Payment Cards
August 19, 2019

How SaaS is breaking the corporate credit card

Written by
Yohann Kunders

Over 40% of companies in the US put significantly more spend on card programs in 2018 vs. 2017. It’s easier than ever for businesses to start a corporate card program and new payment processors such as Stripe and Square make it simple for vendors to accept card payments.

Employees prefer to use credit cards because they’re convenient and accessible. It’s much easier to enter a credit card number and hit submit rather than dealing with invoices and PO approvals.

Unfortunately, the ease of use of credit cards is also what makes them a challenge for finance teams to manage.

Why corporate cards fail at scale

Corporate cards work best for traditional T&E spend, booking a flight or paying for a client dinner for example. These transactions are easy for finance to process when you know that the cardholder is the only person using the card.

The problem today is that corporate cards are often shared between several employees within the organization. You have department heads sharing cards with their teams, and at smaller companies, you may even have cards shared across the entire company.

This diffusion of spend turns each card statement into a “whodunit” expense crime scene for the finance team to solve every month. And the problem only grows as you bring on more employees.

You’re also one lost or deactivated card from putting your business operations at risk because placing all of your mission critical services onto your CTO’s or Marketing VP’s card, for example, turns those cards into a single point of failure for engineering or marketing.

The likelihood of card failure actually increases as card usage goes up because your fraud risk rises as the card information gets into the hands of more and more vendors. Then your team has to pause to update payment details across vendors when it’s time to switch to a new card.

How the subscription economy broke corporate cards

The shared corporate card problem becomes a complete mess for finance when you pile on today’s bottom-up SaaS subscription sales model.

The days of boxed software are over. Businesses with 250-1000 employees use an average of 124 SaaS apps to get work done. Slack, G-Suite, Salesforce, QuickBooks Online, Xero, NetSuite, Zoom, Gusto, Intercom—there’s a SaaS application or several competing services for every problem.

The proliferation of SaaS comes with two big changes:

  • An explosion of vendors. Today, teams buy point solutions, try them, and cycle through alternatives until they find one that fits their business. It’s not just a CRM that salespeople use anymore—they rely on sales orchestration, lead generation, and meeting software to get work done.
  • A change in purchasing. Businesses don’t sell to whole companies anymore, they sell to individuals and teams. And the initial small ticket prices are better suited to card payments rather than a PO and invoice process. The new nature of SaaS subscription spending means that your list of ‘individuals who need access to a corporate card’ now includes almost everyone at the company.

How do you improve corporate cards without changing the infrastructure that it’s built on? We want to keep the convenience of cards but get back the accountability of knowing exactly who owns each transaction.

Upgrading the business credit card

At Airbase we’ve turned the corporate card model on its head. Instead of using a single card for multiple vendors, we make it easy to generate a unique card for each vendor. 

Employees can request an expense and instantly get access to a new virtual card after the expense request is approved. Finance now sees expenses as employees request them instead of only learning about them when the statement comes at the end of the month.

Using a unique card for each vendor minimizes fraud risk and makes it easy to see who in the organization owns each expense. Isolating vendor payments by virtual card makes it easy to change cards if an employee leaves or if a card is compromised, keeping your critical subscriptions safe.

You can still issue physical cards to employees that need to travel or entertain clients but you can keep all recurring subscription or one-time spend on individual virtual cards.

Finally, a vendor-specific card means air-tight control. You can set spend and transaction limits on a card to match the expected vendor charges. Email notifications for each card keeps you in the loop for declines, extra charges, or renewals, or any other changes for that particular vendor.

There’s no question that card payments and bottom-up purchasing have upended the procurement process for growing businesses.

Having a system like Airbase to manage expense requests, issue virtual cards, and automatically code transactions for accounting will help finance teams manage exploding card spend in the SaaS subscription economy.

Interested in learning how Airbase can help you implement virtual cards? Schedule a demo today.