Growing Your Virtual Card Payment Program

by Ashley Poynter

Content Manager

Growing Your Virtual Card Payment Program

Implementing virtual card programs enhances the vendor management function. What’s more, it can improve performance across the entire organization. These programs streamline payment processes, enhance security with single-use card numbers, improve cash flow for vendors through faster payments, have cash-back incentives for payers, and offer greater control and visibility over transactions.

They also reduce manual processing and offer detailed transaction data. The result? Your organization can better manage expenses, negotiate vendor terms, and allocate resources efficiently.

But wait, there’s more: virtual cards also mitigate the risk of fraud, making them a valuable tool in modern vendor management strategies.

What Is a Virtual Card Payment Program?

5 Ways Virtual Card Payment Programs Enhance Vendor Management

#1. Enhanced Security

#2. Improved Cash Flow

#3. Payment Optimization

#4. Better Accountability

#5. Enhanced Spend Management

Virtual Card Payment Programs in Action

–Case Study: Dartmouth College

Continuous Enrollment and Why It Matters

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What Is a Virtual Card Payment Program?

A virtual card payment program is a digital alternative to traditional physical credit cards. It uses a unique, temporary 16-digit card number for each vendor payment transaction.

A virtual card payment program is secure since it doesn’t require a tangible token (aka cash or a physical credit card). Instead, these payments are akin to credit transactions occurring between your accounting department and the accounting department of your vendor.

Additionally, these virtual card payments can also simplify the reconciliation process via efficient electronic payments and improved cash flow management. Better yet, you can tailor virtual card payment programs to include payment controls. So you can place limits on merchant types, amounts, and more to keep payments compliant and aligned with other internal policies.

5 Ways Virtual Card Payment Programs Enhance Vendor Management

Virtual card payment programs are growing in popularity – and with good reason. A recent report by Juniper Research estimates the total volume of virtual card transactions will hit 175 billion by 2028. That’s a stark increase from 36 billion in 2023.

Organizations employ virtual cards for many reasons. For one, they are way more efficient than traditional means (i.e., checks). Additionally, most vendors who accept credit card payments will also accept virtual card payments, enabling a higher adoption rate.

But the benefits extend far beyond ease of use. Let’s dive into the biggest benefits of virtual card payment programs.

#1. Enhanced security

Virtual cards use unique numbers for each transaction, reducing fraud risk. Why? Because there’s no physical card to be stolen or duplicated. The unique number is only good for one-time or limited time use, adding an extra layer of security.

Moreover, virtual cards don’t require the vendor to share their bank account information, unlike checks or ACH payments. That means there’s less risk of sensitive information ending up in the wrong hands. In fact, the payment information is never connected to a vendor’s bank account.

Controls can add another layer of security, limiting how virtual cards can be used. For example, you might add amount limits or specify time frames. This protects payments from bad actors. Even if a virtual card number were stolen, if a fraudster tried to use that number outside of the specified time frame or spend an amount not equal to the specified amount, the virtual card wouldn’t work.

The security benefits alone make virtual cards a superior option to most payment methods, and especially to paper checks. Our partner from Huron, Snow Rutkowske, highlights some other reasons to stop using paper checks below:

Long story short, virtual card payment programs are one of the most secure ways to pay vendors.

#2. Improved cash flow

Faster electronic payments can lead to better cash management – and virtual cards are faster than checks and ACH payments. Additionally, virtual cards integrate nicely with an organization’s procurement processes, allowing them to extend days payable outstanding (DPO) while increasing rebate revenues. On the other hand, vendors can increase cash flow by reducing days sales outstanding (DSO), making it ideal on both sides of the transaction.

Virtual card payment programs also create operational efficiencies for accounts payable (AP) by automating the reconciliation process. And vendors can also access robust data for reconciling accounts receivable (AR).

Our own Grace Mabie waxes poetic on some recent trends in virtual payments and how the efficiency of this payment method can make a big difference, no matter which way you slice it:

#3. Payment optimization

With the right vendor onboarding platform, it’s possible to marry your payables strategy to your vendor onboarding process and convert vendors to electronic payment types. This is a huge win for most organizations that, despite internal mandates and efforts, are still paying the majority of vendors by check.

And moving away from that payment method is tough. Incomplete contact information thwarts efforts to talk vendors off of checks, and bank calling campaigns for virtual cards are disruptive and yield minimal results. Worse yet, most organizations have no straightforward way to report on the effectiveness of the payment strategy.

With a digital supplier onboarding platform, organizations can increase rebates by increasing virtual card spend via continuous digital enrollment. By enrolling vendors from the very start of the relationship, organizations can pay via virtual card from the very first invoice.

The ability to tap into robust analytics around these payments means organizations can monitor and adjust their payments strategy as needed to align with overarching business goals.

