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Virtual Card Payments: Key Benefits for Accounts Payable | Tipalti

2025.01.09 10:36


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What Are Virtual Card Payments and How Do They Benefit Accounts Payable?

By Brianna Blaney

Brianna Blaney

Brianna Blaney began her career as a fintech writer in Boston for a major media corporation, later progressing to digital media marketing with platforms in San Francisco. She has worked as a financial writer for Tipalti for 7+years, keeping a close eye on shifting trends and reporting on the ever-evolving landscape of financial automation. She prides herself on reverse-engineering the logistics of successful content and implementing techniques centered around people (not campaigns). In her spare time, she loves to cook and take care of her pet squirrel, Marshmallow.

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Table of Contents

What Are Virtual Card Payments? Where Can a Virtual Card Be Used? 7 Benefits of Virtual Card Payments How Virtual Cards Are Changing Accounts Payable Optimize Your Accounting Department With Virtual Card Payments

From remote workplaces to the metaverse, virtual models are taking over many areas of everyday life. Digitization in business has led to newfound optimizations like automation, data-driven decisions, and seamless collaboration. Why shouldn’t your card payments be virtual too?

A virtual card is a 16-digit unique card number created for one vendor transaction between payer and payee. It’s a digital payment solution to modernize traditional processes, reduce errors, and save time. Virtual card payments improve security and accountability to increase the efficiency of your accounts payable processes.

What Are Virtual Card Payments?

A virtual card payment is a 16-digit number combination that acts as a non-tangible credit card used to pay back a vendor for a specific transaction. 

Virtual card payments don’t require a tangible token to happen—you don’t need a physical credit card, cash, or another form of payment. Essentially, a virtual card payment is a digital card transaction made between accounting departments.

A virtual card is not a physical card. Rather, it’s used for “cardless” credit card payments. This form of electronic payment is growing in popularity as businesses recognize the value of simpler, faster, and more secure payments. By 2026, B2B payments are estimated to account for  71% of virtual card payments , even though they represent less than 1% of total transactions.

Where Can a Virtual Card Be Used?

Virtual cards can be accepted by any entity that takes traditional credit card payments, which should include the vast majority of your vendors. If you can pay for something with a regular credit card, you can probably use a virtual card number, too. To see if a vendor will accept virtual card payments, check first to see if they accept other digital payments like debit and credit cards, bank transfers, or PayPal.

Virtual cards can be used just like you would a physical card. In addition to online purchases, it’s utilized for contactless payment in stores by adding it to Apple Pay or Google Pay. Some virtual cards even allow you to withdraw money at an ATM.

Many top brands support the use of a virtual card, including (but not limited to): 

Visa MasterCard Capital One American Express

These companies support the use directly through the card, or with a separate app or browser extension.

It’s important to note that virtual cards are single use only. A virtual card has a unique number, expiration date, and card verification value (CVV) number. This restricts the virtual card’s usage to specific dates, merchant categories, and amounts.

7 Benefits of Virtual Card Payments

A virtual card program allows your business to add digital payments to your  AP workflow . This is a much more efficient way to pay invoices. The most obvious benefit is that the card is virtual, which means it’s widely accepted by vendors who also process credit card payments. This includes top card issuers like Visa, Mastercard, and American Express.

Beyond quicker supplier payments, the additional benefits of a virtual card service are significant.

1. Enhanced Security

Unlike ACH payments and checks, virtual payment cards don’t require a supplier to share or expose their bank account number. Payment information is never tied back to your bank account. The virtual credit card number is specifically created for a one-time transaction, with a certain amount assigned.

Virtual payment cards are always locked down to a time limit, specific amount, and maximum credit limit. That means if a thief were to steal a virtual card number outside of the time window and try to spend more than the exact payment amount, the virtual card would not work.

Compromised credit cards create a huge risk for businesses. If just one of your vendors is hacked, the payment information for all of your suppliers could be in danger. But with virtual card payments, there’s no physical trail to a card. These factors also make theft much less of a risk than when processing paper checks. This type of real-time protection offers one of the best levels of payment security you can find.

2. Reduced Processing Costs

Virtual cards come with a lot of cost savings. They don’t require manual workflows that lead to bottlenecks or errors, and their short expiration dates further reduce the time it takes to make a transaction.

Like other digital payments, virtual cards eliminate the time, resources, and costs of check payments, reconciliation errors, and exceptions processing for discrepancies between invoices and payments. Virtual card payments also integrate seamlessly with  AP automation  to further reduce processing costs for buyers and suppliers.

Using this method means your account will never process payments for anything higher or lower than the pre-set amount. This type of financial control eliminates the possibility of short paying or overpaying your vendors.

3. Additional Transaction Details

Although ACH and wire transfers are popular repayment alternatives to virtual cards, both methods lack the space afforded for remittance data. ACH provides only 80 characters of space for transaction details, while wire transfers are limited to 140 characters. That’s not a lot of space to go into much detail.

