Why You’re Not Maximizing Virtual Card Rebates (And How to Fix It)

Organizations can win big with virtual cards, both in terms of secure, seamless vendor payments and optimizing a payments strategy. They not only offer unparalleled convenience but also bolster security and significantly reduce the risk of fraud compared to their physical counterparts and other payment methods like checks and ACH transfers.  But are you optimizing your virtual card spend to maximize your rebate revenue? 

If not, you’re missing out. In fact, you might be leaving money on the table – money that can be reinvested into your organization or the bottom line. (Or maybe even pay for something like automating your vendor onboarding process- 😉!

Let’s dive into why virtual cards are a top choice for vendor payments, what virtual card rebates are, and how you can optimize these rebates to enhance your payment strategy.

Virtual cards offer a stand-out vendor payment option for several reasons. First, they offer convenience; with just a few clicks, payments are made instantly, without the need for physical cards or cumbersome checks. Secondly, security is a major plus; organizations can issue each virtual card to a specific vendor with a set limit, reducing the risk of unauthorized transactions. 

Lastly, they excel in fraud prevention. The unique number generated for each transaction acts as a barrier against fraud, a significant advantage over checks or even physical credit cards that are prone to theft and misuse.

But here’s why finance professionals are actually excited: virtual cards can generate significant rebates. Similar to rewards on a personal credit card, businesses earn back a percentage of their total spend made through virtual cards. This can translate into substantial financial returns, turning a routine part of business operations into a revenue stream.

They work on a simple principle: for every transaction made with a virtual card, the issuing bank or financial institution offers a share of the vendor’s interchange rate with the payer, aka a rebate. The more dollars you pay out to your vendors on virtual cards, the higher your rebate.  Organizations of all sizes in all industries are drawn to and incentivized to use virtual cards for larger and more frequent transactions. 

That said, don’t overlook smaller vendors. It’s tempting to focus on your top 20% of spend but it’s actually the other 80% where you have a real opportunity to optimize rebates. Smaller vendors are often more greatly impacted by cash flow issues and are more likely to appreciate faster payments.

It’s a bit of an oxymoron, yes, but the team charged with spending money often uses that activity to generate revenue for the  business. And the impact isn’t just a bottom line impact; we’ve seen people get promotions from doing this right!

This is exactly what the City of Vista did in promoting an account clerk to an account tech, using the fruits of their labor to empower the finance team to be even more strategic:

If you already have a virtual card program but aren’t seeing the results you want or need, start by revisiting your entire payments strategy.

Maximizing the benefits of virtual card rebates means being thoughtful and executing a payments strategy.Here’s a deeper dive into making virtual card rebates a cornerstone of your payments strategy, ensuring you’re not leaving any money on the table. 

Most organizations start with the obvious: a bank-led call campaign. These are a pretty heavy lift; however, they can yield great results.

They go something like this:

1. Vendor Selection: Your bank looks at your supplier file and identifies which vendors are likely to accept virtual card payments. 
2. Setting Up: Your bank will coordinate to set up your account for virtual card transactions. This can involve setting payment limits, specifying approval processes, and defining rebate terms.
3. Call Campaign: Your bank will use their internal resources, bolstered by your AP team, to call and ‘recruit’ the identified vendors to accept virtual cards for their payments going forward. This might occur via email or even snail mail. Once you have a new vendor hooked and set up correctly in your ERP, you can begin paying with a virtual card.
4. Transaction Execution: For each payment, a unique virtual card number is generated and used by the vendor. This number is linked to a specific transaction amount and expiry date, which minimizes the risk of fraud.
5. Reconciliation: Each transaction is tracked and recorded automatically, easing the reconciliation process and providing clear audit trails.
6. Rebate Accumulation: As transactions are processed, rebates accrue according to the terms set with your virtual card provider. These rebates are usually paid out on a monthly or quarterly basis.

As mentioned at the top, this is a time—and labor-intensive—process that requires effort from many teams across most organizations. 

If you already have this work behind you, awesome, but now what? Once the call campaign is over, how else can you impact your rebate revenue? How can you bolster your bottom line against leakage of vendors opting for ACH or check in the future?

Vendor onboarding

The first step in taking advantage of virtual card rebates is through an automated vendor onboarding platform. This technology not only simplifies the process of adding new vendors but also allows you to continuously onboard vendors to a virtual card payment type. What’s more, you will get vendors saying yes right from the start. This equals rebate revenue with that very first invoice!

By automating the vendor onboarding process and marrying it to the virtual card onboarding process, you can significantly impact the number of vendors who will consider taking the card. Not every vendor is targeted by a traditional bank-led call campaign, but every vendor has to give you their W9 to start working with you. Ask them at that moment if they will take a card. Better? Don’t ask them, just default your form’s payment choice to be a virtual card.

Part of effective onboarding is educating vendors about the benefits of accepting payments via virtual cards, so don’t forget this part. Remind vendors that virtual cards enable them to get paid faster – and more securely.  Highlighting the benefits and the favorable payment terms right at the moment they are asked to choose between virtual card and check will give you educated vendors who understand what they are opting into.

