How Virtual Cards for B2B Payments Improve Cash Flow, Capture Efficiencies, and Reduce Fraud

J.R. Robertson
J.R. Robertson
Vice President, Coupa Pay, Coupa Software

J.R. Robertson is Vice President, Coupa Pay, and an entrepreneurial enthusiast and culture builder at Coupa. He holds a Bachelor of Business Administration (B.B.A.) in Marketing Management from California State University, Chico, and currently resides in the smoky state of California.

Read time: 14 mins
How Virtual Cards for B2B Payments Improve Cash Flow, Capture Efficiencies, and Reduce Fraud

Cutting costs and mitigating risk is top of mind for many CFOs, especially in times of business uncertainty. One area that can positively impact your bottom line and decrease risk, if managed properly, is payables. Yet inefficient processes, incomplete reporting, lack of transaction visibility, and the growing risk of fraud can lead to missed payments and decreased cash flow.

The Coupa Pay team is seeing many CFOs move away from traditional credit card transactions because of the risk they pose. One large financial institution recently confirmed this, with many CFOs moving their physical credit card spend to what we call a “controlled invoice” process to reduce risk, increase visibility and efficiencies, and gain control over spend. Virtual cards (vCards)—also sometimes referred to as virtual credit cards (VCCs)—combine the benefits of physical/purchasing cards (p-cards), the functionality of a check, and the efficiencies of ACH to improve cash flow, capture efficiencies, and reduce fraud. They offer a controlled invoice process because the business can control how much is spent and who is paid.

[Looking for insights on how to improve your cash flow, protect your supply chain, and increase agility? Download the new eBook, Rethinking Working Capital Management and Payments]

Used properly and strategically, vCards enable an organization to:

  • Improve payable processes for both buyers and suppliers by streamlining day-to-day payments and providing greater control over cash flows. 
  • Enhance security that mitigates the risks of misuse, protecting against fraud better than traditional physical business credit cards. 
  • Extend DPO on purchases and drive increased rebate revenues, while also creating operational efficiencies for AP with automated reconciliation.

In this article, we explore what vCards are and why vCards are trending, the drawbacks of existing solutions, the full benefits of adding vCards to your payments processes, and how to best integrate vCards into your payments systems and workflows. We’ll also discuss how a modern P2P payments platform enables capturing the most value from vCards.

What is a vCard?
A virtual card is a digital representation of a credit card that is typically generated for a specific use, like paying a supplier invoice or purchase order. Virtual cards can be created instantly through a pre-approved process and are assigned to the specific amount of the payment or order they are tied to. Each virtual card has a unique number that ensures security and reduces risk. This allows employees to utilize a card payment in more scenarios while still encouraging adherence to their employer’s pre-approved spend policies. 

vCards use a unique 15- or 16-digit virtual card number that is automatically generated, with payment authorized only for the designated supplier and a designated amount. This information, along with remittance detail, is emailed securely to the supplier. The supplier then submits the transaction. With vCards integrated into a modern Business Spend Management (BSM) technology platform, the transaction is automatically reconciled with the associated purchase order once the payment is processed.

vCard spend to exceed $1T by 2022
Despite the digital revolution in consumer payments, most companies still rely on checks and ACH to pay and be paid by their business partners,yet this is changing for Fortune 500 corporations and SMBs alike. Innovation is underway, with 33 percent of companies planning to roll out real-time payments innovations in the next three years and 32 percent working to introduce innovations related to automated payables, according to PYMNTS’ B2B Payments Tipping Point: Why All Signs Point To Innovation report. The report concludes that the B2B payments field is ripe for innovation. 

According to Juniper Research, the annual value of vCards used by businesses will grow 90 percent over the next four years, exceeding $1 trillion by 2022, up from an estimated $568 million in 2019. By 2021, virtual card spending is expected to surpass that of traditional purchasing cards and checks, meaning vCards will soon secure a larger share of the corporate card spending space than physical corporate cards.

Smart businesses—from large enterprises to SMBs—committed to technology innovation and capturing new value and agility are leading the way with vCard adoption. Larger firms are investing in payments innovation generally, with most already taking steps toward AP automation or planning to do so. SMBs, meanwhile, are taking advantage of the opportunity to adopt AP automation to get ahead of the competition and facilitate fast growth.

[Get the most value out of your AP, supplier management, and payments strategies with a new model for driving efficiency, optimizing cash flow, and mitigating risk by accessing our eBook, Rethinking AP Automation and Payments]

Drawbacks of existing solutions
Checks remain one of the most common forms of B2B payment. Yet, most companies are reducing their use of checks due to the high costs (estimated at up to $10 per check with fully loaded costs) the lack of visibility, and the often laborious manual work involved with processing checks. In 2018, about 50 percent of payments by U.S. businesses were made by check, down from 81 percent in 2004, according to Goldman Sachs. As the decline of paper checks persists, the growth of electronic forms of payment, such as virtual credit cards, continues to climb.

