39% of Firms Use Virtual Cards for B2B Payments

United States and Canadian firms’ days sales outstanding (DSO) measurements are getting longer, but these businesses have the power to change course. Investing in digital innovations like virtual cards can help them receive payments faster and also provide a number of additional efficiencies.

Thirty-nine percent of firms now use virtual cards for B2B payments, according to Accelerating The Time To Realized Revenue, a PYMNTS and Mastercard collaboration that surveyed more than 400 executives.

The firms that use virtual cards say they have yielded an average of 3.4 operational and financial benefits, including receiving payments faster, improving transaction details and securing transactions.

Operational and Financial Benefits 

The primary way in which virtual cards improve payments processes is that they allow firms to receive payments much faster than might be possible using manual paper methods. Sixty-four percent of firms that use virtual cards report receiving payments faster than they did without them.

Fifty-seven percent of the firms in the study say that their transaction data is more detailed with virtual cards, and 50% say that virtual cards have helped make their transactions more secure.

Other commonly cited benefits include improving cash management, reducing exceptions on processing, enhancing credit processing, meeting the expectations of suppliers and customers, accessing credit and accessing rebates.

Barriers to Using Virtual Cards 

There are still many firms that do not use virtual cards, often simply because their existing payments systems are not designed to accommodate them. Twenty-four percent of firms that do not use virtual cards cite this as a primary reason for not using them, and 16% say that they have had trouble integrating virtual cards into their systems.

Other reasons firms cited for not implementing virtual cards include problematic transactions, lack of expertise, high cost, lack of interest among suppliers and customers, and currency conversion problem.

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An Investment in Digital Innovations 

When virtual cards are combined with other digital innovations such as dynamic terms, artificial intelligence and real-time payments, U.S. and Canadian firms can multiply the benefits, including greater transparency, lower fraud risk and a reduced need for manual review. Payments digitization can also pave the way for automation and reduce barriers to implementing future innovations.

Innovations like these can help businesses succeed in the uphill battle to manage their B2B payments flows. Currently, 39% of the large and mid-sized firms in the U.S. and Canada say their DSOs are now longer than in 2019. They now face an average DSO of 45 days. There is a better way. PYMNTS research shows that payments automation can cut these organizations’ DSOs by as much as one-third.

Third-party vendors are poised to play a key role in helping businesses implement the digital technologies they need to optimize their B2B payment flows, and the majority plan on using them to outsource their payments innovations in the next five years. The key questions are which technologies firms will prioritize and which vendors they will choose to empower their innovation journeys.