The Benefits of Virtual Cards for B2B Payments

Even though we are in the digital era, paper checks are still the preferred payment method for B2B payments. Virtual payments are picking up thanks to regulations such as PSD2 directive, high internet penetration, and growing smartphone adoption. Virtual cards are becoming a crucial payment method especially for online payments, but why is that?

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by Raquel Orejas 18 May 2020

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According to Acumen Research Consulting, the global B2B payment transaction market size is expected to reach around US$ 63,084 Bn by 2026. The industries that process the highest numbers of B2B payments are manufacturing, professional and financial services, insurance, real estate, rental and leasing, covering more than 75% of the market share. 

 

There are several types of B2B payments, such as cash, paper checks (the winner), wire transfers, ACH payments, credit/debit cards, cryptocurrencies, and online payment platforms such as PayPal. At Payhawk we offer virtual credit cards that simplify B2B online transactions and offer several benefits to your company:

 

Safety

According to a recent J.P. Morgan survey report, 62% of companies were targets of payment fraud in 2014, with the most targeted methods being checks, credit/debit cards, and wires. Moreover, card sharing in business is common practice with very high risks such as theft, loss and data breach. 

 

Virtual cards, such as the one we offer at Payhawk, have the benefit that is not linked directly to your main company bank account, but to a wallet.  

 

Improve cash flows

As virtual cards are a fast payment method there is more accurate data on your business cashflow. Data from one of our key partners, Xero, shows that 28% of Britain’s small business owners say managing cash flow is a key challenge and that the average number of days for an invoice to get paid is 39. 

 

With virtual card payments, the working capital of your company can be optimized as payments are done instantly. This way finance teams and account payable teams, in particular, will not need to hold on to funds for longer than they need. 

Real-time information on budgets

Neobanks and fintech companies allow you to manage spending limits in real-time. Breaking up your budget and allocating it in different virtual cards instantly is way better than having to deal with multiple payment accounts.

 

Access to company funds

Virtual cards can also be used when your team needs to make company purchases outside traditional supplier invoice payments. You can issue a virtual card in one click and track transactions and allow spend policies for each of the cards so you don’t have to worry about overspending. 

 

Virtual cards also have some disadvantages as vendors need to accept card payments and this is always dependent on the technology they use and in some cases, you might incur higher fees than traditional wire or check payment. For that reason is always good to check the exchange fees, the monthly card fees, and the type of card. 

 

It is important to mention when we talk about B2B virtual payments that the market needs a strong regulation to allow different players to solve the payment process and have real-time information on transactions. The PSD2 directive in Europe focus on stronger security requirements for online transactions with multi-factor authentication (MFA) and allows companies like Payhawk to serve customers in a more efficient way than traditional banks. 

Written by Raquel Orejas

May 18, 2020

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