global value of virtual card transactions is expected to jump to $6.8 trillion over the next four years — compared to $1.9 trillion last year — and a large portion of that growth will come from business-to-business (B2B) transactions.”

Virtual cards are often one of the featured payment methods offered by payments companies (along with ACH and check). The B2B payments company issues them, in cooperation with a card network like Visa or Mastercard.

Once the buyer approves payment, the outsourced payments company sends the card automatically via email to the vendor. Buyers and suppliers can then track the cards online. And, the B2B company can reissue the card, should it expire before the vendor processes it.

Who Issues a Virtual Card for B2B Payments?

Is It Safe to Pay with Virtual Card?

Virtual cards are among the safest payment methods. They don’t necessitate the storage of any banking data and are one-time use in nature. They have a short expiry date, often 60 or 90 days. And, the numbers become invalid once the supplier processes the virtual card payment.

Moreover, they are only valid for a fixed amount. They can be issued for one invoice of $3,250 or multiple invoices, in the amounts of say $3,250, $670, and $0.93.

Because of these safeguards and others, virtual card payments are less likely to be the target of fraud. Virtual cards represent only three percent of attempted/actual payment fraud versus 66 percent for checks*.

*2021 AFP Payments Fraud & Control Survey

In general, suppliers who accept credit cards are also likely to accept virtual card payments. Based on Nexus’s analytics, the supplier types most likely to accept virtual card include:

  • Flooring – Carpet/Hardwood
  • Hardware/Materials Suppliers
  • Landscape Design/Care
  • Marketing Services
  • Pest Control
  • Plumber/HVAC/Appliances
  • Security Services
  • Software/Technical Services

But the numbers – and types – are growing. That’s because suppliers are seeing the benefits of virtual cards, including faster receipt of payment.

Virtual cards do have associated fees for the supplier. But, just as with credit cards, many suppliers accept these fees as a cost of doing business. Furthermore, Nexus has found most suppliers don’t pass on these fees to buyers in the form of higher prices.

Who Accepts Virtual Card Payments?

What Are the Benefits of Virtual Card Payments for Buyers?

Businesses of all sizes who need an efficient way to pay suppliers can use virtual cards. Real estate companies in particular may find them useful. This is because they often have invoices constantly streaming in, such as those for landscaping, maintenance, upkeep, repairs, etc.

Virtual cards offer many benefits for buyers, including:

  • Stronger supplier relationships – Nexus has found that its supplier customers who accept virtual cards receive payments, on average, five days faster than those who receive check payments. That fortifies supplier relationships because they receive prompt payment.
  • Lowered fraud risk – each virtual card is good for a pre-specified amount, is issued for a specific invoice (or set of invoices) and has a set expiration date. It can’t be duplicated or have its amount or recipient changed once sent. After reaching a $0 balance, it automatically expires. These features make it less likely to face fraud attempts.
  • Cash rebates – buyers can earn cash back for invoices paid with virtual cards. Amounts of rebates vary among payment companies.
  • Business continuity – when buyers (or their outsourced payments company) pay suppliers electronically, such as through virtual cards, they can perform every step of the payment process from anywhere with an internet connection.
  • Cost effectiveness – while rates for issuing virtual card payments vary, they are often less expensive than sending a manual paper check. This is especially true when you factor in all the ink, print stock, postage, etc. you need for checks.

For suppliers, the benefits of using a virtual card include:

  • Faster payment – virtual card payments are sent faster than traditional payment methods (checks in particular). In fact, 41% of suppliers said they planned to increase virtual cards (and ACH) this year to mitigate late payments.
  • Enhanced buyer relationships – virtual card acceptance can help suppliers’ standing among buyers, since buyers often prefer this payment method.
  • Full visibility – suppliers can track virtual card status online 24/7, so they never need to call their customers about lost or late payments.
  • Detailed remittance info – suppliers can perform reconciliation quickly and easily thanks to all the detailed information that comes along with virtual card payments.
  • Guaranteed payment – since Visa or Mastercard back the virtual card, they guarantee the payment.

What Benefits do Suppliers Get from Virtual Cards?

How do Suppliers Process Virtual Card Payments?