ACH payments are great for large payments and with frequently paid suppliers, but payments can take two to three days to settle, which is not ideal for expedited payments or payments that are part of an early payment program. From a supplier onboarding standpoint, it can sometimes be difficult to get bank details from suppliers, so it often takes additional AP effort to hunt down the bank details of their suppliers.

Traditional physical credit cards are typically used by multiple employees and aren’t pre-approved, so they must be manually coded and reconciled by accounting. Corporate controls typically require approval for each expense transaction, but it’s not always clear who should approve. Without POs to specify the accounting, it is difficult for the accounting team to code purchases to the appropriate general ledger account, which leads to a lack of visibility into and control over spending. In addition, physical cards tie up credit and are increasingly misused for fraudulent purposes.

Why vCards need to be integrated into a Business Spend Management solution
Deploying a comprehensive Business Spend Management (BSM) strategy across your company, complemented by a BSM platform that connects all spend processes in one place, lets a company easily implement vCards and maximize the benefits. By integrating all aspects of spend and buy-side cash flow—from procurement to payments to working capital optimization—BSM takes a holistic approach to how companies source, procure, expense, invoice, and pay for the goods and services that make their business run.

Modern BSM platforms offer seamless integrations not only with existing ERP systems but also with suppliers and banking partners, facilitating the move to vCards. With these groups working together in one system, you have the tools to free up cash while supporting important suppliers to keep your business running smoothly.

6 benefits of vCards integrated with BSM

1. Improve cash flow and days payable outstanding (DPO)

vCards enable businesses to pay suppliers faster compared to using check or ACH payment. With vCards integrated into a company’s P2P processes, and with the ability to pay on order, businesses increase cash flow by extending DPO, given the time between purchasing and paying the bank statement.

At the same time, suppliers increase their cash flow by reducing their days sales outstanding (DSO). It’s a big win-win for both buyers and suppliers. Obtaining capital float is turning into a primary value driver for the move to a virtual card. vCards also help strengthen supplier relationships, as suppliers get robust data that they can use to help reconcile their account receivables systems. (Learn how to increase cash flow and DPO in this eBook.)

2. Drive savings and efficiency

Virtual cards provide savings and drive process efficiencies by reducing the time, resources, and costs spent on check-cutting, reconciliation, supplier onboarding, and exceptions. By automating tasks such as card charge detail reconciliation, vCards lower processing costs for both buyers and suppliers. 

Moving spend to virtual cards for international payments can also eliminate wire transfers or cross-border card payments that drive down FX costs, move funds faster, and eliminate unnecessary fees. vCards are an ideal replacement for check payments and useful in situations where ACH payments and negotiated discounts can't be maintained.

3. Increase rebates and become a revenue-generating center 

vCards can be leveraged to increase card rebates from existing rebate programs and spend tiers with your bank. This enables your department to become a revenue-generating center, rather than just a cost center.

4. Reduce fraud and minimize risk with enhanced visibility and controls 

Virtual cards enable you to achieve greater spending control with the ability to set unique parameters for each purchase, including limits for the amount, payment date range, and merchant type. Without an integrated form of payment like vCards for credit card-based transactions, a company’s visibility and control of spend is hampered, and managing risks is tricky, given the large number of transactions firms make every day.  

Virtual cards offer a simple, effective tool to manage fraud with special security, anti-fraud, and reconciliation features. For example, vCards are transaction-specific and can deliver strict controls at the point of purchase and automatic reconciliation on the back end. Controls can be set per transaction for account limits and merchant type. Virtual cards do not have any hard data that can be used fraudulently, even if stolen, and with predetermined limits, overcharging can’t happen.

5. Protect against the clawback of card rebate agreements

Many businesses have set expectations and agreements with their banks issuing the credit for their traditional business cards. Due to the global pandemic, many companies aren’t meeting their spend levels. T&E expenses from physical credit cards for employees traveling make up a significant portion of many companies’ spend. With the near halt in business travel over the past six months, charges are a fraction of expected for many organizations. (See Why Insight Into Corporate Travel & Expense Is More Valuable Now Than Ever Before.)

When companies aren’t reaching their spend targets, the banks can potentially “claw back” rebate pre-payments. In response, many businesses in this situation are adopting vCards to get more AP spending onto cards via virtual cards to meet their spend commitments and increase their rebates.

