Virtual Cards Bring Spend Management Into the Digital Age

The great digital shift has brought all manner of firms fully into the digital realm, where employees are geographically dispersed. But spend management has not modernized at the same pace.

Dan DeVall, vice president of business development and director of banking alliances at Airbase, told PYMNTS that virtual cards can help hasten that evolution in an environment where 80% of buyer-to-supplier transactions could be completed electronically by 2025, according to some estimates.

Recent research found that 31% of finance employees are submitting more expenses now than before the pandemic, with 90% reporting employees are also expensing new items as a result of remote work and the need to furnish new workspaces at home.

While virtual cards have been around for decades, the stage is now set for their widespread adoption as they are made to support distributed spend, remote work teams and make accounts payable more efficient. And DeVall noted that the credit card industry has done a good job over the past few years developing payment products for enterprise clients to address a variety of operating expenses.

A Wide Range of Cards 

“You have [travel and expense] cards. You have purchasing cards. You have fleet cards,” he said.

But among that plethora of options, he said, it can be hard for enterprises and for finance professionals to determine which cards are the most useful. As he told PYMNTS: Not every card is meant for every organization, and not every organization qualifies for every card.

“What will be telling over the next several years will be going after this ‘last mile of spend’ that is not yet digitized — and making sure that the value exchange is real for buyers and suppliers,” DeVall said.

Simply put, many interactions up and down supply chains are still done through paper means — or if they are done electronically, payment is made with traditional cards. Back offices still have to tackle a lot of activity closing the books and keeping tabs on spending patterns throughout the company.

That, he said, presents opportunities for companies including Airbase to educate enterprises about how virtual cards can bring value to back offices — and employees in the field, so to speak.

It’s an opportune time, from a spend management perspective, to consider virtual cards and how they fit into the broader discipline of spend management, DeVall maintained. With the shift toward working from home, it has become harder for companies to track spending, to create the “right” software-enabled workflow that ensures employees are using the right payment method with the right tools, following the right policies and getting the right approvals without creating more hassle for employees.

In terms of mechanics, the virtual card creates a unique number, which associates a specific spend amount — and time period — in which the card can be used.

“These virtual cards are dynamic in nature,” he said.

Various levels of customization provide additional layers of security, so that a company and department are not exposed — instead there is only a single card on file, perhaps with a single merchant that needs to be replaced.

The controls also make it relatively easy to set parameters before the card is issued to the end user, he said, such as making sure the right policies and approvals are in place, that cards are rendered inactive when employees leave the firm, and that the back office can be alerted immediately in the case of anomalies or if the card is compromised.

Virtual cards, he said, give employees a convenient payment method they’re already familiar with.  For the back office, too, there are inherent advantages:

“Now it’s not about having to learn one system and then another — or ripping out a system and replacing it,” DeVall said. “Now there is just consistency” across all reporting functions.

Virtual cards can improve the relationships, and level the playing field, between buyers and suppliers. Historically, there’s been a natural tension between the two sides of the B2B transaction —buyers want to hold onto cash, and suppliers want that cash as quickly as possible.

For many suppliers, virtual cards offer a rich integration into the purchase workflow, which can eliminate tasks such as having to process an invoice. A virtual card attached to a purchase order that automatically flows through the receivables process can be especially valuable, he said. It also gives buyers the chance to offer a level of empathy, he said — interacting with the supplier to offer faster payments (in turn improving the suppliers’ cash flow).

“You can have a spirit of collaboration that was not there before,” he told PYMNTS.