Suppliers process virtual cards much like credit cards. The cards consist of a 16-digit number, CVV, and expiration date that the supplier enters in their Point-of-Sale system. They then receive the funds in their linked bank account.

Nexus even has a solution for suppliers who don’t have Point-of-Sale systems. It’s called NexusDirect, powered by Chase.

With this solution, Nexus sends suppliers a virtual card but processes it on the suppliers’ behalf. If the supplier has a bank account with Chase, the money is deposited into the supplier’s account the same day.

Just about all virtual card programs store the virtual card information online – including processing status.

Some companies, like Nexus, also show the invoice(s) associated with the virtual card, unprocessed cards, reissued cards, refunded virtual cards, and partially processed cards (if the card covers multiple invoices).

Suppliers can go online to grab all the information they need to process the payment. This includes the invoice number, card number, CVV, and expiry date. Some companies also send this information to the supplier via email too.

How do Buyers and Suppliers Track/Reconcile Virtual Cards?

Buyers and suppliers can track their payments in an online portal, like NexusConnect

Are There Costs to Virtual Cards?

There are fees for virtual cards, but they are often lower than with other payment methods.

The buyer or the company that’s paying the invoices usually pays a fee per invoice paid.

For the supplier or the company that’s getting paid, the card issuer (Visa or Mastercard) charges a fee as they do with regular credit cards. The outsourced payments companies may also charge an additional fee for processing the card.

But even so, virtual cards are still less expensive than paper checks. Just think of how expensive check stock, postage, toner, etc. are.

Virtual card payments are growing overall, but especially among real estate companies (multifamily, CRE, etc.) who pay hundreds of vendors a month and want to use a safer, more efficient method than paper checks.

Per data from Visa, virtual card payments are expected to grow a lot over the next few years.

Nexus has already seen explosive growth with virtual card payments. Since launching its virtual card program with Visa, Nexus has seen 170 percent growth in the number of suppliers that have chosen the Nexus Virtual Card as their payment method instead of checks.

Is Virtual Card Usage Growing?

How Do Outsourced Payments Companies Encourage Virtual Card Adoption?

Some outsourced payments companies do all the legwork of switching suppliers off of check payments and onto virtual card payments.

They often rely on a supplier services team that contacts suppliers and educates them about the benefits of virtual cards. They’ll also then convert suppliers to this payment method. Some do this on a rolling basis – which is important for real estate companies who are always adding/changing suppliers. They can count on the supplier services team to include any new suppliers in their onboarding efforts.

One of the reasons Nexus has such a high acceptance rate of virtual cards is because of it sophisticated data analytics engine. This tool identifies suppliers most likely to accept Nexus Virtual Card. With these insights, the Nexus Supplier Services team can reach out to suppliers and personalize their conversations about switching from manual check payments to secure digital-card payments.

Virtual card payments provide rebates much like credit cards do. Suppliers underwrite the rebate – often split between the payments company and the buyer – as part of the interchange rate.

Thus, if rebates are a motivation, ensure that the outsourced payments company has of lot of YOUR suppliers in-network. A wide network – in and of itself – won’t necessarily help you.

Keep in mind, though, some payments may remain ineligible for rebates, such as tax disbursements.

How Do Virtual Cards Generate Rebates?

What Should You Look for in a Virtual Card Provider?

There are a couple things to consider when looking to add virtual card payments to your B2B payment suite. First, you should ensure the payments provider already works with many of the suppliers in your industry. Many companies count a broad range of suppliers in their card-accepting network, but they may serve the healthcare, manufacturing, automotive, etc. spaces because their clients are in those verticals.

Nexus, on the other hand, only serves real estate. Therefore, we have a robust network of suppliers who already serve multifamily, CRE, mixed-use, retail, storage, student living, senior housing, and/or construction companies.

Second, the outsourced payments provider should have a strategy for adding new vendors to your virtual card accepting population. This way, you won’t miss out on additional efficiencies or rebates.

And finally, you should look at the amount of support they provide suppliers, who are receiving the virtual card payments. If they don’t get answers quickly, they could drop virtual card payments (or never select them in the first place).

For all of the reasons outlined above, there’s no time like the present to adopt virtual cards. They enable you (and your suppliers) to automate manual payment processes, free up time, and mitigate risk.

When Should You Switch to Virtual Card Payments?