virtual-credit-cards
Finance tools & tech 10 min read

How to choose a virtual credit card for your business

Patrick Whatman

Virtual credit cards are an exciting step towards smart company spending. They give businesses a more secure, more personalized, and more trackable way to pay for things online. 

Virtual cards let employees pay for the things they need right from their desktop. They're quick, completely safe, and far easier for finance teams to manage.

Frankly, it's amazing that most companies are still hooked on the corporate credit card

But we're getting ahead of ourselves. We're going to explain everything you need to know about using virtual credit cards (VCCs) for your business.

Table of contents

  1. What is a virtual credit card?
  2. What's wrong with the company credit card?
  3. Why virtual cards beat the company card
  4. What to look for in a virtual card
  5. Where to get one

But first, there's a more urgent question to answer:

What is a virtual credit card?

A virtual card is usually prepaid, like a gift card, with a specific sum of money loaded onto it in advance. These cards only exist online, but carry the same information as a physical bank card: card number, expiration date, and CVV code.

Each card can be “single use” for an even higher level of security, or “recurring use” - for example in the case of a monthly subscription renewal. And employees using these cards can make payments with all the speed and ease of using a traditional credit card.

Virtual cards appeared on the market a few years ago specifically to address the risk of fraud when shopping online (more on that soon).

And they're quickly growing in popularity. According to the Mercator Advisory Group, "there will be $315.1 billion dollars a year in commercial purchasing with virtual cards" by 2021.

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How does a virtual card work?

In simple terms, people with access to virtual cards get to the "checkout" step of an online payment. Then, instead of pulling the company card out and typing in the details, they copy/paste in the their virtual card's information. 

Virtual cards facilitate:

  • Subscriptions and subscription renewals of all types of SaaS software
  • Expenses relating to business trips; hotel stays, train and plane tickets
  • Occasional expenses; office supplies and miscellaneous supplies, event participation fees etc.

Basically, if you're paying online, you should be able to do it with a virtual card. 

This is different from your average credit card. From MoneyUnder30, "a VCC’s usefulness lies in the way that it shares card data. The physical data printed on your card (credit card number, security code, address, and expiration date) are always the same and, accordingly, are subject to storage and misuse by hackers.

"Virtual credit cards provide online retailers with dynamic information so that every time you pay using a virtual credit card, the verification data is different."

What's wrong with the company credit card?

As we've written before, there are countless problems with the company card. And all of these stem from the basic realisation that most business credit cards weren't actually built for businesses in the first place. They're really just the same as personal credit cards, even though businesses and individuals spend in quite different ways. 

Most founders and CEOs don't realise this. Companies everywhere rely on their credit cards because it's the way things have always been done. And this comes with some significant drawbacks. 

Fraud and security

Online spending is turning the classic company credit card into a security risk. From buying plane and train tickets, booking hotel rooms and renting vehicles, to subscribing to SaaS software, online payments are numerous and varied. 

And every one of these payments is another potential risk. Can you truly trust these websites and services with your company card details?

Not to mention the fact that cards get shared around the office without proper oversight. Employees may have the details on a Post-It or saved in an email, which is nobody's idea of "safe and secure."

But according to Experian, "disposable card numbers can add an additional level of security in an age when retailer data breaches seem to be commonplace. If a hacker manages to get ahold of your virtual credit card information, you can simply cancel that virtual card without needing to close your entire account and get a new one."

Spend visibility

When the company is small, it's relatively easy to keep track of spending. The CEO or office manager keeps their hands on the card, and you always have a decent idea of who's spending what. 

But the more the card gets passed around, and the more online tools and subscriptions you acquire, the trickier this becomes. 

Because there's only one (or three, or five) company cards, it's not clear who has made purchases. Nor who approved each purchase in the first place. 

Which means that often, at the end of the month, your finance team or office manager spends hours combing through the credit card statement to get to the bottom of it all. 

 

company-credit-card-statement

Convenience and efficiency

You also shouldn't overlook just how clunky the process around the credit card actually is. We mentioned the unnecessary time it adds for your finance team each month. 

But how about the wasted time just trying to find the thing when you need it?

Credit cards get lost easily, and team members leave them lying around the office constantly. Which means that tracking it down is usually more effort than you expect. 

Plus, because VCCs are new and entirely digital, they're easy to integrate with your existing financial stack. So you don't have the usual ugly hassle at the end of each month. 

Why virtual cards beat the company credit card

The beauty of good virtual cards is that every team member can have their own. You don't need to share, and there's never a risk that they'll get lost. 

In fact, there's nothing to lose at all. They're virtual, so team members can't possibly leave them lying around. 

And because every employee can have their own, you always know exactly who's spending online with company money. You can assign every legitimate expense to the right team budget, and can limit purchasing so that nobody spends more than they're allowed. 

