Reinventing the Future of AP with B2B Virtual Card Payments

Modern AP departments must be flexible, efficient, and up to date with the latest digital payment methods to stay competitive. This is particularly important for business-to-business (B2B) transactions where delays and errors risk compromising vendor relationships and come with financial consequences.

Businesses can offer their vendors and suppliers a faster, more secure alternative to paper checks by incorporating virtual card payments into the payment mix. Virtual card payments already account for $320 billion in annual worldwide transaction volume and are projected to reach a volume of $553 billion by 2024.

Additionally, most B2B businesses are still using manual processes to facilitate payments. According to Goldman-Sachs, 60% of B2B payments are still made via check, which can be labor-intensive and expensive for companies. Accounts payable costs are at around $2.7 billion. Fortunately, these expenses can be reduced through the implementation of AP automation and electronic payment solutions.

This post will outline the value of virtual cards, how they work, and why B2B companies should consider switching to virtual card payments.

What is a Virtual Card in B2B?

Virtual cards are randomly generated 16-digit credit card numbers that can be used only once and for a specific, pre-set amount. The “virtual” in virtual cards means that they are not physical objects like plastic credit cards. However, vendors process them in much the same way that they would a credit card payment.

Virtual cards are randomly generated, 16-digital numbers, sometimes referred to as “tokens,” that are authorized for a specific amount. In most cases, virtual cards are single use and can be swiped only once for the authorized amount. However, it’s also possible for some AP automation platforms to generate multi-swipe virtual cards, which offer greater control and security than traditional credit cards while meeting specific needs of vendors. For instance, if the vendor’s merchant terminal has a transaction limit, a large payment could be broken into multiple swipes up to the authorized amount. Additionally, multi-swipe virtual cards could be used in instances where a single payment covers multiple invoices, but the vendor’s AR process requires one swipe per invoice.

Virtual card payments are inherently more secure than a credit card or other payment types. Moreover, virtual card payments are faster than other payment forms and can be incorporated seamlessly into automated payment processes.

How Do Virtual Cards Work?

Vendors receive virtual card payments via email, and they process them the same way they would a credit card payment. Virtual cards are the fastest form of payment, they are more secure, and they also provide a better experience for the vendor by delivering the payment and remittance together in the email. Virtual cards not only streamline the payment process but make reconciliation much easier.

The 16-digit virtual card number is created through a process called tokenization and typically can only be charged one time for a specified amount. Virtual card payments can also be set up to expire if not charged within a designated time window. These factors make virtual cards inherently more secure than most other payment types, including checks.

How Virtual Cards Are Changing the Payment Process in B2B

Virtual cards simplify and improve the AP workflow for both sides of B2B transactions. On the payer side, they help eliminate manual tasks and integrate well with automated processes. This reduces workload, but also costs–which are further enhanced by rebates and early payment discounts. According to recent research, organizations that implement automated AP automation could decrease costs by up to 75%.

Meanwhile, vendors receive their payments faster and in a way that reduces paperwork and error on their end, since they don’t need to process physical checks. The COVID-19 pandemic accelerated the adoption of digital technologies across most industries. Many vendors have come to expect these types of payment options and the added convenience that comes with being able to handle transactions from any internet-connected device.

The Benefits of B2B Virtual Cards

The benefits of virtual cards are many–some of which have already been described. Ultimately, virtual card payments enable faster, easier, and more secure invoice payment, all while providing greater transparency, improving reconciliation, and more, making them a key payment method for modern B2B transactions.

Faster Payments

When compared to other payment options, virtual cards are the fastest. They no longer need a person involved who must verify approval, print a check, and mail it. This leads to improved vendor relationships because it increases the number of on-time payments and generally makes it easier to predict when payments will arrive.

Rebates

Virtual cards add to your business’s bottom line in more than one way. Not only do they permit more access to working capital and the potential to take advantage of early payment discounts, but many virtual card providers offer cash-back rebates on every payment. In fact, by playing your virtual cards right, you can earn enough rebates to cover your AP platform’s cost.

Improved Transparency

When integrated into your AP system, virtual card payments can improve both your and your vendors’ ability to view and track invoices and payments. You will always know exactly where your money is and when it will leave your accounts. This access to real-time spending data can improve quarterly budget management and make it easy to generate up-to-date reports.

