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How to Make Virtual Card Payments Part of Your Overall Payment Strategy

Ira Brooker   May 12th, 2023

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The way people and businesses pay for purchases has undergone some major changes over the past decade. Physical payment methods like checks and cash have been in steady decline for years, and the events of the COVID-19 pandemic have only sped up that process. Now even standard credit card transactions are starting to be phased out as faster, more secure forms of payment take their place.

Virtual card payment is at the front of that wave of change. As Recharged Education LLC founder Lynn Larson notes in the webinar she’s hosted with MHC, “More Than Hype: Using Virtual Cards to Expand Invoice Payment Options,” this type of payment have existed  for decades in some form, but recent technological advancements and workforce changes have made them more important than ever before. By offering all of the convenience of credit cards along with greater ease of access and stronger online security standards, virtual payments are quickly changing the face of vendor relationships and supply chain management. Let’s take a closer look at this versatile technology.

What Is a Virtual Card Payment?

Virtual card payment works in a similar fashion as a standard credit card payment. It is a unique, 16-digit number issued by a bank or payment provider and created for a specific transaction between a business and a vendor. The non-tangible nature of a virtual payment allows for faster, more secure transactions with a sharply reduced risk of error.

How Do Virtual Card Payments Work?

“Virtual cards are designed to work within a traditional purchase-to-pay process,” notes Lynn Larson. As far as your AP system is concerned, virtual card transactions are similar to any other credit transaction. When a business requests a virtual card payment, the system generates a unique, encrypted 16-digit number that takes the place of a standard credit card number.

This number keeps your actual account number hidden and secure. It is usually intended to be used only for that specific transaction, although there may be some cases where a virtual payment number will be reused. That increases the speed of transactions and provides added security in the event that a vendor suffers a data breach in the future — the virtual card number you supplied will be inactive and useless to any cybercriminals.

Using Virtual Cards_ Lynn Larson
The beauty of it, compared to ACH, is that suppliers don’t have to provide their bank account info. That’s safer for you as the buying organization. You don’t have to have all the controls that are so necessary when you are holding your suppliers’ bank account info.

Lynn Larson, Recharged Education

Who Are Virtual Cards Meant for?

Virtual cards can be used for a wide range of reasons by a wide range of users. On the shadier side of things, that includes individuals using virtual purchasing to conceal their identities — this is why they are sometimes referred to as “burner cards” or “ghost cards.” That reputation is quickly fading away, however, as virtual transactions become more and more an integral element of legitimate business.

For business users, virtual cards are extremely useful for any organization that wants to add an extra layer of security and convenience to its transactions. Not only does the single-use nature of a virtual card number help to protect against fraud, it also allows businesses to delegate employees to make quick transactions without entrusting them with sensitive banking information. Virtual cards can even be usable only by a specific vendor or supplier. That further enhances security by ensuring that card numbers will be declined if used in an unapproved context.

Where Can Virtual Cards Be Used?

Generally speaking, a virtual card can be used in any situation in which a standard credit card can. A virtual card is tied to the same banking account as the organization’s physical credit card. It should be compatible with any standard method of payment, including Apple Pay and Google Pay. As mentioned above, one key difference is that in many cases the virtual card number is valid only for transactions with a particular supplier or vendor. That means that each new virtual transaction will require the user to secure a new number.

What Is the Difference Between Virtual, Digital, Lodge, and Disposable Cards?

As with any relatively new technology, there is some confusion surrounding virtual cards and some similar methods of payment. Here is a brief rundown of some related terms and the differences between them:

A digital card is a digitized version of a physical bank card which includes the same card number, expiration date, and card verification code (CVC).

A virtual card is a digitized payment card that is tied to a specific bank account but includes a unique card number, expiration date, and CVC.

A disposable card (also known as a “burner card” or “ghost card” in slang terms) is a virtual card that can only be used a limited amount of times, usually only once. Its card number, expiration date, and CVC become invalid after its use.

A lodge card is a payment card with an established credit limit. Its card number, expiration date, and CVC can be used multiple times, but become invalid once that established limit is reached.

