Wondering ‘What’s a Virtual Card?’ You’re Not Alone.

Wondering ‘What’s a Virtual Card?’ You’re Not Alone.

February 22, 2019

5 min read

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The very name ‘Virtual Card’ is ambiguous. It’s no wonder, then, that organizations may be slow to warm up to the idea. How can your real estate businesses be expected to embrace an entirely new payment method when it’s hard to nail down what it even is?

What Is a Virtual Card?

Simply put, a Virtual Card is a randomly generated, 16-digit credit card number that exists electronically, rather than on a physical card. Each Virtual Card number is unique and can only be used to pay for a specific transaction.

Virtual-Card 1-1The seemingly endless buzz about Virtual Cards exists for a reason.

The Virtues of Virtual Cards

Virtual Cards can be used by businesses of all sizes who need an efficient way to pay suppliers. In real estate, they can be applied to the vast array of invoices that are constantly coming in, such as those for landscaping, maintenance, cleaning, upkeep, repairs, etc. Here are some of the reasons why real estate companies like yours might want to start leveraging Virtual Cards:

  1. Increased security – there’s no need to share credit card details or bank account information with suppliers, so you don’t have to worry about data breaches.
  2. Lowered risk of fraud – each Virtual Card has a pre-specified amount, is issued for a specific invoice, 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 the Virtual Card almost impossible to misuse.
  3. Spend controls and oversight – Virtual Cards allow you to set restrictions and limits on what may be paid for, so you can enforce spending guidelines.
  4. Cash rebates – you can earn cash back for purchases made with Virtual Cards and reinvest that money in your business.
  5. Cost savings – by ditching paper checks, you reduce the amount of time and labor dedicated to processing, paperwork, and administration.
  6. Exceptions protection – since Virtual Cards are tied to a specific dollar amount,  any payment higher or lower than the predetermined amount will not be permitted.
  7. Faster receipt of payment – Virtual Cards allow you to eliminate the mail float associated with checks and get payment to your suppliers faster, allowing you to fortify supplier relationships.
  8. Enhanced transaction details – the remittance information included with Virtual Cards can ease reconciliation, saving time for your AP team.


What About Suppliers Though?

How do all the painters, repairmen, locksmiths, general contractors, and other suppliers with whom you work actually use Virtual Cards? Do they receive their funds on a card that they then use to issue their own payments, similar to a gift card?

As it turns out, suppliers can process Virtual Cards in exactly the same manner as regular credit cards. After running Virtual Card numbers through their Point of Sale terminal, suppliers’ funds are deposited directly into their checking/bank accounts.

Besides being easy to process, Virtual Cards offer some key advantages for suppliers:

  1. Virtual Card payments clear faster than traditional payment methods and help suppliers maintain critical cash flow.
  2. With the reliability and speed of Virtual Cards, suppliers don’t need to call you about lost checks or late and duplicate payments.
  3. Suppliers receive detailed remittance data with Virtual Cards, simplifying their reconciliation.
  4. By accepting Virtual Cards, suppliers can make themselves more appealing to customers looking to use this payment method. This helps them win new business and expand existing relationships.
  5. Suppliers don’t have to worry about fraud, since they’re not storing and securing the financial information of their customers.


How Do Virtual Cards Relate to the Accounts Payable Process?

Instead of manually printing checks, routing them around for signatures, and mailing them out to your scores of suppliers, you as a buyer can automate payments and use Virtual Cards. You don’t even have to make changes to your upfront Accounts Payable processes, like your approval hierarchies or workflows. Here’s how simple it is to fit Virtual Cards into the AP payments process:

  • Once you approve invoices, you submit a payment file to your selected payments provider.
  • Your payments partner generates all the needed Virtual Cards and emails them to your suppliers with instructions on how to process them.

Not only can Virtual Cards replace the inefficient process of issuing paper checks, they can bring tremendous value to the business as a whole.

So Why Isn’t Everyone Using them Already?

Despite the long list of perks above – for buyer and supplier alike –  Virtual Cards aren’t yet being used across the board. Suppliers may resist accepting them because of the manual steps required to retrieve card numbers and remittance details from emails, enter information into POS terminals, and apply payments in their systems. They may also wish to avoid the associated interchange/transaction fees.

It’s natural for you to assume these challenges will cause your suppliers to simply reject Virtual Cards outright.

But the adage ‘You never know until you try’ holds true. In fact, the RPMG 2018 EAP Benchmark Survey reported companies had an 80% net increase in suppliers paid with Virtual Card in the last year. It seems suppliers can be won over. You just need to develop a strategy for educating suppliers about the benefits of Virtual Cards once your organization is ready to add this option to your payments mix.

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