Virtual cards rescue small businesses from paper checks

Updated on November 22, 2021

Virtual card rescue small businesses from paper checks

Over the years, many large businesses have reaped the cost savings, efficiency as well as security benefits associated with faster-payment initiatives which were led by the Federal Reserve, NACHA as well as finetechs.

However, some small to midsize businesses (SMBs) have access to e-payment solutions which satisfy their own unique needs, this force many individuals to accept the slow nature of paper checks and the negative impacts.

virtual card

IMAGE: Dreamstime

As we are about to head into 2018, many things which serve as barrier to e-payments for SMBs would be removed because fintech extend the benefits of virtual card which is also regarded as v-card solutions to this underserved market. The research from First Annapolis also predicts that the virtual card payments will increase from $83 billion in 2015 to $160 billion in 2018, and will also expand to more than half a trillion dollars by the end of 2024.

Most SMBs are now choosing v-cards as their most preferred form of electronic payment due to the fact that they are able to solve many of their payment challenges, while also helping them to solve the cost which is associated with custom software solutions designed for larger businesses or the burdens of joining many disparate e-payment networks so as to reach different suppliers they pay.

Due to the fact that the businesses continue to look for new ways by which they can gain competitive edge, many companies would see the benefit of streaming non-revenue generating process such as A/R as well as other financial reconciliation process so as to reduce cost and also improve the efficiency.

For companies who are looking for a means by which they can streamline and modernize accounting processes in 2018, it is very easy to start by eliminating costly paper checks. About 79% of organizations which took part in the AFP Payment Cost Benchmarking Survey which occur recently are looking for ways by which they can convert paper checks to electronic payments.

The median cost for receiving a paper check for an organization with annual revenue below $1 billion is between $2.01 and $4.00 according to AFT. In the same survey, around 88% of AFP respondents showed increased efficiency as the major reason for changing from paper checks to electronic payments, 60% to prevent fraud, 82% to reduce costs and 38% to enhance straight through processing (STP).

The on-time usage of virtual card provides the cure to many challenges of accounts receivables which small businesses experience. The advantages of changing from checks to v-cards include:

According to the survey which was carried out in 2017 by AFP Payment Fraud and Control unit, checks are the common payment method for fraud. Research shows that about 75% of all businesses experience fraud. However, virtual card make it rather impossible for fraudsters to steal and also re-use the card number because v-cards can be used in the exact amount of payment bill and the payment can be restricted to a particular industry.

Faster Access to Funds: With this, businesses do not need to wait for 7 days before check would be available for use. The virtual card payments is usually cleared within 24 hours, which indicate a better flow of cash and also improve revenue cycles performance for SMBs.

Save Time and Money: Based on AFP estimates, receiving a paper check is far more expensive than receiving an electronic payment. Businesses would definitely incur credit card fees whenever v-card are used as a payment means but they would also gain rich remittance details in return. There are many businesses which accept this trade-off due to the fact that the remittance information would improves the efficiency of accounting by supporting automatic reconciliation of payments as well as transparency into the payment activity.

As we are about to enter into 2018, we expect the rate of adoption of v-card as well as participation in networks to continue increasing as more SMBs are looking for ways by which they can capitalize on the benefits of e-payments and as more and more B-to-B processors recognize the value of extending their electronic payment reach to small businesses.

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