Other benefits

There are a few more clear advantages to opting for virtual cards to pay online employee expenses:

  • The risk of fraud is limited if not completely removed: the company card cannot be hacked
  • Expense management is optimised since a limit can be set on the cards
  • Single-use cards are highly secure since they expire the moment the payment has been made
  • Recurring-use cards let you track ongoing payments, and also provide an overview of weekly, monthly, and annual spending
  • All company spending is monitored from the centralised spend management platform 
  • And all approvals are tracked digitally, so you always know which managers signed off and the reasons given

And perhaps more than anything else, VCCs save everyone time. Per Chargebacks911 "this has the potential to shave countless tedious hours off bookkeeping and internal records processes—and saving time, of course, translates to saving money.

"Travel managers who utilize VCCs can save on overhead and reallocate staff for a more efficient, streamlined department."

What to look for in a virtual card

There are lots of options available, from traditional banks, to modern fintech companies (like Spendesk!). When you're considering your options, it's more important to look at the functions available, than who's providing it

In other words: your existing bank might offer virtual cards. But are you getting the product you really need, or just the one you're already familiar with? 

The best virtual cards let you do a few important things:

Access single use or recurring use

The difference between the two is pretty simple. Single use cards are used just once. These are wonderful if you're making an Amazon order on a one-off basis. But they're not great if you have a subscription payment, because you'll need a new card every month. 

Recurring use cards are still different from your company card - they have their own account details. So fraud risk is still low. But the card will exist for the length of your subscription, so you'll keep payment for your tool or service for as long as you need it. 

Have as many cards as you need

Some providers only give you access to one virtual card. It's nice not to have to use your main company card to make payments, but you're still sharing the same details out over and over again. This kind of defeats the purpose. 

You want to be able to create new virtual cards for every payment you make. That way, if one of your cards is compromised (the account details are hacked), you only have to cancel that one virtual card. All your other payments are safe and secure - even the recurring ones. 

And if somehow one of your cards goes over its limit, the same. It'll only affect that one payment in question, and not all the others you may have ongoing. 

Integrate directly into your expense management processes

"The key to an efficient accounting workflow is in the integrations," according to Beanworks. "The most comprehensive workflow with include a fully integrated payments process. With virtual credit cards, payments can be approved and released to vendors directly from within your accounts payable automation software."

We've talked about this a lot elsewhere, but reconciling expenses is costly and time-consuming. And if you're going to be creating dozens on virtual cards for online payments, this just leads to more moving parts. That means more ways in which things can go wrong at tax time.

good spend management tool will not only issue you virtual cards, but also track every payment made within its own platform. So you're not relying on your staff to report every payment, and your finance team has a full record of how the money has been spent. 

Require authorisation for certain payments

Suppose you want to give employees autonomy and flexibility, but only up to a point. In this case, it's nice to give them access to virtual cards, but with certain conditions or limits in place. 

The most simple option is just to require authorisation before the payment can go through. The team member sets up the payment, creates the card, and then you get a notification to approve (or deny) it before it can be executed. Good tools let you do this through the central dashboard, and you can give this authority to team leaders and managers. 

These same tools also let you add more customisation. For example, your Head of Sales may be authorised to spend up to £150 without approval, whereas a regular salesperson may only have access to £100. And in either case, if they want to go over these limits, they'll need someone higher up to confirm.

Not all virtual credit cards give you these options, so it's important that you ask around and find one that does.

Where to get one

As things stand, companies can choose between two main providers to get a virtual payment card: banks and SaaS startups like Spendesk. And these two options generally let you do quite different things.

1. From a traditional bank
Opting for a banking establishment means the head of the company and the administrative and financial director can use an online tool that generates virtual cards. Information (card number, expiration dates, CVV code) can be given to employees so that they can make online purchases.

2. A spend management platform 
The second option: call Spendesk (or another tool like us)! In this case, the process is easier and grants employees and the finance team more advantages.

new-tab-feature-product-spendesk

Why?
Because Spendesk integrates the entire process: from the purchase request to payment and on to account reconciliation.

In real terms
When using Spendesk, the employee makes a purchase request through the platform and once it's been validated by the manager, financial director or head of the organisation, a virtual card is generated. Then the employee gets a real-time notification to say they can go ahead and use the virtual card.

Spendesk Virtual Cards Infographic

This whole workflow makes employees more autonomous while keeping finance teams in control

Choose virtual cards for your company

With so many advantages, the virtual card is the natural choice for secure, simple and agile method of payment. 

If your goals are to save the company time and effort, while at the same time making your spending more secure and easier to control, then virtual cards are just what you need. 

And the best way to get them is with a spend management platform like Spendesk:

Spendesk-request-a-demo

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Patrick Whatman

Patrick Whatman is a content marketer and writer. He lives in Paris, loves music, and writes his own brand of cultural criticism for fun. Tweet him @mrwhatman where he mainly talks digital marketing, American sports and New Zealand trivia.