Juniper Research estimates the global market for virtual credit cards is expected to reach $9.1 trillion by 2027, a surge of 280% from 2022. Driving the majority of this growth are B2B payments, which Juniper Research predicts will comprise 70% of virtual card transactions by 2026.
AvidXchange’s 2024 Trends Survey underscores this, finding that 31% of organizations used virtual cards to pay suppliers in 2023. Many businesses prefer virtual credit cards as a payment method because they’re designed to enhance privacy and simplify reconciliation.
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What is a Virtual Credit Card?
A virtual credit card delivers the same functionality as a physical credit card. However, instead of having a single card number used across all transactions, a virtual credit card provides a unique, temporary card number, expiration date, and card verification value (CVV) for each transaction.
By keeping the card details private, virtual credit cards are designed to reduce fraud risk and enhance privacy for the cardholder.
Some businesses choose to use virtual credit cards for spend management, setting budget limits for projects. Others assign a unique virtual credit card number for different projects to help with reconciliation and expense allocation.
What Does VCC Stand For?
VCC stands for virtual credit card. Some people use this abbreviation in place of the longer phrase. Some people also refer to virtual credit cards as “disposable credit cards” due to their one-time use applications.
How Do Virtual Credit Cards Work?
Virtual credit cards work by providing a temporary, digital card number that can be used for online and over-the-phone purchases, helping protect your business’s credit card information. In most cases, you can get a new virtual credit card number by generating one via your provider’s website or app.
Once you have your virtual credit card number, you can use it as you would a physical credit card. Enter the number, expiration date, and CVV code where they are requested to complete a purchase.
All virtual credit card purchases will appear on a centralized bill comprised of all the VCC purchases made using your account. Payment is handled the same as with a traditional credit card – your organization can pay the balance immediately or accrue interest on delayed payments.
How Do You Use a Virtual Credit Card?
A virtual credit card number is used the same as a physical credit card number. But virtual credit cards cannot be used for in-person purchases in stores, for example. Virtual credit cards only work for purchases that don’t require a physical card reader.
Virtual Credit Card Processing
Virtual credit card processing is no different from processing a physical credit card. Your supplier receives an email with a card number, which they will then enter into their point-of-sale or merchant processing system.
How to Get a Virtual Credit Card
There are a few different ways to get a virtual credit card for your business:
• Through your existing credit card issuer
• Through your expense management platform
• Through your payment automation provider
AvidXchange offers businesses automated payments to suppliers via virtual cards. These payments are issued within one business day of payment approval. Delivering payment via virtual credit card can help improve cash flow and protect your organization from certain types of payment fraud.
Once you’re set up with an account that offers virtual credit cards, you can log in to your provider’s website or app to generate a temporary card number as needed. If your business uses AvidXchange for virtual credit card payment, there’s no need for this step – our system will generate a virtual credit card number and pay your supplier on your behalf once you’ve approved their invoice.
Benefits of Using Virtual Credit Cards for Business
Using virtual credit card payments in your business can offer numerous advantages that help enhance privacy, budgeting, convenience, security, and supplier relationships.
Privacy
Since VCCs have a unique card number for each transaction or vendor, your business’s credit card number remains undisclosed, helping reduce the risk of it being compromised. This translates to greater protection of sensitive financial information and reduced vulnerability to data breaches.
VCCs also allow businesses to provide credit card information to employees without clearance for a corporate card for one-time payments or subscriptions. For example, if an intern needs to place an online order for event t-shirts, their supervisor can give them a virtual credit card number for that purchase, helping ensure it won’t be used for other non-approved charges.
Budgeting
Virtual credit cards offer a powerful tool for budgeting and financial management. They can allow businesses to set specific spending limits for each virtual card number, helping expenditures stay within predefined budgets. This feature is useful for managing departmental or project-specific expenses.
By issuing virtual credit cards with controlled limits, companies can help prevent overspending and maintain better oversight of their financial resources. Additionally, the detailed transaction records provided by virtual credit card platforms help simplify expense tracking and reporting, making it easier for accounting teams to analyze spending patterns and make informed financial decisions.
Convenience
Virtual credit cards cannot be lost, stolen, or damaged like physical credit cards. If a virtual card number is compromised, it can be easily deactivated without affecting the main credit card account. Rather than affecting all the transactions on the account, the impact is limited to the purchase involving that VCC number.
Virtual credit cards can be generated and used instantly, facilitating quick online transactions. This is especially beneficial for businesses with frequent online purchases or subscriptions, as it can streamline the payment process and reduce the administrative burden of managing multiple physical cards.
Moreover, virtual credit cards can be integrated with various payment platforms and accounting software, further enhancing operational efficiency by helping to track and allocate expenses.
Security
Financial security is a major concern for many businesses today, and virtual credit cards help keep transactions safe. Each virtual card number can be limited to a single transaction or a specific vendor, helping minimize the risk of fraudulent charges. Additionally, many virtual credit card providers offer advanced security features such as tokenization and encryption, which help to further protect sensitive payment information.
Improved Supplier Relationships
Offering payment options to suppliers, including virtual credit cards, can help improve their overall satisfaction level. Virtual credit cards, in particular, can deliver advantages for suppliers, including:
• Faster payment processing compared to paper checks
• More secure payments due to one-time use credit card number
• Simplified reconciliation (invoice information provided on remittance email if your buyer uses payment automation)
• Less time spent following up on payment status
Types of Virtual Credit Cards for Business
Depending on your unique needs, there are different types of virtual credit cards for businesses.
Single-Use Virtual Credit Cards
These cards are generated for a one-time transaction They are considered highly secure because the card number cannot be reused, helping reduce the risk of fraud.
Multi-Use Virtual Credit Cards
These cards are designed for multiple transactions with a single supplier. They can have predefined spending limits and expiration dates, making them suitable for recurring payments with a supplier your business uses regularly.
Prepaid Virtual Credit Cards
These cards can be loaded with funds in advance. They are often used to control corporate spending, such as for employees’ travel expenses or specific departmental budgets.
Subscription-Based Virtual Credit Cards
Tailored for subscription services, these cards can be set up for recurring billing cycles. They help manage and control subscription payments, preventing unwanted charges and simplifying cancellations.
Virtual Debit Cards
These work like virtual credit cards but they are linked directly to a bank account. Virtual debit cards offer the same convenience and security as VCCs, but they use funds directly from a bank account rather than a credit line.
Cost and Fees of Virtual Credit Cards
The costs and fees associated with virtual credit cards vary by provider. Common fees include issuance fees, monthly maintenance fees, and transaction fees. Some providers might charge by the number of virtual card numbers generated or for using advanced features like reporting and spending controls.
Generally, businesses that use virtual credit cards find the convenience, security, and other benefits to be worth the expense.
The Future of Virtual Credit Cards for Business
The future of virtual credit cards for business looks promising as they help enhance privacy, efficiency, and control. Compared to traditional payment methods, VCCs can reduce the risk of fraud and unauthorized use.
For businesses, this means safer online and recurring transactions, as well as easier management of vendor payments. Automation and integration with accounting software and enterprise resource systems (ERPs) streamline expense management, allowing for simplified tracking and reconciliation. Additionally, virtual credit cards can help improve budget control through predefined spending limits and detailed transaction records.
As businesses embrace digital transformation, virtual credit card adoption will likely grow, driven by advancements in automation technology and increasing security concerns. Learn more about how businesses are using VCCs and other emerging digital payment technologies in our “B2B Payment Trends” report.