The way businesses pay and get paid is evolving rapidly. While traditional payment methods like checks and ACH transfers have served businesses for decades, they’re increasingly being replaced by faster, more secure alternatives. One of the most exciting developments in this space is the rise of virtual card payments, a game changer for small- and medium-sized businesses (SMBs), helping them manage cash flow and streamline payment processing.
What are virtual cards?
A virtual card is a digital payment method with a unique 16-digit card number for each transaction. Virtual cards are prepaid and created specifically for one-time use or for payments to a specific vendor. When you get paid with a virtual card, you receive a temporary card number that you can process similar to other credit or debit cards through your existing payment terminals or online payment systems.*
How virtual card processing works for vendors
The process is surprisingly straightforward and familiar:
- Payment initiation and virtual card opt-in: Your client initiates an ACH or paper check payment through QuickBooks Bill Pay for your invoice. You get notified and can choose to receive the payment as a virtual card instead of ACH or paper check.
- Card details delivery: You receive an email with a secure login to a vendor portal to access the card information.
- Payment processing: You enter the card details into your existing payment terminal, online system, or phone payment system.*
- Instant authorization: The payment processes quickly, like a card transaction.*
- Automatic reconciliation: The payment comes with detailed transaction and remittance information that makes reconciliation a breeze.
The beauty lies in its simplicity. You don’t need new equipment, software, or training. Your existing payment infrastructure handles virtual cards seamlessly.
Why select virtual cards over ACH payments?
- Fast, reliable payments: Virtual cards process quickly and settle within 1-2 business days.* ACH can take up to 5 business days, excluding weekends and holidays.
- Enhanced security: Each virtual card payment uses a unique, single-use card number that expires after the transaction. This eliminates the need to share sensitive bank account information, typically required for ACH payments.
- Improved cash flow: Fast settlement times and payment confirmation with virtual cards can help improve cash flow forecasting and help avoid disruptions caused by delayed settlement and potential returns associated with ACH.
- Richer data for easy reconciliation: Virtual card payments include rich transaction and remittance details, simplifying reconciliation. ACH payments info is limited to 80 characters and may require manual reconciliation.
- Seamless Integration: Virtual cards leverage your existing card processing system.* ACH payments may require separate processing setup and bank account verification.
Why choose a virtual card over a paper check?
- Speed and availability: You can process a virtual card almost anytime once you receive it, including holidays and weekends.* Paper checks require physical delivery that can take several business days, and may be impacted by postal delays or loss.
- Enhanced security: Virtual cards use encryption and are limited to single-use with an expiration period. Paper checks are vulnerable to theft and alteration, with limited recourse.
- Reduced administrative burden: Virtual cards have minimal handling requirements and process like a credit card payment. Paper checks involve administrative overhead, including endorsement, bank visits, and manual reconciliation.
- Improved recordkeeping: When you process a virtual card through your existing card processing system, it can automatically create detailed digital records, making recordkeeping in systems such as QuickBooks effortless. Paper checks may require manual recording and physical storage of documentation.
- Cost efficiency: Virtual cards help reduce administrative costs associated with paper checks, such as handling and manual processing, which can contribute to significant operational savings.
What this means for your business operations
Technology integration
Virtual cards work with your existing payment infrastructure. Whether you use a traditional card terminal, online payment gateway, or mobile card reader, virtual cards process similar to physical credit and debit cards.*
Staff training
Minimal additional training is required since your team already knows how to process credit card payments. The main difference is receiving card details digitally rather than from a physical card.
Financial planning
Virtual card payments reduce the amount of manual labor associated with managing paper checks. This can improve cash flow, and help you forecast and budget better.
Key benefits of accepting virtual card payments
Enhanced security
Virtual cards provide an extra layer of protection against fraud since they’re typically single-use or have strict spending limits. In addition, you don’t need to share your banking details to get paid with a virtual card.
Improved cash flow
Virtual cards enable SMBs to be paid faster than traditional payment methods, helping maintain steady cash flow and reducing the need for working capital financing.
Reduced administrative costs
Processing virtual cards helps reduce the time and costs associated with check handling, bank deposits, and ACH return management. Your staff can focus on core business activities rather than payment processing tasks.
Better recordkeeping
Every virtual card transaction creates a detailed digital record, making reconciliation and accounting more straightforward. This automated documentation helps reduce bookkeeping errors and can simplify tax preparation.
Common vendor concerns addressed
“Will I need new equipment to process virtual cards?”
No. Virtual cards process through your existing payment terminals and online systems.*
“Are virtual cards secure?”
Yes. They often include enhanced security features like fixed limits, expiration periods, and single-use restrictions that make them more secure than traditional payment methods.
“How do I know the payment is legitimate?”
When you process a virtual card, you get swift confirmation of fund availability, similar to credit cards.*
The future of B2B payments
Virtual cards have the potential to become an important financial tool for small businesses, offering improved security, better control, and practical convenience. As more small businesses adopt digital payment solutions, accepting virtual cards can help you take advantage of exciting payment innovations.
Virtual cards represent more than just another payment option. They are a strategic advantage that can help improve your overall cash flow, reduce administrative overhead, and enhance your competitive position in the marketplace.
The opinions expressed in this article are the author’s own and do not reflect the view(s) of Cross River Bank.
“Virtual cards” as referenced in this article refer to the Intuit Prepaid Mastercard. Intuit is a technology company, not a bank. The Intuit Prepaid Mastercard is issued by Cross River Bank, Member FDIC, pursuant to a license from Mastercard International Incorporated.
*Subject to third party terms and conditions including with your payment processing provider.