Decreased Fraud

Using virtual cards means you have no physical, plastic credit cards to protect or checks to keep track of. The virtual card number is only valid for one-time use for a specific amount. There’s no need to worry about vendors storing your credentials since each individual payment generates a random, 16-digital number. This eliminates the possibility of payment information falling into the wrong hands either via snail mail or email.

Lower Costs

Because virtual card payment initiation can be automated, and because there are no physical checks to print, stamp, and mail, sending payments via virtual card is less expensive than other payment methods. The lower costs come from reduced labor hours in addition to the cost of paper, printer ink, and postage. Additional savings come from reduced errors and fewer late payment penalties as well.

Reduced Manual Tasks

The fewer manual tasks that must be performed by the AP department, the easier it is for the department to handle fluctuating invoice volume. The extra time also means existing employees can focus efforts on more creative endeavors and complex tasks instead of stuffing envelopes or tracking down invoices and payments.

Reducing manual processes not only saves time and money but tends to reduce errors associated with repetitive tasks and promotes overall efficiency and end-to-end AP streamlining. Vendors are happier because payment is timely and predictable and AP teams are happy because they can spend their time on more engaging projects.

Easier Reconciliation

Virtual cards facilitate easier tracking and categorization for reconciliation and expense management. Corporate credit card reconciliation requires the time-consuming task of reviewing separate credit card statements each month, but with virtual cards, the entire reconciliation process occurs within the same platform and bank account that payments are made through.

 

More Control

With the entire end-to-end AP process–including virtual card payments–happening on the same platform, organizations have much better visibility and control. Virtual card payments flow much more easily into the standard approval process when compared to payment options such as corporate cards, where employees might just use the card to make a purchase without the same approvals and controls. AP departments can view all invoices in one location and set exact payment dates and alerts. And because each payment is set for a specific amount and can only be processed one time, cash flow control is improved as well.

 

Challenges with B2B Virtual Cards

The team capacity to contact and enroll vendors is one of the main challenges to digital payment adoption. Although 64% of AP teams intend to make more electronic payments in the upcoming year, the process can be time-consuming for departments that are already strapped in terms of time.

However, partnering with the right digital payment provider can help. MineralTree offers supplier enablement services to help maximize vendor enrollment in the virtual card. When Simple Mills elected to adopt SilverPay, they were able to save time and resources, since the AP automation company was able to handle this process for them.

Maddy McGannon, Simple Mills’ Controller, noted “what was really great about SilverPay was that the entire process was led by the MineralTree team. They went through our list of suppliers and identified those they knew accepted virtual card payments, contacted each one, and enrolled most of them in SilverPay.” Due to the rebates collected by using SilverPay, Simple Mills was able to offset the costs associated with their AP automation platform and are now working alongside MineralTree to enroll more vendors.

B2B Virtual Card Case Studies

Many businesses are already reaping the benefits of virtual card payments. Here are just a few examples of how some have found great success by adopting MineralTree’s SilverPay Virtual Cards:

Affinity Dental Manage Uses Virtual Cards to Streamline Supplier Payments

Affinity Dental Management recently began using MineralTree’s SilverPay as part of its AP automation adoption. This helped them further streamline supplier payments and earn valuable cash-back rebates which have more than offset the cost of the entire MineralTree solution. The use of virtual cards has also improved their relationships with suppliers, many of whom enjoy the ability to process payments immediately.

cCare Takes Advantage of Cash-Back Rebates

California Cancer Associates for Research and Excellence (cCARE), a full-service, private oncology and hematology practice in California took advantage of SilverPay for the valuable new revenue stream its cash-back rebates offered. This approach also provided cCARE’s AP team with a digital means of supporting vital processes during the work-from-home restrictions imposed by the COVID-19 pandemic, enabling them to pay vendors without visiting the office to print paper checks.

BrightView Health Can Support Rapid Business Growth

BrightView Health–a provider of outpatient medication-assisted treatment–was able to support rapid business growth with the help of MineralTree. In part, this growth was enabled by adding SilverPay to its payment mix, which not only generated cash-back rebates but provided control over outgoing cash. BrightView Health’s AP department can now precisely time payments to hold onto cash as long as possible while still paying suppliers within their terms.

If you’d like to learn more about how MineralTree’s SilverPay virtual cards can help your business, request a demo today.

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