What is a Virtual Expense Card?

Aug 4, 2023 by Zazil Martinez

Virtual Expense Cards are digital payment tools that simplify and enhance B2B transactions. Unlike physical credit or debit cards, these virtual cards operate online, making them ideal for card-not-present purchases. Incorporating them into your financial toolkit can revolutionize expense management, control spending, and streamline payment processes.

As businesses evolve in the digital age, financial transactions significantly transform too. For B2B payments, embracing innovative solutions can streamline operations, boost security, and enhance efficiency. One groundbreaking tool gaining popularity is the Virtual Expense Card.

In this blog post, we'll delve into Virtual Expense Cards and explore how they empower businesses with enhanced security, improved expense tracking, and simplified payments. Let's unlock the potential of this innovative solution and witness the advantages it brings to B2B payments.


What Are Virtual Expense Cards?

Virtual expense cards are prepaid cards employees can use to securely make purchases online and over the phone. These cards work like physical cards, allowing businesses to issue 16-digit numbers in a few clicks. To the merchant, there's no difference from any other payment. Still, neither employees nor merchants can access bank information. This adds a layer of security to the transaction.

Virtual expense cards give finance teams better control and visibility over company spending. For Accounts Payable (AP) teams, processes become simpler and more efficient, protecting all parties in a transaction against fraud. Some virtual card providers even offer reward points to use on payables or expenses or redeemed for cashback.


How Do Virtual Expense Cards Work?

Virtual expense cards allow businesses to create a unique 16-digit virtual account number (VANs). This number acts as a temporary alias for a bank account. From the processing side, they are treated like regular credit cards during a transaction, except the factual payment information is locked away behind a randomized token that makes these credentials unreadable to fraudsters. It's one of the most effective ways to protect personally identifiable information (PII).

For employees to start making purchases, they must first be assigned access to funds. That's why one of virtual expense cards' core use cases is expense management.


When Are Virtual Expense Cards Used?

Virtual expense cards are appealing because they make it easier to make purchases while reducing the friction of expense approval. Corporate credit cards usually require employees to pay for something upfront and fill out an expense report to get paid back. They risk being hooked to pay that charge if an expense is not approved.

With virtual cards, businesses can move to a request-based process that issues cards to employees when spend is required. This flips the switch and ensures your business has visibility of spend before it happens, reducing erroneous spending and the back-end work required to track and report expenses.

Other everyday use cases for virtual expense cards are:

  • To pay vendor or contractor invoices
  • To reduce transaction fees associated with credit cards
  • To earn reward points or cashback incentives on payables
  • To obfuscate sensitive payment information
  • To simplify time spent on expense reporting


What Are the Benefits of Virtual Expense Cards?

  • Enhanced security. Virtual card numbers help avoid data breach issues or fraud, with a unique number generated each time you create a card. If a fraudster gets your virtual card information, you can cancel that card without closing your entire account and starting a new one, so there is no trail to a bank account.
  • Greater control. From creating cost centers that give teams and departments control of their assigned budget to customizing expense categories to make expense reports easily understood and tied to line items, virtual expense cards have many unique tools and features to help you manage how much your company spends at any time. You can even re-assign funds to other teams or create sub-groups to allocate the available budget better.
  • Improved efficiency. Using virtual cards to replace outdated payment options like cash or paper checks eliminates all the associated manual-process inefficiencies—no more writing and handling checks and metering envelopes. In addition to saving time, you reduce or eliminate the risks of human error with a streamlined accounts payable process through single-issued virtual cards. AP departments can combat the challenges in the AP process by issuing virtual cards.
  • More transaction detail. One of the perks of using virtual cards is that you can add more information on transactions to streamline the reconciliation process. Typically, ACH only provides 80 characters of space, and wire transfers are limited to 140 characters. Virtual cards don't have these limits, so that you can customize remittance information to your business needs.
  • Fewer chargebacks. Unlike "single-use" virtual credit card alternatives, prepaid expense cards make the refund process easier because funds can be re-loaded to the account.
  • Reduced workload. When you replace outdated payment options like cash or paper checks with virtual cards, you eliminate all the associated manual-process inefficiencies—no more writing and handling checks and metering envelopes. In addition, you also reduce or eliminate the risks of human error with an automated process that transfers remittance information to the ERP system, saving countless hours of manual data entry.
  • Reduced exception processing. Because you can tie virtual cards to a dollar amount and set expiration dates, the card will not process payment for any higher than the pre-set amount. This added control makes overpayment impossible, reducing time-consuming and costly exception processing.
  • No credit check is required. As a prepaid card, there is no credit check for the cardholder, making it suitable for your team members with "single-use" expense needs.


How to Choose a Virtual Expense Card for Your Company?

Virtual expense cards provide too many benefits for employees and businesses to be ignored. They make it easier to make payments, reduce the risk of fraud, and make managing your company and employee spending easier and more flexible. They also add powerful automation and efficiency to your business, allowing you to eliminate the inefficient AP processes and systems that add hours of data entry and manual work to your team's workload.

If you're looking for an automated AP solution for your business. In that case, Paystand's DeFi Card can give you a flexible way to manage, optimize, and automate your expense management process.

Whether you are looking for a one-stop payment shop or need answers to your questions, our payment experts are here to improve your business. Book a demo today!