Security Systems for Virtual Card Payments

Extra security is one of the most appealing aspects of a virtual card for many organizations. By adding another layer of protection between your bank account and your card number, virtual payments make it nearly impossible for cybercriminals to access your information. That’s a major advantage in an era where data breaches are an epidemic across nearly every industry.

A virtual card system such as IronPay from MHC NorthStar creates a one-time virtual card number for each payment. That means that your sensitive bank account information does not need to be stored or shared with anyone in order to complete a transaction. This reduces the risk of fraud and prevents unauthorized parties from using your account.

Even if a criminal is able to steal your account numbers, the single-use nature of virtual payments renders that information unusable outside of that specific transaction.

As a fully online system of payment, virtual cards like IronPay also provide several extra layers of security, including multi-factor authentication, real-time alerts for any account activity, and the ability to turn online payments on or off instantly. Those safeguards protect against fraud both inside and outside of your organization.

Virtual Card Payments Infographic

Get a better view on virtual card payments in our infographic! Learn all about how they’re different from digital and disposable cards, what security features they feature, what benefits they bring and how they’re revolutionizing accounts payable. 

Presenter: Lynn Larson, Recharged Education
Move checks to the back of the line and make room for another electronic payment method besides ACH: virtual cards. Join MHC and B2B payments veteran Lynn Larson to find out all about virtual cards – how they work, what benefits they offer, and what challenges they bring.

10 Ways Virtual Cards Are Changing the AP Landscape

As concerns over data security and privacy continue to spiral and online transactions continue to grow, the onset of virtual payments is quickly and permanently transforming the way many organizations do business. The specific implementation of virtual cards will vary across organizations and industries, but businesses that adopt this system can expect to see noticeable changes in a number of areas, including:

Stronger security

As we’ve mentioned several times, possibly the biggest selling point for virtual card payments is the added level of security they offer for AP teams. Online crime has hit unprecedented levels in recent years, and financial teams are not immune to that rise.

By implementing virtual payments, an organization can sharply reduce the threat posed by data breaches. One-time use card numbers and credentials sharply undercut the damage that can be inflicted even by a successful breach. Each virtual card must be used within a certain time frame and comes with a predefined credit limit, making it essentially useless to a thief.

Reduced risk of payment fraud

While ransomware gangs, data thieves, and other cybercriminals pose a real danger to online businesses, internal threats remain a deep concern as well. All of the same safeguards that prevent external cybercrime also apply to internal payment fraud schemes such as overbilling and credit card skimming.

Records of individualized transactions can also provide more visibility into the causes and sources of any breaches that do occur — since each virtual payment is a one-time event tied to specific data, identifying the culprits in any fraud attempts becomes that much easier.

Learn all about Accounts Payable Fraud and Gow to Prevent It

Using Virtual Cards_ Lynn Larson
I personally have never heard of a fraud case on a virtual card, because of how they work — how a number is assigned to a supplier, how the value of the card is so locked-down and tied to an invoice. You’ve got great controls and great protections.

Lynn Larson, Recharged Education

Improved spend management

By their nature, virtual cards are a strong tool for controlling spend management.

Making a virtual payment requires pre-approval from your business. That means that any payments made using this technology are unique, identifiable, and easy to track.

Since virtual payments are issued with a pre-set spending limit and window of validity, keeping tabs on exactly how much is being spent and when is considerably easier than it is under a standard credit card payment system. Payments can be pre-approved for the exact cost of a purchase, eliminating most of the risk of overspending that can cause budgetary headaches down the line.

Stronger vendor relationships

Maintaining a strong, trusting relationship with the vendors and suppliers is crucial to keeping your supply chain moving smoothly. The errors and delays that come along with manual processing, and even with more traditional card payments, can do serious damage to those connections.

By offering an easier, faster, and more accurate means of payment, your organization can cement your working relationships with existing suppliers while also setting yourself apart from the competition. Virtual card payments can also be an important differentiator for attracting new suppliers. That’s a potentially major advantage in a highly competitive marketplace.

Using Virtual Cards_ Lynn Larson
The more expansive or diverse you can make your payment toolkit, the better off you are, because every organization has such different goals when it comes to their AP process and related things like days payable outstanding.