Proactive management

If you’re just now making the switch to an automated vendor onboarding and management platform, you likely have quite a few (if not all) vendors that you can move to a virtual card payment.  Ensure your onboarding form is dynamic and can support payment choice options. Monitor the acceptors and the associated spend so you can chart a clear before and after on your rebate revenue.

Using automated vendor onboarding to maximize virtual card payments is an ongoing process. Use this data to inform your payment strategies and identify opportunities for further optimization.

You may also need to adjust your strategy over time. As your business and vendor relationships evolve, so should your approach to using virtual cards. Be prepared to adjust your strategy to continue maximizing rebates.

Leveraging technology

The key to successfully integrating virtual card rebates into your payment strategy is using the right technology. An automated vendor onboarding platform not only streamlines the addition of new vendors but also ensures that virtual cards are integrated into your payment processes from day one. 

This dual approach of automation and strategic payment routing maximizes your organization’s rebate potential, making the process effortless. You can hear The University of Tennessee System’s Director of AP, Tisha Marshall talk about how they used an automated platform to increase the adoption of their virtual card program below: 

Virtual card rebates can make a pretty big financial impact on your organization. Ideally, it can turn your accounts payable department into a revenue-generating unit. We’ll get into that more now.

Let’s explore how virtual cards can elevate your organization’s revenue potential and turn the Accounts Payable (AP) department from a traditional cost center into a dynamic profit center.

Virtual cards redefine the economics of vendor payments by introducing a compelling revenue model through rebates. Unlike traditional payment methods (think: checks or ACH transfers), virtual cards offer a unique opportunity to earn money back on every transaction. This shift from cost to revenue is pivotal, especially in large-scale operations where even small percentage rebates can accumulate into substantial amounts over time.

Cost comparison: virtual cards vs. traditional payment methods

Check payments: The traditional method of check payments is fraught with hidden costs, from printing and postage to manual processing and reconciliation efforts. Each check can cost an organization between $4 to $20 when considering materials, labor, and potential for fraud.

ACH transfers: While ACH transfers reduce some of the costs associated with checks, they still involve processing fees and lack the revenue-generating potential of virtual card rebates. Furthermore, ACH does not offer the same level of control and fraud protection as virtual cards. (Unless you use PaymentWorks for your vendor onboarding- we vet those bank accounts and identify fraudsters before a payment is made. But this is a story for another blog.)

Virtual cards stand out as the ideal payment method for several reasons:

Higher rebate potential: Virtual cards typically offer higher rebates than physical credit card rewards, turning a significant portion of your accounts payable into a revenue stream.

Enhanced security and control: With features like single-use numbers and customizable spending limits, virtual cards significantly reduce the risk of fraud and unauthorized transactions.

Operational efficiency: Automating payments with virtual cards streamlines the payment process, reducing the administrative burden on your AP department and lowering operational costs.

By utilizing virtual card payments, organizations can transform their accounts payable (AP) from a cost center into a profit center. That is to say, instead of viewing vendor payments as mere operational expenses, businesses can look at them as opportunities to generate revenue. Don’t believe us? Listen to Sharon Loosman and Megan Catt of North Carolina State University talk about how they not only slashed paper-pushing tasks but created a profit center: 

How to transform AP

Here’s how virtual card rebates can transform your AP function: 

Direct revenue generation: The rebates earned on virtual card transactions can directly impact your bottom line, turning what was once an operational expense into a source of revenue.

Operational savings: Reducing labor-intensive payment methods (i.e., paper checks) means your organization can save a ton in operational costs, improving financial performance.

Strategic financial management: Virtual card rebates enable AP departments to contribute strategically to the organization’s financial health, whether by investing rebate earnings back into growth initiatives or using them to improve cash flow management.

And here’s how to do it: 

• Maximize enrollment: The more payments you process through virtual cards, the more rebates you’ll accrue. Work to convert as many vendor payments as possible to virtual cards.
• Negotiate better rates: Depending on your volume, you might be in a position to negotiate better rebate terms with your card provider.
• Leverage data: Use the data from your virtual card transactions to analyze spending patterns and identify further cost-saving opportunities or additional vendors who could accept virtual card payments.
• Streamline operations: Reduce processing times and costs by integrating virtual cards into your ERP system, which can help improve overall efficiency and cost-effectiveness.

Implementing virtual cards in your vendor payments strategy is more than a shift in payment method; it’s a strategic move toward financial optimization. Organizations can use virtual cards not just for their convenience and security but as a tool for financial innovation and growth. 

Educate your team on the cost benefits and substantial revenue potential of virtual card rebates – and the importance of leveraging automated vendor onboarding to streamline and simplify how vendors can opt-in to virtual card payments. This proactive approach can transform AP from a cost center to a profit center, showcasing the untapped financial potential within vendor payments.

Will you be partying with us for Vendor Management Appreciation Day (VMAD)? We highly encourage you to join us! 

Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.

Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for this year’s celebration, and we want you to be a part of it!

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

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

In the meantime, learn more here, and grab some free vendor management goodies.

Explore our blogs below. They’re filled with action items you can implement right away.

Growing Your Virtual Card Payment Program

What You Don’t Know About the Rising Popularity of Electronic Vendor Payments

The Benefits of B2B Virtual Card Payments You Probably Don’t Know

Vendor Verification: How NOT to Do it and What to Do Instead

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