Businesses in general use virtual cards for online transactions such as marketing campaigns or subscriptions. However, the travel sector has used virtual cards for more than 20 years now. The accessibility, ease of issuance, and control have made this payment method almost indispensable for travel managers.
As vaccination rates increase, business travel seems to be picking up in some parts of the world. Face-to-face events and in-person meetings are finally happening again.
However, business travel will never be at the same level as pre-pandemic. Data from McKinsey mentions that in 2020, total global business travel expenses contracted by 52%. In addition, a recent survey by Bloomberg to 45 large corporations in Europe, Asia and the US, revealed that they will reduce their travel budget between 20% and 40% in the next year.
As travel managers will have tighter budgets, choosing the right tools to allow flexibility for the team with strict budget controls will be crucial.
It was not so long ago that if you needed to travel, personally or professionally, you will call your travel agent or travel department, tell them your dates, preferences, and a few other details and in a couple of hours, voila! The trip was all organized. Today, thanks to online travel brands such as Travelperk and digital payments we can do all of this process in one click from our home or office.
Spend control in business travel is a complicated issue. Travel managers often want to fulfill multiple needs which include speed, security, ease-of-use, fraud prevention, reconciliation, and coverage compliance. Also, taking into account FX rates and other transaction costs, handling travel payments at scale is not an easy task.
We think that virtual cards have only existed less than a couple of years, but the travel industry has been using them since the early 2000s, Clive Cornelius from Visa Europe mentioned in one of our webinars.
According to a survey from AirPlus International in 2015 only 8% of companies used virtual cards to pay for their employee’s hotel accommodation costs compared to 31% in 2018. Virtual cards have been since then the preferred solution, but why?
Reconciliation is automatic. This means that transactions are reconciled automatically with expenses. In other words, employees who travel don’t have to collect all receipts, do expense reports that are time-consuming, take a quick look to our Expense Report Calculator here. Moreover, accountants and CFOs don’t have to manually check all the transaction information. A win-win for all.
Security. Virtual cards are not linked to your company bank account, in the case of Payhawk. Virtual cards are linked to a wallet that you transfer funds via bank transfer. Travel managers use one-time virtual cards that are created specifically for a vendor or a trip so if there is any security breach is almost impossible to track the account details.
Speed. In Payhawk it takes less than one min to issue a virtual card, literally. As there is no need to send a physical plastic card, you can have access to company funds fast and easily. Travel managers can issue on-demand cards for last-minute trips and employees don’t need to spend their own funds and wait for reimbursement, which on average can take weeks or even months to have the money back into their account.
Travel policy enforcement. Thanks to virtual cards, companies can now have stronger enforcement of their travel policies. If employees want to spend out of their limits, or with different vendors than the ones approved by the company, the card will simply not work. This will allow CFOs and travel managers to have better control over their travel spending and budgets.
It will not be fair to talk of all the great benefits of virtual cards for business travel without mentioning the drawbacks. Remember that not all virtual cards are the same. Many prepaid virtual cards are not accepted in car rentals or hotels. At Payhawk, we offer Virtual Commercial Debit cards with the same acceptance rates as credit cards. Recently we also launched a 3% cashback on all POS spend, capped at your subscription for Enterprise clients.
As a CFO or CEO, virtual cards can be part of your digitization efforts. If you need to choose a virtual card for your business, please take into account several factors such as exchange rates, monthly fees, and the type of virtual card. If you are ready to try virtual cards for your business, you can schedule a demo here.
Whether you have tens, hundreds, or thousands of employees, we’re making your business spend work for you, giving you control over spending at scale with a single solution. Say goodbye to tedious finance tasks, schedule a demo with us today.