Lynn Larson, Recharged Education

Fewer processing costs

Especially in the new era of remote and hybrid work, anything that helps to digitize complicated payment processes is a welcome change. Virtual payments eliminate the need for many of the human and technological resources required for processing standard payments. By automating functions such as three-way matching and data entry, an organization can cut down on the operational costs of processing invoices.

Those cost savings are borne out further in several other key areas. Virtual cards integrate seamlessly with most existing AP automation software, eliminating time that might be spent transferring data across spreadsheets or platforms. The reduction in errors, exceptions, and overall processing times that comes with a switch to virtual payments also adds up to significant savings all around.

Using Virtual Cards_ Lynn Larson
Another benefit of virtual cards that doesn’t get enough press is relief of reporting for federal 1099 payments. That’s another way to really take some burden off of accounts payable. When tax time comes, they’re so busy dealing with 1099 statements and things. Virtual cards give you some relief from that because those payments are reported through suppliers’ merchants acquirers.

Lynn Larson, Recharged Education


Discover Our AP Automation Solutions

Find out how to simplify the processing of invoices and payments while reducing costs, errors, and time-consuming tasks with MHC NorthStar! Explore the features and book a free demo today!

Fewer manual processes

Where accounting is concerned, any opportunity to reduce manual processes is an opportunity to reduce the risk of costly errors. Not only do virtual card payments eliminate the need to handle and record physical checks, using them in combination with an automated accounts payable software solution cuts out most of the need for manual data entry as well.

Virtual payments automatically associate each transaction with a specific date, amount, purchaser identity, and purchased item. All of that data can be automatically entered into your AP system without a single human touch point, ensuring that vital data is logged in the right place with very little risk of errors.

Using Virtual Cards_ Lynn Larson
As you’re paying your invoices, a supplier might be getting a specific one-time account number for each invoice, or for a batch of invoices collectively. The supplier might also retain the same account number. When a supplier is retaining the same account number on file, there’s no value until your organization does the whole approval process of the invoice and kicks off the payment process.

Lynn Larson, Recharged Education

More visibility into transactions

Virtual payments create an easy-to-follow data trail that makes it simple to review every step of the process. That can be a big help in the event of audits or exceptions, allowing your team to look back through the invoicing process and determine the source of any issues. Greater visibility is also an advantage when vendors inquire about the progress and timing of upcoming payments.

Easier payments to suppliers

Virtual card payments allow your suppliers to receive and track payments in real time. That eliminates waiting for a check to make it through the mail or for a company credit card to make its way to the necessary person. Virtual payments can also cut disbursement time down from several days to just a few minutes. That gives both your team and your suppliers less to worry about as you navigate the unpredictable terrain of the modern supply chain.

Using Virtual Cards_ Lynn Larson
“Virtual card accounts aren’t available for a supplier to charge until you have done the approval process, you’ve initiated the payment, the supplier has gotten notification to charge the card. It’s not like they can process duplicate charges, like we see on purchasing cards or our own personal consumer cards.

Lynn Larson, Recharged Education

More accountability

Since each virtual payment is unique to a specific transaction, tracking who is spending what when becomes far easier. Rather than trying to maintain records of which employee used the company credit card for which purchase, virtual cards allow your team to instantly identify key transaction details. That makes reconciling payments much simpler and keeps each employee accountable for their own card usage.

Using Virtual Cards_ Lynn Larson
A supplier can’t just charge a virtual card any time they want. Once a virtual card is provided to a supplier, there is usually a very short window of time when they can charge that account for the designated invoices. With a purchasing card, as long as there’s enough limit left, the supplier can be charging it at any point. They might do it too early, before they provide the goods and services ordered. They might be doing it too late.

Lynn Larson, Recharged Education

More engaged employees

In an era of widespread employee shortages, anything that helps keep workers more empowered and engaged is a benefit to your business. Unlike physical credit cards that can only be entrusted to a small group of employees, virtual cards allow your business to empower a much wider range of workers to make and approve purchases. That not only keeps employees feeling more engaged and valued, it also increases the efficiency of your purchasing process significantly.


Discover Our AP Automation Solutions

Find out how to simplify the processing of invoices and payments while reducing costs, errors, and time-consuming tasks with MHC NorthStar! Explore the features and book a free demo today!

