What is a Virtual Card?
Neat Team May 3, 2021 11:32 pm

4 Surprising benefits of virtual cards for businesses

What are virtual cards exactly? And how can they help you streamline your finances and grow your business?

Here’s the thing: As your business develops, your purchasing requirements are likely to grow and become more complicated. For example, companies often need to manage more and more vendor and service payments. Plus, as your workforce expands, you’ll need a way to empower employees to make purchases autonomously — while also mitigating risk and keeping a steady hand on your cash flow.

None of this is easy — but thankfully, virtual cards can help.

Virtual cards have boomed in recent years, and the trend shows no signs of slowing down. In 2019, Juniper Research predicted that virtual payment card spending would top $1 trillion by 2022. And since then, Juniper Research discovered that COVID-19 lockdowns had increased businesses’ need for remote payment authorisation, increasing virtual card payments by a whopping 11%.

So, what are the benefits of virtual cards? And how can you use them to improve your businesses’ financial processes? Let’s find out.

What are virtual cards?

Virtual cards are digital payment devices. Think of them like normal credit, debit, or prepaid cards without the plastic. You can use virtual payment cards to make payments online or over the phone.

Virtual payment cards have all the same credentials as a physical payment card, including:

  • Card number
  • Cardholder name
  • Expiration date
  • CVV security code

These credentials are randomly generated using a process called tokenisation. As a result, businesses can create and manage virtual cards quickly and easily.

When using a virtual payment card to make a payment online or over the phone, you would provide the virtual card details just like you would with a physical card.

Like many credit, debit, prepaid physical cards, virtual payment cards typically come with financial controls, such as the ability to set payment limits.

4 Surprising online virtual card benefits

The benefits of virtual cards can make managing payments safer and more straightforward. 

And compared to alternative payment options such as corporate cards and cheques, the idea of adopting virtual payment cards becomes a no-brainer for any fast-growing businesses.

In this section, we’re going to explore four interrelated virtual card benefits and how you can use them to grow your business:

  1. Reduce the risk of fraud and spend violations
  2. Increase transparency and control
  3. Improve financial management processes
  4. Reclaim power from vendors and services

1. Online virtual cards reduce risk and spend violations

Fraud is a serious issue that requires businesses to invest in safeguarding strategies. 

To illustrate this point, data from Oversight revealed that although travel and expense (T&E) spend decreased in the second quarter of 2020, T&E spend violations and fraud rose a whopping 206.7% year-over-year.

If that’s not shocking enough, Juniper Research revealed that ecommerce merchants will lose an estimated $25 billion in 2024 to online payment fraud — up from $17 billion in 2020.

Now, businesses often issue the same high-limit corporate card to many employees. This payment card then gets used to pay for countless different expenses. In this scenario, there’s massive potential for fraud, theft, and abuse.

Firstly, should the card details be stolen, the thief will have access to a large amount of money. Businesses would then have to:

  • Cancel the card
  • Reissue new cards to all employees
  • Wait for the cards to arrive
  • Update the payment details for every vendor and service

On the other hand, virtual payment cards allow you to diversify the risk of fraud and spend violations by simply creating multiple online payment cards with strategic payment limits.

To start, virtual cards can’t be lost or stolen in the real world. 

However, if an employee’s card details are stolen online, you can simply shut down the card and create a new one. That employee can then update the payment details for the vendors and services they’re responsible for. This process is quick, and it won’t affect your other employees or payments for vendors and services. 

The damage is contained. 

You could even take it one step further and generate separate virtual cards for each purchase, vendor, or service.

Plus, setting different card limits for individual employees allows you to safeguard against spend violations and unnecessary purchases.

2. Virtual payment cards increase transparency and control

Instant virtual cards increase the visibility of business spending and provide additional options to manage and control expenses.

When many employees are using the same payment card, it can be tough to understand who made each purchase. It’s also challenging to control spending effectively when you find out the details after purchases have already been made.

Again, online virtual cards offer clear advantages over standard physical cards.

Businesses can simply issue a unique virtual card to every employee, allowing finance teams to easily track spending.

You can also set individual spending limits for employees, which helps prevent violations and helps you manage cash flow more effectively.

You can even require employees to submit approvals for expenses. For example, if an employee needs to hire a freelancer to help with a project, they can send a request to their manager for approval. The manager can then increase the limit on the employee’s virtual debit card.

It’s also possible to create separate virtual cards for each vendor or service provider to track how much you spend with each one. Similarly, you can create single-use virtual cards for large one-time expenses to increase security and make it easier to track funds.

Finally, businesses can also cancel virtual cards whenever there’s a need to stop someone’s spending, such as an ex-employee.

