When is a virtual corporate card the best payment method? (Spoiler alert: almost always.)
Picture this: You wake up to discover you’ve been teleported into the year 2025. You pour over the news on your phone, but it’s all too much to process. This calls for a trip to the coffee shop. Then something strange happens when you whip out your card to pay for your fat-free, energy-injected, vitamin-D-enriched oat milk latte. The cashier gasps, takes a step back, and gives your card a suspicious look. “A credit card? Where did you even get that?”
Over-dramatized? Perhaps. Payment industry science fiction? We don’t think so. Digital wallets and virtual cards are increasingly popular, especially as the world turns to contactless payment during the global pandemic. The control and security afforded by virtual cards make them attractive in uncertain times, with many experts predicting the use of virtual cards will grow in the coming years. As more people realize the benefits of these payment types, physical cards may indeed be as obsolete in 2025 as (we hope) the need for face masks.
However, it’s not 2025 yet. Today, Accounts Payable teams can authorize payments by virtual card or physical corporate card, as well as by ACH, check, wire or vendor credit. Which card type is best? As you might guess from our opening fantasy scenario, virtual cards have many advantages. But they’re not always the best choice at this point in history. Check out some tips for deciding whether to use a virtual or physical card.
Virtual credit and debit cards are accepted by most companies who accept credit cards. (You can see a list of some popular B2B vendors who take virtual cards in this blog post.) They’re also astonishingly easy to use. A virtual card number can be generated in seconds, and easily shared with a vendor when paying online or by phone. As the purchase is processed, the payment details are sent to the General Ledger, where the transaction is booked automatically. Whenever speed and convenience are a priority, and whenever entering or transmitting card details for payment is possible, virtual cards are the way to go.
The value of virtual cards is further magnified when managing recurring payments like subscriptions. Because each step of a virtual card purchase is fully visible, from approval request to the GL sync, instances of zombie or duplicate spend are immediately flagged. The ability to create vendor-specific cards and to restrict a card to a single use further improve security. The combination of ease-of-use, visibility, GL sync, and control explains why remote teams love virtual cards. So, if you’re purchasing SaaS subscriptions or authorizing expenses for distributed teams, virtual cards are the best option.
A physical corporate card is the clear choice in situations when a purchaser must physically be present and swipe a card, so on-the-go travel expenses, like airport coffee, and client entertaining at restaurants typically go on these cards. Physical cards don’t have the same level of visibility as virtual cards because their creation doesn’t have the same detailed approval workflow, they don’t automatically sync to the GL (although this step can still be simplified for the accounting team given the right corporate card provider), and they’re not vendor-specific. It also obviously takes more time to get a corporate card and, if it’s shared among co-workers, a corporate card can be tough to keep track of, especially in this era of remote work.
A well-designed spend management platform can overcome some of the disadvantages of physical cards. Physical cards can be added to digital wallets, which are easier to keep track of, have the advantage of contactless payment, and have an extra layer of security. When paying by Google Pay or Apple Pay, card information isn’t exchanged during the transaction. Instead, a unique token is created by the app, which is then verified by the credit card network. Building in receipt compliance controls also helps increase the visibility of physical card usage and removes the burden of tracking receipts from the accounting team. For stronger control, a good physical corporate card program should have the ability to set limits on a daily, weekly, monthly, quarterly, or annual basis.
For both types of corporate cards, the value ultimately lies in the software behind the card. The ability to adjust spend limits and the availability of up-to-date reporting are essential for companies who have to adapt quickly — which covers pretty much all companies for the foreseeable future. Will that future belong to virtual cards? Only time will tell. But in the meantime, finance teams and employees can choose between two card payment methods.
If you’d like to learn more about Airbase’s card programs, book a demo with us.
Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.