One of the business stories of the past year is the dramatic growth in electronic supplier payments. In the fourth quarter, Nacha, National Automated Clearinghouse, reported a 15% year-over-year increase in B2B ACH payments. The unfortunate side of this story is the increase in ACH payment fraud. In all likelihood, we’ll see a corresponding 15% increase in ACH B2B fraud, if not more, as remote work restrictions have left many organizations vulnerable to attack.

As organizations work to improve their defenses against ACH fraud, they should also increase their use of virtual cards as much as possible, as this is the safest way to pay vendors. Vendor objections to fees have always acted as a barrier between the status quo and prepayment options. With the changing B2B payments landscape and the increase in fraud, it may be worth revisiting these conversations with vendors. Or, for some companies, maybe starting this conversation for the very first time.

Not the same as plastic

Despite being around for a decade, I still meet a good percentage of people who have never heard of virtual cards – or if they have, they don’t know how they work. Many businesses today use a plastic card to pay their suppliers. Alternatively, they use acquisition cards when purchasing supplies. These physical cards are often lost or stolen. The number can also be stolen even without owning the actual card.

Virtual cards use the same networks as plastic cards, but they offer several layers of protection that make them resistant to fraud. They are sometimes referred to as one-time cards because the 16-digit number provided can only be used once. This alone is significant. It is just not as attractive for scammers to steal single-use information. It is much more attractive to get a regular card number or hack a provider system to hijack ACH payments. These are scalable and repeatable types of fraud, if you will.

When it comes to single-use cards, the card number is associated with an amount and a merchant identification number. Each piece of information should match the details provided for the transactions to be made. This strict requirement makes the use of single-use virtual cards very difficult.

Really, the most sensitive virtual card risk is employee misuse. You can even eliminate this risk by using virtual cards through a payment service provider – they usually have an indemnification process in place.

Fast and guaranteed funds

The big advantage of fraud protection is obviously on the buy side, with the buyer receiving a discount, which helps cover the costs of the AP. But what about the advantages on the supplier side?

Before joining Nvoicepay, I sold in accounts receivable. The big concern is to collect and reconcile payments as quickly as possible. Virtual cards can help in both cases. Virtual card funds reach their designated accounts within 24 hours of payment approval, while checks and ACHs can take up to 10 and two days, respectfully. It’s great to be able to offer AR teams quick payouts.

In addition, these are guaranteed funds. Once they execute the card, the funds are theirs. This is not always the case with check and ACH payments, which can fail or bounce back. Wire transfers are the only other type of guaranteed payment, but they are expensive to issue and time consuming to set up, which is why they are generally not used nationally.

When it comes to reconciliation, plastic cards are difficult to reconcile on a large scale, but virtual cards can be integrated into a technological solution like the one I was selling that automates these processes.

A more nuanced vision

When it comes to fees, there is still a misconception that accepting the virtual card is expensive for providers. I think 2020 has been a tipping point where providers are looking at fees in a more nuanced way. Quick and guaranteed funds are not to be sneezed at in an environment where many of their clients might be in trouble.

Suppose you adapt your program and set up a portal for providers to receive virtual card payments. In this case, you can get discounted level two and three treatment. This can often significantly reduce your costs. I have seen cases where the fees have gone from 2.5% to 1%.

The volume and size of the payment are components of these discounts. If you are making large volume payments, you might get a better overall rate and better rates on smaller payments. But access to data is another component. The additional data associated with virtual cards helps issuers mitigate the risk of fraud. Other data is transmitted with the payment which can be used for economic analysis and even for marketing.

It appears that in 2020, COVID-19 has done more to steer businesses away from supplier checks and electronic payments than all the sales and change management efforts of the previous decade combined. While the initial response was to embrace ACH payments, businesses that mature their electronic payment programs will find the virtual card a strategic component that promotes fraud protection and provider support.


Kristin Cardinali is Vice President of Regional Sales at Nvoicepay, a FLEETCOR company. His sales and sales leadership experience spans 16 years and includes positions held at companies such as Capital One and Billtrust. With Nvoicepay, it offers scalable payment solutions to mid-sized businesses and businesses. Kristin has received several accolades, including Sales Representative of the Year and Quarter, and several President’s Awards.

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