#4. Better accountability

If you rely on manual vendor management processes and your primary vendor payment methods are not virtual cards, then you’re probably used to paper chasing. The vendor desk is often tasked with manually tracking and reconciling payments, which means keeping track of pesky paper receipts, scrubbing transactions against purchase orders, and getting tension headaches from reading through credit card statements.

Virtual cards streamline all of that, automatically allowing for better tracking without needing more manual labor. You’re able to simplify reconciliation while increasing accountability around finances and tracking expenses in a more sophisticated way.

#5. Enhanced spend management

Spend management is critical but challenging. You know it and I know it, right now, companies are under increased scrutiny to cut costs. Ironically, this is often complicated by expense management bottlenecks and lackluster insights (or simply lacking transparency) into financials.

Virtual cards can help organizations speed up reconciliation, improve transparency, and efficiently allocate resources with real-time visibility into spend analytics.

The ability to tailor and add controls to virtual card payment programs means organizations can be sure expenses are correctly allocated while avoiding misuse and unauthorized purchases.

Virtual Card Payment Programs in Action

Don’t just take our word for it or gamble on hypotheticals. We have a real-life example of a higher education institution that was able to convert the vast majority of its payments to ACH or virtual card. Let’s dig in.

Case Study: Dartmouth College

Thanks to a college-wide initiative to move to a cashless and checkless campus, the Procurement Services team at Dartmouth College — with $527M in A/P spend — was ready to move their suppliers off of check payments. When the pandemic unfolded, they found the perfect time to move to preferred methods of electronic payment: Virtual Card and ACH.

In previous years, with worries of ACH fraud risk keeping most vendors on check payments, the College had been successful in building a Virtual Card program as their exclusive form of electronic payment. However, it had been several years since their last bank-assisted vendor recruitment campaign. They knew there was an opportunity to grow the program further by soliciting suppliers that had been onboarded since the last campaign.

With the implementation of PaymentWorks for digital supplier onboarding and management, the College now had a risk-free way to move to ACH, and a new lever to pull to encourage Virtual Card adoption.

After conducting an analysis of their existing vendor file, several hundred vendors were identified as good candidates for Virtual Card payments.

The College then sent emails to the targeted suppliers requesting they register on PaymentWorks to update their existing information. This helped Dartmouth strengthen its regulatory compliance.

More than 56% of the targeted suppliers completed their registration on PaymentWorks. As a result, Dartmouth’s existing Virtual Card spend increased by 8% annually. Additionally, they were massively successful in moving vendors off of costly and time-consuming check payments to ACH.

Since implementing PaymentWorks, the College has seen 75% of onboarded vendor spend move from check to ACH or Virtual Card.

Continuous Enrollment and Why It Matters

When it comes to growing your virtual card payment program, getting vendors to accept virtual cards is key. In most cases, they can and will, if you have the right finesse. As we mentioned earlier, it’s usually true that if a vendor can accept credit card payments, they can also accept virtual card payments.

But what about vendors you’ve been working with who are currently using a different payment method? With the right vendor onboarding and management automation platform, you can execute a recruitment campaign with your financial institution partner.

The platform can extend the reach of this type of campaign by continuing to enroll vendors after the campaign has ended and by reaching vendors that are not typically targeted during a call campaign.

No friction for new vendors

And what about new vendors? This is the fun part. With an automated vendor onboarding platform, you can continuously enroll new vendors into your virtual card program with virtually zero friction.

You simply offer and highlight the benefits of choosing virtual cards as a payment method to capture virtual card spend from new suppliers. That means you can start earning rebate revenue right from the first invoices. For example, last year, a PaymentWorks customer, an independent school district (ISD), updated their form within our platform and saw immediate and impactful results. Within the first month, virtual card adoption jumped from 0 to 20% of vendors and averaged double-digit adoption moving forward:

It’s also the best way to grow your virtual card payment program. Waiting until the vendor is already onboarding can introduce friction to the process by asking them to change the way things are done.

They may already be comfortable receiving another payment method and hesitant to switch. Continuous onboarding makes it seamless to onboard the vendor, enroll them in the vertical card payment program, and collect their information from the start.

Growing your virtual card payment program can be very advantageous. Not only does this payment method enhance security and streamline financial operations, it offers improved cash flow, increased control and compliance, and significant cost savings.

As businesses continue to seek efficiency and security in their transactions, the adoption and growth of virtual card payment programs can be a strategic way to achieve these objectives – and to boost your organization’s financial health and operational success.

Get Ready For Vendor Management Appreciation 2024

Good news! The Vendor Management Appreciation Day (VMAD) celebration continues in 2024. It’s our way of creating one giant love letter to our favorite people: vendor managers!

Why? Because we know it’s one of the most critical, under-recognized roles across industries.

VMAD is a brand-new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.

We’ve released gifts each month to help you supercharge your vendor management efforts. We’re also planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.

Learn more here, and grab some free vendor management goodies.