Virtual cards ready for breakthrough

This seems to be the feeling among finance executives across the B2B sector, especially amid the current landscape marked by ongoing inflation and tightening access to capital. These conditions, coupled with staffing and supply chain challenges, particularly impact mid-market businesses, where working capital is crucial. Virtual cards in this space could offer potential stability and much needed assurance as reported on pymnts.com.

According to Paul Christensen, CEO of a B2B payment solutions provider, eliminating the payments ‘waiting game’ with suppliers could be the catalyst for widespread adoption of virtual cards. Christensen believes we're at a tipping point where virtual card usage could surge from its current 2% share of accounts payable (AP) spending to 5% to 10% and beyond. This shift could unlock trillions of dollars in spend, enhancing efficiency across the supply chain ecosystem. What is needed to make this a reality, is quality data and efficient technology. Amid payment uncertainties, virtual cards offer a welcome solution.

Despite advancements in payments, commercial transactions remain entangled in paper-based processes. Cheques still dominate in the US, invoices await manual approval, and traditional post persists as a primary payment conduit back to suppliers. Christensen notes that mid-market businesses, with annual revenues ranging from $100 million to $1 billion, face additional complexities, such as the demands for using different invoicing systems, methods and integration capabilities.

Consequently, mid-market players, operating with constrained resources, have to deal with increased payment processing costs. The back and forth between buyers and suppliers amplifies processing costs, with buyers preferring to retain their cash and suppliers eager for faster payments.

Colleen Taylor, President of Merchant Services at American Express, underlined the need for tailor-made payment solutions accessible to mid-market firms, who often lack sizable technology budgets for internal transformation. Seamless integration with accounting platforms is paramount, offering the sought-after visibility and transparency. Taylor emphasises the significance of solutions facilitating efficiency and digitisation, ultimately optimising working capital commitments.

Their research confirmed mid-market suppliers were keen to embrace virtual cards, with 80% expressing a willingness to accept them. Most would even incur fees of up to 3% of the invoice value for timely or early payments, providing suppliers with payment certainty and improved cash flow. Taylor adds that virtual cards are gaining traction across corporate travel and expense use cases, emphasising functional advantages like easy replacement and controllable spending limits.

Electronic invoicing emerged as a critical task in automating AP/AR processes. Regardless of industry vertical, CFOs must prioritise investments in invoice automation. Neglecting these investments could lead to less favourable buying terms, ultimately impacting the bottom line and delaying goods and services.

By automating AP/AR processes and investing in payment digitisation, businesses can bridge these uncertainty gaps, streamline processes, enhance security and gain visibility into their buying behaviours, ultimately optimising their operational efficiency and financial stability.