6. Maximize unused credit 

Physical credit cards tie up your credit from the point you issue credit cards to your employees (usually $3k to $5k per card), which can mean months and months before the credit is actually used. One of the compelling advantages of vCards over physical cards today is that vCards offer dynamic credit and don’t tie up credit the way physical cards do, because each single-use vCard is its own balance based on a specific PO or invoice. 

How to embark on your vCard strategy
The most optimized way to start a vCard strategy is to holistically look at your existing payments processes considering all your other payment types (ACH, check, etc). Your ability to convert suppliers from one payment type to another will depend on your ability to offer the suppliers value. When a business recognizes the benefits of vCards and is ready to capture the value they can deliver, the organization will need to make some choices and change some internal processes, systems, and workflows to support vCards most effectively. Here are a few tips to help you plan your move to vCards.

Choose a bank—or, better yet—choose a BSM platform with vCards built in
Many banks are offering vCards directly to customers. The banks offer what we call “card on invoice,” where they pay a supplier on an approved invoice. There are suppliers that will absolutely take this method for payment. But there are also some limitations on the business benefit for the supplier (interchange costs, little to no improvement in DSO, hard to reconcile in their AR system). Banks also are not integrated with a company’s purchasing and controls system, so the ability to capture ongoing supplier enablement is hard. The bank usually does one initial onboarding campaign, but the truth is supplier onboarding and enablement must be an ongoing activity for procurement and AP departments.

The avoidance of extra integrations with banks is always welcomed by IT teams. Most companies have different card programs with different banks based on the country of their business entity. The reality of tackling multiple bank integrations to support the vCard initiative for the business can easily wipe away a lot of the value that these card programs produce. Mid to larger companies wanting to “spread around” their card spend to several bank partners, as well as companies unable to award their card business to just one issuer, need a unified platform to support a multi-issuer program if value is going to be created.

[Learn how Coupa’s BSM platform with integrated vCards from multiple global bank partners can solve these challenges]

Address supplier concerns, onboarding, and enablement
When adopting vCards, there are supplier concerns to be addressed and programs to deploy to assure successful supplier adoption. This includes messaging and onboarding programs to help suppliers understand all the benefits of adopting vCards, and then helping suppliers successfully adopt and fully benefit from them.

vCard deployment faces hurdles, but it’s worth the investment. As with any change to your procurement and payments processes, getting employees and supplies to adopt a new way of doing things can be challenging. You can create adoption marketing programs until you’re blue in the face, but if your vCard program is detached from your spend management processes and technologies, you’re likely to see minimal usage, negating the great benefits of this payments tool.

How Coupa makes vCards easier and more valuable
Along with the internal controls and approval workflows expected from a Business Spend Management solution, Coupa includes the missing link—payments processes with integrated vCards—as part of its streamlined workflow. Companies have the option to issue a one-time-use virtual card right at the time of purchase or as payment on an invoice. Accounting and budgeting information can be collected and approved upfront as part of a purchase request, eliminating the risk and reconciliation issues of physical card transactions.

Coupa Pay Virtual Cards lets companies use their existing relationships and credit lines with one or more bank partners, selecting strategically to optimize card rebates and geographic coverage. Coupa works with leading bank partners, including AMEX, Citi, Bank of America, J.P.Morgan, Wells Fargo, U.S. Bank, Silicon Valley Bank, Barclaycard, BNP Paribas, and Wex.

Coupa’s collaboration with leading financial institutions makes it straightforward for Coupa users to take advantage of the benefits of vCards with their established banking relationships. With a robust selection of vCard providers pre-integrated into the Coupa platform with Coupa Pay, there is no implementation required to enable vCard usage. Once a company has decided to use vCards within Coupa Pay, APIs ensure that data simply flows from Coupa’s BSM platform to the vCard issuer for payment, and then back to the company’s ERP for reconciliation.

Deep integration between payments and purchasing lets Coupa users offer suppliers a vCard or early-payment discount before they’ve even issued an invoice, increasing adoption
Coupa offers many things over what the banks are offering that drive the effective use of vCards. With Coupa you get all the benefits of the banks’ vCards, plus all the controls and integration of the leading BSM platform. Supplier acceptance of vCards as payment is straightforward, providing suppliers fast access to cash and often reduced costs with straight-through processing (STP) of Coupa Pay virtual cards. 


J.R. Robertson is Vice President, Coupa Pay, and an entrepreneurial enthusiast and culture builder at Coupa. He holds a Bachelor of Business Administration (B.B.A.) in Marketing Management from California State University, Chico, and currently resides in the smoky state of California.