Embrace Virtual Card Payments with MHC NorthStar and IronPay

As virtual card payments continue to expand across all industries, it becomes more and more evident that they represent the future of business transactions. Upgrading your payment system to incorporate virtual cards is a necessary step for keeping your organization competitive, efficient, and error-free when it comes to paying valued suppliers.

IronPay from MHC NorthStar is a top-quality virtual card payment option that offers users a rebate payment of .1%. For a $5 million annual payment, that’s a rebate of $50,000 — no small consideration! IronPay also includes payment optimization to assist in onboarding vendors to the virtual card experience and provide payment file analysis when needed. Ready to learn more about the many ways virtual card payments from MHC NorthStar can help your business keep up with the competition? Contact us today to arrange a free demonstration of our proven AP automation solutions!

Virtual Card Payments FAQ

A virtual card payment can be processed the same way as any other credit card, by providing a card number with username, expiration date, and CVC. The only difference is the absence of a physical card.

Yes, the majority of virtual card transactions are conducted for business purposes. Business usage of virtual payments continues to grow and expand every day.

Yes, in fact virtual cards are safer than standard credit card transactions because they are not directly traceable to your bank account. Virtual cards must be used within a specific time frame and for specific purchase amounts, making them essentially useless to cybercriminals.

That depends on the specific card and provider, but generally speaking a business can make as many virtual card transactions as needed.

Tapping to pay is not necessary with a virtual card, because there is no physical card to tap. Virtual cards allow secure, contactless payments for any online transaction.

Paying with a virtual card works the same as paying with a credit card. Simply enter the card number, user identification, date of expiry, and customer verification code and your transaction can be processed.

Depending on the provider, both debit and credit cards can be virtual.

Yes, paying with a virtual credit card is completely legal. In fact, in many industries it is quickly becoming the default method of payment.

Transferring funds from a virtual card to a bank account works the same way as transferring funds from a physical credit card. As long as all card data is correct and up-to-date, transfers should process smoothly.

Any business that accepts a standard credit card will also accept a virtual credit card payment.

Any international business that accepts a standard credit card will also accept a virtual credit card payment.

If you regularly make purchases or withdrawals that require a physical card, a virtual payment option will not be useful.

An ATM that requires swiping or tapping a physical card will not be compatible with a virtual payment, since there is no physical card involved.

WEBINAR: More Than Hype: Using Virtual Cards to Expand Invoice Payment Options

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Presenter: Lynn Larson, Recharged Education

Move checks to the back of the line and make room for another electronic payment method besides ACH: virtual cards.

Virtual cards for invoice payments are well established, but maybe your organization has not explored them yet or you still have lingering questions.

How are they different from other card options? What are the benefits? What about the potential challenges?

Watch Now 

Lynn Larson, a B2B payments veteran, will address these questions and more, including best practices related to working with your suppliers and handling key accounting aspects. This webinar goes deeper than all the hype to help your organization succeed with virtual card usage.

This is invaluable information for anyone working in accounts payable, as well as procurement, finance, and treasury professionals.

Register today and you’ll be able to:

  • Explain to colleagues and management what virtual cards are and how they work
  • Establish parameters for making virtual card payments to suppliers
  • Guide AP on fitting virtual cards into their operations
Using Virtual Cards_ Lynn Larson

LYNN LARSON – Principal, Recharged Education

Lynn Larson, CPCP, has more than 20 years of business-to-business payments experience. In 2014, she founded Recharged Education LLC, which focuses on payment strategies and commercial card training, consulting, and educational resources; learn more at: Her previous job roles include education manager for the NAPCP, a professional association for the commercial card and payments industry, and p-card program manager for the Federal Reserve Bank of Minneapolis. In addition, her work experience includes many years in the procurement field. She has held the Certified Purchasing Card Professional (CPCP) credential since 2007.

Ira Brooker

Ira Brooker is a freelance writer and editor based in Saint Paul, Minnesota. He has been writing blogs and copy about software-as-a-service solutions for most of the past decade. Before exploring accounts payable and workflow solutions with MHC, he wrote about fields including cybersecurity, workforce management, online accessibility, audiology, retail sales, and much more. When he’s not doing business writing, he also indulges in writing fiction, journalism, arts criticism, and bar trivia.


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