Virtual cards can benefit business banking customers

Providing this alternative payment method can increase the visibility of your financial institution and generate income as well.

According to the BAI Banking Outlook, digital customer experience is the top business challenge and investment priority for financial institutions in 2022 – only 9% of financial services leaders describe their digital customer experience as “excellent.” As banks look to new innovations to improve this area, it is crucial to look past the surface and leverage specific capabilities to bring tangible results.

Digital experience shouldn’t stop with consumer banking. With higher growth potential in business banking, virtual cards are a capability that can improve digital experience for corporate customers. Similarly, the pandemic has accelerated the need to offer digital payments.

Community financial institutions emphasize supporting small and local business by providing products important to the continued success of these organizations. Virtual cards can be integrated into commercial cards for treasury management services. They can be recurring, or on-demand digital card numbers that enable accounts payable managers to restrict usage to a specific amount, supplier and time period to pay an invoice.

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Here are four significant benefits of virtual cards for business customers.

Pay faster

Businesses can streamline their accounts payable process by using virtual cards. Vendors and suppliers do not have to wait on outdated paper checks to go through a manual system – instead, virtual card payments are executed immediately. Businesses can instantly provision and pay the exact amount due to a supplier through virtual cards.

With the ability to pay faster, the AP teams become more efficient in handling payments to multiple vendors. In addition to the time saved, utilizing virtual cards can reduce or eliminate human error with a streamlined accounts payable process.

Decrease processing costs

Virtual cards can facilitate lower payment processing expenses and easy reconciliation with financial systems. Not only are the corporate customers saving money on the processing costs, but the cost of supplies as well – check stock, MICR toner, envelopes and postage can all be reduced or even eliminated.

Industry estimates are that payments made with virtual cards cost $8 less than the expenses associated with printing and handling a check. On top of that, virtual cards save the costs of creating and mailing physical cards. Financial institutions also offer rewards on payments made through virtual cards that can benefit business customers.

Enhance cash flow

There are several moving parts surrounding the processes of treasury management. Companies have to pay vendors, suppliers and employees all while they are also receiving payments. Utilizing virtual cards gives freedom and management to cash flow through instant reconciliation of payments, leading to enhanced reporting that enables accounts payable managers to constantly have the most up-to-date numbers on hand.

When a business uses virtual cards for instant payments to its suppliers, it improves its working capital and cash flows. There is also less risk of fraud through use of single-use virtual cards by reducing unauthorized exposure or usage.

Improve internal controls

Accounts payable managers can have the power to create individual cards with specific controls such as amount, date, merchant name, merchant category, etc.  Virtual card payments are processed the same way as traditional card payments but without the need for a physical card.

With a streamlined process, purchases are automatically entered into the system without additional paperwork or manual entry. Virtual card payments also provide the ability to include customized data capture fields. Traditional ACH and check processing cannot support the volume and quality of remittance data and audit controls that virtual cards can provide.

Providing virtual cards as a service to your small and local business can increase the visibility and reputation of your financial institution as a key member of the community. By leveraging a turnkey card-issuing program, community financial institutions can completely own their credit program, which enables them to keep interchange and fee income, among other benefits in treasury management capabilities.

As financial services leaders innovate in 2022, pushing for continued growth for business customers is crucial. Corporate digital user experience is just as valuable and should be addressed with traditional consumer digital user experience. As instant digital payments become the norm, more of your business customers will need virtual cards for their supplier disbursements.

Anil Goyal is president of Corserv Solutions.