How virtual cards can transform your business in 2024 (and beyond)

Photo courtesy of Yooz

Opinions expressed by Digital Journal contributors are their own.

It’s estimated that 82% of American adults have a credit card. At the same time, Americans only use paper checks 14% of the time, and typically for larger transactions.

Despite these trends in personal finances, businesses largely continue to lag behind. A report from the Guardian indicates that roughly one in three B2B transactions use paper checks, and 81% of businesses use paper checks at least some of the time.

However, the reality is that switching to electronic systems such as virtual cards can make a very real impact on your business operations. I recently had the chance to speak with Jay Deubler, CRO at Yooz, about how virtual cards can have a transformative effect for businesses across a wide range of industries.

Changing perceptions

While adoption of virtual cards has been slower in some industries than others, Deubler has seen significant change over the years.

“When I entered into technology, the whole SaaS model was argued for the first seven to 10 years I was in the industry. ‘You know what? A controller will never want their information off site. They want to be able to look and they want to be able to do their backup every night’,” Deubler recalls. “And that has totally changed. And I think as we see the workforce changing with younger people coming into more and more positions of power and decision-making, the acceptance of technology and things like virtual credit cards becomes second nature.”

As more businesses transition toward virtual cards and other tech resources, the benefits will become more pronounced — and those that don’t use them will begin to fall behind.

To Deubler, much of this change stems from increased use of electronic payment methods in personal transactions, and an improved understanding of why virtual systems matter so much:

“‘Hey, I use it when I buy online.’ Why isn’t your business using the same thing that’s out there that you’re doing in your personal life? If you are in the office of finance, you are to be a good steward of the company’s money. That is your job. And if you are not using the latest technology and you’re not using all the safety precautions that are out there, are you truly doing your job correctly?”

Immediate impact

One of the biggest benefits that Deubler cites of using virtual cards is how they can work in tandem with AI tools to mitigate payment fraud, noting that virtual cards are fully insured against fraud. Considering that 96% of businesses were targeted by payment fraud attempts in 2023, it’s clear that mitigating fraud should be a key priority for many — and that virtual cards can make a difference.

However, the potential benefits of virtual cards extend beyond security, helping businesses become better equipped to streamline their entire payment solution, while also being better able to negotiate better rates or terms with their vendors.

Deubler explains: “A three to five percent shift just by maximizing cash flow, ensuring that you’re collecting on time, ensuring that you’re paying within the time bands that you have allotted, and taking advantage or even negotiating discounts that you may not have had before — if you can save half a percent or one percent and you’re spending $100 million, you’re going to be saving a lot of money.”

A cost-efficient solution

Virtual cards do have inherent costs to the business (such as how traditional credit card processing fees charge between 1.5% to 3.5% per transaction). But the cost to the bottom line isn’t so cut and dry as it might appear at first.

“There’s some costs of businesses that receive virtual cards. Everybody that’s receiving that card has to pay for it,” Deubler admits. “But they get their money faster, and it’s more secure. So, they get a lot of benefit and they’re willing to make that trade off.”

Many virtual card processors also provide incentives that make it easy for businesses to balance out any potential costs associated with transitioning to virtual cards.

“As part of our user pay agreement, we actually pass those savings onto our customers,” Deubler explains. “So, a lot of our customers are actually able to pay for not only the payment gateway, but the entire usage of our system by using virtual credit cards. The more they use, the more cash back they get. […] We look at that as a win-win-win situation where the end user’s winning because they’re getting their money faster, our customer’s winning because they’re more secure and they actually get a piece of the pie, and we’re winning. We have more loyal customers and we’re able to benefit from it as well.”

With cash back options, virtual cards can further bolster the financial position of the businesses that use them. Combine with reduced fraud risk and the ability to negotiate better payment terms with vendors, virtual cards can clearly have a significant financial impact in several areas.

Prepared for the future

The vast majority of people have shifted away from paper payments for their personal transactions. In fact, any time you make an online purchase with a retailer, you’re essentially making a virtual card payment. As businesses catch up by using virtual card payment solutions themselves, they can position themselves to be more agile and secure, while also unlocking opportunities to further improve the bottom line.