All in all, virtual cards provide an enormous amount of flexibility for managers and finance teams to manage expenses.

The best part? All of this flexibility and control creates next-to-no drawbacks for employees as they can continue to make purchases like normal online and on the phone. 

3. Online payment cards improve financial management processes

When many employees share the same payment card, financial reconciliation and accounting quickly become complicated and time-consuming. Consequently, it makes sense to issue employees individual cards — however, this process is expensive and inefficient.

Virtual cards make this entire process much easier, as finance teams can create, issue, and manage the cards online.

Plus, employees can start using their virtual payments cards immediately, as there’s no need to wait for physical cards to arrive in the post. This is especially useful for remote teams operating in different countries where it might take weeks for physical payment cards to arrive.

In addition, allocating unique corporate cards to individuals, teams, vendors, or services can make accounting and reconciliation more straightforward. This type of set up makes it easy for finance professionals to see all spend owners and the purchases they’re responsible for at a glance.

Still, perhaps the most attractive aspect of virtual cards for finance teams is the built-in live reporting and accounting. With carefully managed virtual cards, finance professionals can see what funds are available, what’s been allocated, and what’s been spent. Everything is tracked in real-time, eradicating the need for time-consuming spreadsheets and paper trails.

Bottom line, online virtual cards can significantly reduce financial administration tasks and ultimately save businesses time and money.

4. Virtual cards allow businesses to reclaim power from vendors

Another benefit is the ability to reclaim power from vendors and subscription services.

In essence, when you give a vendor or service your card details, they’re able to charge your card whenever they want. Consequently, it’s not uncommon for subscription payments to continue longer than needed and for price increases to happen without noticing.

Instead of discovering these unnecessary payments on your account statement at the end of the month, online virtual payment cards allow you to prevent them from happening altogether.

For example, when an employee signs up for a software service they need for a limited time, you can create an instant virtual payment card with a limit. This way, if the employee forgets to cancel the subscription on time, you won’t be out of pocket.

Similarly, you can create limits for different vendors to stop them from overcharging you or making unapproved changes.

How to use virtual cards: 5 online payment card tips

Now that we’ve thoroughly explored the benefits, let’s take a quick look at five tips to help streamline your finances, free up time, and save money.

1. Create separate cards for employees or teams

First things first: Instead of having many people using the same card, streamline your expense process by assigning unique cards to individuals or teams. This will allow you to track spending and oversee expenses more easily. You should also set appropriate limits for each individual or group.

2. Create separate cards for specific functions

You can create instant virtual cards for specific purposes. For example, you could make one to pay for monthly subscriptions for software tools like Slack or Google Workspace. 

In another example, you could create a separate one to pay for your Facebook advertising campaigns. This way, you’ll be able to see how much your total Facebook advertising spend is at a glance, no matter how many campaigns you run.

3. Create dedicated virtual cards for events

Whenever your business puts on an event, consider using a single card to easily track all event expenses and ensure the event managers stick to the budget. Once the event has passed, you can then shut down the card and never worry about fraud or theft.

4. Create virtual cards for third-parties

If you work with consultants or firms and regularly reimburse their expenses, consider giving them a virtual card with reasonable limits to reduce admin. Remember, you can always shut the card down at any time.

5. Don’t create too many online virtual cards

Although it can be incredibly easy to create virtual cards, issuing too many can quickly become a managerial nightmare. So, before you start issuing cards, make sure you have a well-thought-out plan for managing them.

Start using virtual cards today 

Virtual cards are quickly becoming an essential tool for fast-growing businesses. In summary, here are four virtual card benefits for business:

  1. Virtual payment cards reduce the risk of fraud and spend violations by allowing you to create unique cards for employees and functions.
  2. Online payment cards increase transparency and control for managers and finance teams by enabling them to set limits and require prior approval for purchases.
  3. Virtual cards streamline the financial management process by allowing finance professionals to see all spend owners and transactions in real-time.
  4. Virtual payment cards enable businesses to reclaim power from vendors and subscription services by creating dedicated cards with set limits.

All in all, virtual cards provide enormous transparency, flexibility, and control over your payments and expenses process.

How to get a virtual card in 15 minutes 

Harness the power of virtual cards for your business by signing up for a Neat Account

You’ll gain access to instant virtual cards and can start using them anywhere that accepts Visa. Neat’s virtual payment cards also allow you to set customised spending limits for each cardholder and create instant transaction notifications. 

Plus, Neat’s cards come with useful benefits, such as:

  • 1% cashback on all purchases
  • More than 25 exclusive perks and discounts
  • Limited corporate liability and travel accident protection

There’s no hidden charges or monthly fees either. Sign up now.

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