For B2B players, paper checks rank right up there with death and taxes when it comes to life’s certainties.
But this ongoing reliance on checks as a primary B2B payment method results in traditional enterprise transactions looking like a two-sided tug of war, where buyers want to hold onto their cash for as long as possible while suppliers want to be paid as quickly as possible.
The problem hindering broader digitization of B2B payments? It’s the fact that any innovation success depends on the engagement of all participants in the ecosystem.
B2B payment innovations can create a divide between buyers and suppliers because each party has different priorities. While buyers generally favor innovations that improve their payment flexibility and cash flow, suppliers prioritize speed, certainty and ease of payment processing.
Addressing the divide between buyers and suppliers involves creating payment solutions that balance flexibility for buyers with certainty and profitability for suppliers. Innovations, such as virtual cards, represent a promising component of a holistic digital payment strategy for B2B businesses.
While buyers have traditionally been the driving force behind B2B adoption so far, the next phase of growth will likely require a concerted effort to bring suppliers on board.
Read more: Solving for the Hundred-Trillion-Dollar B2B Payments Acceptance Problem
A virtual card is a 16-digit credit or debit card number that exists only in digital form. It is generated electronically and typically linked to a buyer’s main credit card or bank account. Each virtual card can be single-use or have specific limits and expiration dates, which are set based on the transaction or vendor agreement.
Buyers can benefit significantly from reduced fraud risks, improved cash flow and automated reconciliation processes. But while the buyer’s case for adoption is clear, suppliers often face a more complex decision-making process.
For suppliers, virtual cards represent a significant departure from traditional payment methods like checks or wire transfers, which can take weeks to process. Even ACH transfers can be subject to delays, particularly for cross-border transactions. For example, instead of waiting weeks for payments to clear or reconciling invoices against vague ACH transfers, suppliers receive precise, secure payments that are directly linked to specific invoices.
With faster access to funds, suppliers can reinvest in inventory, equipment, or growth initiatives without resorting to costly financing options.
“The 2024-2025 Growth Corporates Working Capital Index,” a PYMNTS Intelligence report commissioned by Visa, found that the integration of suppliers — through digital means, as their billing systems are linked to the buyers’ payment operations — can improve cash flow for both parties, and by extension, create B2B ecosystems that are efficient.
Read more: Virtual Cards Brought Flexibility and Security to B2B Payments in 2024
Reconciling payments against invoices is a perennial headache for suppliers. Traditional methods often require extensive manual effort to match payments to the corresponding invoices, particularly when dealing with bulk transactions or inconsistent remittance details.
Virtual cards solve this problem by embedding invoice-specific details into each transaction. When a payment is received, suppliers can instantly identify the associated invoice, streamlining reconciliation and reducing administrative overhead.
In the PYMNTS Intelligence report “CFOs Want Virtual Cards in Their Toolkits,” 56% of CFOs say virtual cards are key for managing financial flexibility.
“We’ve seen tremendous growth in virtual cards over recent years,” Widad Chaoui, vice president and general manager, corporate program product management at American Express, told PYMNTS, noting that fundamental to the promise of virtual cards is their ability to deliver enhanced fraud protection, automation and flexibility compared to traditional methods, such as checks — three qualities that resonate strongly.
“Demonstrating the ROI of virtual cards is crucial,” Chaoui said. “Suppliers need to understand how these tools can accelerate payments and reduce their days sales outstanding.”
Despite their advantages, virtual cards are still a relatively new concept for many suppliers, leading to adoption challenges. Some suppliers may lack the necessary infrastructure to process virtual card payments or may be hesitant to embrace a buyer-driven innovation.
Education and collaboration are key to overcoming these barriers. Payment providers and buyers can play a pivotal role in helping suppliers understand the value proposition of virtual cards. By demonstrating how virtual cards improve efficiency, reduce risk, and enhance financial visibility, stakeholders can foster greater adoption across the supply chain.
For suppliers, the decision to accept virtual cards hinges on evaluating whether the benefits outweigh the fees. In many cases, the improved cash flow and reduced administrative burden make virtual cards a worthwhile investment.
At the same time, the rise of virtual cards signals a broader shift toward integrated payment ecosystems. By integrating virtual cards with accounts receivable (AR) automation tools, suppliers can work to unlock even greater efficiencies, paving the way for a seamless, end-to-end payment experience.
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