In 2024, the landscape of B2B payments is witnessing transformative changes with the increasing adoption of virtual cards, a trend spurred by technological innovations and an evolving digital economy. Historically underutilised due to limited acceptance by suppliers, virtual cards are now gaining traction, offering solutions to common inefficiencies associated with traditional payment methods such as checks and ACH transfers. These inefficiencies include lengthy processing times, inadequate security features, and cumbersome reconciliation processes.
The ongoing shift towards virtual card solutions is being driven by several key factors. They provide significant advancements in speed, security, cost savings, and automation, enabling businesses to optimize their financial operations. Widad Chaoui, vice president and general manager of corporate program product management at American Express, stated in an interview with PYMNTS, “The promise of virtual cards is their ability to deliver enhanced fraud protection, automation and flexibility compared to traditional methods, such as checks — three qualities that resonate strongly.”
The surge in the use of virtual cards is also credited to the changing demands of businesses. Emerging from the impacts of the pandemic, companies are increasingly seeking to implement faster and more efficient payment solutions. As highlighted in the PYMNTS Intelligence report, “CFOs Want Virtual Cards in Their Toolkits,” about 56% of CFOs believe that virtual cards are crucial for managing financial flexibility, reflecting their growing acceptance in corporate finance.
Unlike their physical counterparts, virtual cards can be generated instantly and tailored for specific transactions, making them particularly adaptable for outdated procurement practices. Such flexibility is especially beneficial for enterprises that encounter variable payment volumes, like seasonal purchases or project-specific expenditures. By imposing controls on these cards — including spending limits and merchant restrictions — businesses can enhance expense management and improve overall budget oversight.
Despite their potential, the widespread adoption of virtual cards has faced challenges, notably in terms of supplier acceptance. As expressed by Paul Christensen, CEO of B2B payments accelerator Previse, while 80% of buyers favour virtual cards, their utilisation represents a mere 2% of accounts payable transactions. To counter this hurdle, payment providers and industry associations are engaging in educational efforts to demonstrate the advantages of virtual cards, such as improved reconciliation processes and reduced administrative overhead.
Significant advancements are being made in the integration of virtual card payments with existing enterprise resource planning (ERP) systems and accounts payable (AP) platforms. This integration facilitates a seamless transition to automated payment workflows, minimizing manual processes that often lead to errors. With each virtual card assigned to a unique invoice or transaction, there exists a clear and auditable connection between payments and their intended purposes, enhancing transparency and reducing dispute risks.
Experts like Darren Parslow, global head of Visa Commercial Solutions, have referred to virtual cards as “the superpower of working capital”, emphasizing their role in optimising cash flow management, extending payment cycles, and enhancing financial agility. Looking forward to 2025, trends indicate a substantial increase in the adoption of virtual cards, with projections suggesting that usage could double, particularly within retail and marketplace sectors.
The shifting paradigm in B2B payments is becoming increasingly apparent, as around 80% of CFOs and treasurers plan to augment their use of external working capital, signifying a commitment to modernizing business payment practices. As virtual cards gain further acceptance, they are set to play a pivotal role in reshaping the financial operations of businesses across various industries.
Source: Noah Wire Services