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Ensuring Business Continuity with Virtual Cards for Commercial B2B Payments

Friday, May 08, 2020

Businesses making payments to other businesses have historically relied on employees working from an office and cutting physical checks.

During times of social distancing, or even if it's just the desire to operate in a virtual environment, many businesses — of all sizes and all industries in the United States — are looking to adapt their workforce to remote work while still making sure the exchange of funds is quick, secure and flexible.

Accenture reports that check payments in B2B settings represented 42% of payments in 2019, a sizable portion of the massive $9 trillion commercial payments market in the United States. More than 97% of financial professionals acknowledged paying some of their largest suppliers with a check in 2019. And in a digital world, it's costly to undertake manual processes.

Accounts Payables Without Physical Touch Points

How can an organization maintain 'business as usual' account payables practices with a large number of remote employees?

It all comes down to the right tools and the right information, automating and streamlining accounts payable processes and making them less dependent on physical and manual interactions between people.

With digital accounts payable solutions, it's possible to fully automate processes like invoices and payments across online and mobile devices anywhere in the world. They enable a direct connection between corporations that make a payment (also known as 'companies' or 'buyers') and suppliers, who provide services or goods.

Many corporations today place an emphasis on automating purchase orders and invoices, but will then send a paper check to settle the account. After a very streamlined, digital process up front, payments are often overlooked. Automating the whole process, from beginning to end, can help increase efficiency and avoid physical touch points.

The Virtues of Virtual Cards

A virtual card is a 16-digit account number that's typically created for one purpose — to pay for a business transaction, either just once or often multiple times. There is no physical card, and processing works just like any other card payment. Accounts payable departments (buyers) can send to accounts receivable departments (suppliers), with remittance conducted over various delivery methods (often email, fax, or a supplier portal). With those preferences outlined up front, the payment gets sent the right way, the first time.

Graphic stating "More than 97% of financial professionals acknowledged paying some of their largest suppliers with a check in 2019." (source: 2019 AFP Electronic Payments Survey)

Organizations that use virtual cards often have very complex needs. It helps to use virtual account numbers in a scenario where they require very precise controls, such a specific amount, a certain merchant category code (MCC) or specific date ranges. That means the transaction can be completed and documented with the amount, the corresponding invoice, expiration date, authorization code and even more information. Essentially, it injects a payment into the business workflows in real time.

Research suggests that by 2021, virtual card spending will surpass that of traditional purchasing cards and checks. And for good reason – there's a sharp reduction in fraud compared with checks or corporate cards.

Single-use virtual cards are not only more secure but also enable better organization, matching individual transactions with claims or purchases for 100% reconciliation. For industries like travel and insurance, it makes a big difference. It also helps that buyers often get a rebate from major credit card issuers due to the high dollar amounts.

"How can an organization maintain 'business as usual' account payables practices with a large number of remote employees?"

If you're interested in a digital accounts payable solution for virtual cards or other payment methods, here are a few things to look out for.

Buying-Defined Preferences: Each organization making business-to-business (B2B) payments typically uses an internal enterprise resource planning (ERP) system that tracks payments they make to a vendor or merchant ('supplier').

What the most advanced digital solutions can do is document how suppliers want or need (for compliance reasons) to get paid. Some always prefer a virtual card. Others prefer payment options based on business-rule thresholds, such as using a virtual card above a certain dollar amount. The first step to facilitate all of these different payment types is understanding and capturing supplier preferences into the payment platform.

Easy Connection with ERPs: Integrating directly with ERPs is important, as it facilitates the data exchange with the payment platform. Platforms need the flexibility to accept any invoice payment format and map that data directly into its application for processing. Likewise, it's crucial to provide payment reconciliation data back into the ERP to close out accounting needs and identify any exceptions. This provides a completely automated end-to-end solution.

API Access: Some organizations prefer to use a holistic payment automation solution with both the front- and back-end systems. Others prefer to incorporate the functionality into their own proprietary applications, legacy systems and user interfaces. The most flexible digital AP system offers real-time, direct access to application programming interfaces (APIs) so organizations can access the functionality however they choose.

BIN Generators: Solutions with their own virtual account generation engine are able to fully control assignment of virtual numbers for payments in a card-network agnostic way. The ability to generate virtual accounts based on client-defined BINs allows for greater flexibility when assigning specific numbers for unique interchange rates, special programs, large ticket amounts or preferred products. This can help a corporation stay even more organized with virtual cards and even allow for pre-funding in certain scenarios where credit lines are not preferred or permitted.

A Connected Ecosystem: Having an automated payments platform integrated with your card issuing platform means you're able to take advantage of a connected ecosystem of solutions. That means a more aligned back office that makes for better customer service, the ability to conduct research faster and other advantages like direct integration with the authorization and settlement processes.

Digital-First Accounts Payables

With the right solutions in place, business operations can continue seamlessly even though physical interactions are not possible. Today's digital-first commercial payments solutions will equip organizations to conduct business as usual, regardless of how they work to move data and funds seamlessly between online and offline environments.

For more insight on frictionless, integrated commercial payments using virtual cards and more, there's TSYS Automated Payments. From payments to reconciliation to settlement, our end-to-end solution integrates directly with the tools you're already using.