In today's digital age, businesses are only getting hungrier for innovative ways to streamline payment operations and improve financial efficiency. While many useful tools are available to tackle these problems, one, in particular, has gained significant popularity in the last decade among large companies but has yet to be adopted by many small to medium-sized businesses (SMBs): the virtual credit card.

Research from Visa shows that in Canada and the United States, 74% and 93% of businesses, respectively, find virtual cards attractive, yet only 38% of all U.S. and Canadian companies use them to make or receive payments from their business partners, according to PYMNTS. 

It’s time to close this gap and empower SMBs with a better way to pay. Let’s explore why virtual credit cards are so beneficial to SMBs as an extension of traditional physical credit cards and why you too, should use virtual cards to simplify tedious payment processes. 

What is a virtual credit card? 

First off, let’s get crystal clear on what a virtual credit card is.

A virtual card is a payment solution that functions similarly to a regular business credit card, yet it only exists digitally. It has its own credit card number, card verification code (CVC), and expiration date. Virtual cards are usually tied to your physical corporate card, although that option depends on the provider you choose. 

Virtual credit cards vs. traditional credit cards 

While both types of credit cards facilitate transactions, they differ significantly in their underlying nature and usage. 

Traditional credit cards 

Traditional business credit cards are physical cards issued by banks or financial institutions that allow cardholders to make purchases and other payments based on a pre-approved credit limit. You can use them for almost any type of transaction and at various establishments, both in-person and online. 

Overall, traditional credit cards are a convenient and widely accepted payment method that, when used responsibly, equip businesses with flexibility and the ability to build a credit score and credit history.

Virtual credit cards 

On the other hand, virtual credit cards are digital versions or “extensions” of traditional credit cards and were initially designed with security in mind, precisely to mask your account information. 

Each virtual card has a unique card number, often with a limited validity period or a single-use feature. This ensures that even if the virtual card number is compromised, fraudsters can't use it for unauthorized transactions, as it would either decline or have insufficient funds. In contrast, although traditional credit cards have a fixed credit limit, you can’t cap spending per transaction or employee, making them more susceptible to fraud and misuse, especially if you share the 16-digital card number across your organization. 

With virtual cards, you can immediately eliminate the need to wait for physical cards to arrive in the mail or share credit card numbers with employees, contractors, and vendors. Instead, you can generate as many unique virtual card numbers as you need from an app like Extend, instantly deliver them remotely to anyone you wish anywhere, and these individual recipients can use them to make purchases anywhere they would regularly use their physical business card. 

Not only are virtual cards for business beneficial for companies as a whole, as they promote accountability and streamline various payment processes, but they also grant business owners the real-time visibility they need and equip business operation managers with greater control, enhanced security, and improved expense management.

Benefits of using virtual credit cards for business 

There are several advantages of incorporating virtual cards into your business; let's review what you can expect. 

Improve fraud prevention 

Fraud prevention should be a paramount concern for any business, especially now, since fraud attacks via corporate and commercial credit cards rose from 26% to 36% in 2022. Fortunately, with virtual credit cards, business owners gain an extra layer of security, significantly reducing the risk of fraudulent activities. The unique virtual card numbers associated with virtual cards make it challenging for fraudsters to gain access to sensitive information. Additionally, businesses can set spending limits and expiration dates, adding another level of protection against unauthorized transactions.

Increase control over expenses 

Virtual credit cards allow businesses to exert greater control over their spending. Companies can ensure employees adhere to predetermined budgets by setting spending limits and even defining expiration dates for each virtual card they create. This level of control minimizes the possibility of overspending and promotes responsible spending behavior. Moreover, businesses can easily track and categorize expenses made with virtual cards, facilitating accurate accounting and budgeting.

Streamline accounts payable 

Managing accounts payable can be a time-consuming task. Virtual cards for businesses simplify this process by providing a centralized platform for tracking and reconciling expenses. With an app like Extend, each transaction made with a virtual card is recorded and categorized, meaning when month-end reconciliation comes around, bookkeepers and accounting managers can easily tap into an organized and streamlined view of all company spending. Another great advantage lies in enhanced security, mitigating risks of overpayment or fraud, and the convenience of keeping a vendor's card on file for smoother transactions. This approach significantly streamlines the accounts payable process, reduces manual effort, and improves overall accounting efficiency.

Simplify vendor management 

Virtual cards make vendor management more convenient and secure. Instead of sharing sensitive credit card information with multiple vendors, what about issuing a unique virtual card for each one? Not only will this significantly streamline reconciliation and get your vendors paid on time, but it will ensure you adhere to your budgeting goals and reduce wrongful billing by capping spending amounts and even creating autofill cards for recurring payments. And if one of your virtual cards gets compromised — as often happens with physical cards — then you can simply turn off that one virtual card and not worry about changing all the other virtual cards that you may have on file with other vendors. 

Reduce the risk of overspending 

One of the challenges many businesses face is maintaining control over employee spending. Sound familiar? Rather than relying on a single physical credit card and hoping for the best when you discover the statement at the end of the month, address the issue upfront and make it easier for employees to pay for what they need when they need it by creating virtual cards with specific spending limits. This feature significantly mitigates the risk of overspending and helps maintain a healthy cash flow.

How to choose the right virtual card for your business?

Transacting with virtual cards can offer numerous advantages for your business, and making them part of your payment approach as you scale is a smart move. 

If you want to learn more about implementing virtual cards in your business, we’re here to help; get in touch!