While virtual cards, or vcards, are playing a growing role in business payments, market adoption is still in its early stages. As a relative newcomer to the B2B payments industry compared to checks and ACH, virtual cards don’t have the same degree of market awareness, and misperceptions have cropped up along the way. To shed light on B2B virtual cards and how they really work, here are six common myths that we can clear up.
Myth #1: Setting up a virtual card program is hard and time consuming
Because B2B virtual cards are unfamiliar territory, some CFOs initially think it will take a large project to get the program up and running. Actually, it’s very easy to set up a virtual card program because your AP payments provider handles all of the work. Your role is to give the provider a list of your vendors and discuss with the provider how the vendors will be approached, and then the provider takes it from there. Also, the initial application for a virtual card is much simpler than a traditional credit card; it is typically a three-page application that doesn’t require any audited financial information.
Myth #2: A virtual card program would negatively impact relationships with vendors
While some payments providers take an aggressive approach to enrolling vendors for virtual card programs, that is not the norm. Nor is it intrinsic to how B2B virtual cards work. MineralTree, for example, takes a much more respectful approach, presenting virtual card as an option to your vendors to see if it’s a good fit for them. We explain the benefits vendors receive, including getting paid faster, receiving remittance data with their payments, and having greater protection against fraud than with ACH payments and checks as they don’t have to share bank account details.
Additionally, we explain that the cost to vendors is no different than what they would pay to accept traditional credit card payments. As part of this discussion, we will determine if the vendor intends to pass the transaction fee onto the customer. If so, we don’t proceed with enrolling them.
Ultimately, though, the decision of whether or not they participate in the program is up to the vendor—and MineralTree respects that decision.
Myth #3: I will lose control of the vendor enrollment process
The approach of how your payments provider will reach out to vendors is a joint effort between you and your provider, and you are in the driver’s seat. You should have the option to review your vendor list with your payments provider and agree on the talking points and tone of the conversations. You are ultimately in control of the process and can decide what is said and who is approached.
Myth #4: I can’t control how virtual cards are being used
In contrast to traditional credit cards, when you issue a virtual card payment you are in control of how much is charged. It is issued for one-time use only, with a specific dollar amount limit and can only be used for a limited time period (e.g., 30 days). Because of that, you have a high degree of control and an effective way to prevent fraud.
Myth #5: It will complicate how we manage and reconcile payments
The last thing companies need is one more statement to reconcile. Fortunately, virtual card transactions appear on bank account statements as debits, just like ACH or check withdrawals, so there are no additional statements you have to deal with.
Myth #6: Everything is working fine now, so there’s no need to change how we pay
There are hidden costs to doing business as usual, including check and ACH payment fees. Virtual cards are a fast, easy way to pay, and offer strong protection against fraud, which unfortunately is on the rise with ACH and checks. In 2019, 81% of companies experienced actual or attempted fraud, according to the Association for Payments Professionals’ (AFP) Fraud Survey 2020.
In addition, there is an important financial benefit—companies receive cash rebates from virtual card usage. For many MineralTree customers, virtual card rebates actually exceed the cost of their AP automation software.
While not all vendors accept B2B virtual cards, many would be interested in faster, more secure payment along with remittance data to make their accounting process easier. It makes sense for companies to include this method in their payment portfolios as an option to interested vendors, as well as a more secure and profitable way for companies to do business.