Virtual payment cards have no space limits for remittance information. This eliminates processing costs, as transaction details can be customized to your system. 

By including this data early in the payment process, you can eliminate manual processing and speed up reconciliation for your AP team. Payment data can also be imported directly into  AP automation software  to streamline AP workflows even further.

4. Simpler Supplier Payments

Suppliers receive virtual card payments in real time instead of waiting for a check in the mail. This reduces the  disbursement process  to just a few minutes, compared to a few days.

Additionally, with a virtual card, the payment data is attached to the transfer, enabling both buyers and suppliers to identify a transaction by the following:

Date Amount Purchaser Item 

This payment data can then be automatically entered into your accounts payable system without any manual data entry or additional paperwork.

5. Improved Accountability

Another benefit of virtual cards is the increased accountability of your company’s finances. By assigning virtual payment cards to specific employees and suppliers, you can better track expenses.

A purchase made on a virtual card will automatically show up in your payment system with the transaction details attached. This eliminates the need for manually tracking and reconciling payments. No more chasing down paper receipts, comparing transactions to purchase orders, or deciphering confusing credit card statements.

6. Empowered Staff

Before virtual card payments, you had two options: share one physical card with your department or issue a new card to any employee who needs to make a business purchase. In either case, you would need to track and control all credit card transactions to avoid overspending, fraud, or unapproved purchases.

Virtual cards give employees instant access to a payment method so they can pay invoices or make purchases faster. This enables employees to buy whatever they need without the hassle of keeping receipts and submitting expense reports, while you retain full control over spending.

7. Better Spend Management

Although many business tasks have become digital, supplier payments are often still recorded on paper or made with physical cards. These manual processes make  spend management  even more challenging in a world of digital record keeping and near-instant payments.

Virtual cards are only issued when you approve them, restricting your employees to authorized purchases. A virtual card’s rich transaction data provides full visibility and control over employee spending, right down to the most granular detail. This empowers companies to ensure policy compliance and ultimately improve cost control.

Plus, you can use virtual cards to avoid accidental overspending. Let’s say your business pays for an annual membership with a professional association. You can pre-fund a virtual card with the exact cost of the membership and leave it on file with the vendor. If they try to raise prices or add extra fees without telling you, the virtual card payment won’t clear.

How Virtual Cards Are Changing Accounts Payable

Single-use virtual credit cards are shifting the financial landscape of accounts payable departments. Here are some ways in which they can optimize operations and position your business for growth.

Increase Working Capital

Virtual cards enable a more strategic approach than  B2B payments  made with paper checks. The traditional method requires several days to print, pack, stamp, and mail the payment to vendors. In contrast, card payments can be completed immediately.

When your business has the ability to pay faster, your AP team can hang on to larger payment sums for more time. Faster payments extend your  days payable outstanding (DPO)  to obtain more capital float and increase your cash flow. This enables you to collect additional returns on these funds as  working capital . Suppliers see similar benefits with fewer days sales outstanding (DSO).

Faster payment makes it easier to pay invoices on time as well. The quicker vendor invoices are paid, the better your relationship will be. Some may even offer early-payment discounts that can further reduce processing fees and save money.

Earn Cash-Back Rebates

Virtual cards can earn you cash-back rebates on invoice payments. It’s easy math. For example, say your virtual card earns 0.5% for every transaction. That’s $5,000 back to your business for every million spent.

Although this may seem like a small number, consider the fact that it requires almost no effort on your end to earn these savings. As your company continues to grow, the rebate total will increase to a formidable amount of spending money. This all adds up to a tidy sum that can be reinvested into your business.

Reduce Manual Labor

One thing both accounts payable and accounts receivable teams agree on is that processing check payments is antiquated, boring, and time-consuming. It’s a tedious task to have to go through all of these steps to make a single payment:

Print a check Sign the check Pack the envelope Postmark the envelope Mail the check

Receiving payments can be just as tiresome:

Open the envelope Endorse the check Deposit the check Record the payment

Paying with virtual cards creates greater efficiency and gives your accounting team more time to focus on organizational growth. It empowers employees to take on more engaging and business-forward work that interests them, rather than simply maintaining the status quo.

This method also helps to eliminate human error. By removing all of these manual steps, there are fewer opportunities to record inaccurate data that leads to chaotic financial statements in the future.

Optimize Your Accounting Department With Virtual Card Payments

Modern business calls for future-ready solutions, especially in the financial space. Virtual card payments are an intelligent form of payment processing with a variety of cost-saving benefits. From better security to a more efficient accounts payable workflow, businesses of all sizes should look into how virtual card payments can streamline their B2B transactions.

To learn more about how Tipalti can support your organization’s transition to virtual card payments,  book a demo  today.

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