Fueled by machine learning, algorithms, and more, financial innovation is at an all-time high. News media tends to focus on the fallout from inventions like credit default swaps and collateralized subprime-debt vehicles, but meanwhile advances have been made in other areas that stand to benefit businesses and enhance financial security–for one, virtual credit cards.
A virtual credit card (VCC) is a disposable digital debit or credit card that can reduce the likelihood of credit card fraud. Virtual credit cards have been pushing forward-thinking card issuers in the vanguard of production and design.The concept is predicated on tapping into existing credit card infrastructure, but instead of having one piece of plastic associated with a business account, a company can generate unlimited virtual cards that are approved for specific amounts and time periods.
For example, if a corporate credit card has a $100,000 limit, that could be parcelled out by request to cover 100 different $1,000 requests or even smaller denominations. And the card owner–finance most likely–could set expiration dates that cover only a period long enough for the items requested to be purchased. This is the technology that underpins Tradeshift's Virtual Corporate Credit Card Solution.
Three main advantages for businesses using virtual cards:
1) Get spend visibility
It’s no secret departmental credit card spend can often be unmanaged or obscure. By incorporating virtual credit cards into the buying mix, employees gain the ability to buy from anywhere on the web while simultaneously getting rid of the much-abused departmental credit card.
The way this works is through a browser plugin or app. Employees simply find the item they wish to buy, quickly drop it into the collaborative request feature and then a manager can approve, upon which a one-time virtual credit card is issued for the amount requested. Employees simply drag and drop their virtual card onto the payment page at checkout and fields can be filled in automatically. A company has visibility and control the entire time and the employee can enjoy a consumer-like shopping experience.
Another advantage is the lack of monthly reconciliations. If all spend is approved and tracked in real time, there’s no need for the finance to sort through a massive credit card statement at the end of the month, assigning to accounts, looking for fraud and unapproved purchases.
2) Heighten security
To return to the example of the corporate card with a $100,000 limit, consider a situation in which that card is lost or an employee goes rogue. The potential for monetary damage is substantial. With virtual credit cards, the only amount at risk is whatever was pre approved. Combined with the fact that virtual credit cards are only issued after approval, the chance for fraud is greatly reduced.
All the usual security features of a plastic card still apply (card security code, etc.), the virtual card simply enhances it further.
3) Eliminate manual reconciliation
It’s the bane of every finance department’s existence–the end of month reconciliation process. With virtual credit cards, there’s no more chasing after receipts and each line item can be reviewed and approved.
The gains extend not just to finance or department heads, but also to the purchasers themselves. Gone are the days of a shoebox full of receipts poking out from under a desk waiting to be processed. Instead approval and reconciliation happen in real time.
For an more information on virtual cards and to see how they work inside Tradeshift Go download your copy of the Tradeshift Go Overview!
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