What are virtual cards and should you be using them in your business?

The team at Airwallex explain what virtual cards are along with six ways that they can benefit your small business

Of all the chores that come with daily office life, expense management has to be the most tedious.

There’s nothing worse than fumbling through your wallet after a work event, only to find you’ve lost half the receipts from the enormous tab you and your team wracked up.

Then there’s the problem of processing expenses. Many businesses still rely on clunky, dated systems that require hours of admin and leave employees out of pocket for weeks on end.

Enter the virtual card.

Virtual card providers like Airwallex claim to offer a solution to all your expense woes. But are they all they’re cracked up to be? Read on to find out more.

What are virtual cards?

First and foremost, what on earth are virtual cards?

Well, they’re not too dissimilar from physical debit and credit cards in that they link to a central account, come with a card number and expiry date and can be used to pay for things online and when you’re out and about.

The difference is that these cards exist entirely in the digital world. They have no physical counterpart.

This means they can be easily created — you don’t need to wait days for your new card to arrive at your office — and easily cancelled. It also makes them safer, as your details are less likely to be stolen or cloned by fraudsters.

That’s the basic premise of a virtual card. But there are lots of additional features that some virtual card providers offer businesses that can help you streamline your expense systems. Here are a few of them.

Spend controls

If you’re in charge of a large team, the idea of giving everyone access to your company finances can be daunting.

Often businesses choose to issue cards to senior team members only. But having just one or two company cards can be a logistical nightmare, particularly for remote teams.

It can also mean junior team members are left paying for business expenses out of their own pocket and waiting weeks to be reimbursed. Not an ideal employee experience. 

Virtual cards solve this problem. You can issue cards to all your employees and set monthly, weekly or daily spend limits for each card.

Some providers also allow you to put limits on which merchants employees can spend with, freeze cards in a tap and track who is spending what in real-time from a single platform.

Smoother reconciliation

There are two ways virtual business cards can help with reconciliation.

Firstly, you can create new cards for specific expenses. For example, you could create a card just for online advertising spend, or for a specific event or marketing campaign. You’ll then know that any spend on that card relates to that particular expense, event or campaign.

Secondly, modern virtual card providers have apps that allow users to instantly upload receipts for approval and add categories for each expense.

Imagine your employee is buying coffees at a client meeting. They pay with their virtual business card, upload the receipt for approval and categorise the expense as ‘client entertainment’, all whilst waiting for the barista to finish their latte art.  

Sophisticated providers also sync with your accounting software, so expense categories are automatically pulled into your accounts. This makes life easier for your finance team, and means you no longer have to scour over bank statements trying to remember what each expense was for.

Protection from fraud

Virtual cards are a lot safer than physical cards.

For a start, it’s near impossible for thieves to clone a virtual card. But beyond that, you can create cards that expire instantly.

Say you’re making a large payment to a supplier, and you’re worried about card fraud. You can create a card specifically for that payment and set it to expire as soon as the payment has been processed successfully.  

Because it’s so easy to create and cancel virtual cards, it doesn’t matter how many you use. By setting cards to expire when you want, you can ensure your funds are always protected.

Borderless spending

Not all virtual card companies offer this feature, but it’s definitely worth looking into.

Most UK companies can expect to pay for some business expenses in a foreign currency. Whether for SaaS subscriptions, international suppliers, or everyday expenses whilst travelling abroad.

Airwallex is an example of a virtual card provider that allows you to spend in multiple currencies without paying high fees. 

When you sign up to Airwallex, you’ll get a Global Business Account where you can collect and hold multiple currencies. You can use your Airwallex virtual card to spend these funds with no transaction fees. If you don’t have the correct currency in your account, you can convert funds at a rate of just 0.5 – 1 per cent, significantly cheaper than high street banks.

Businesses can cut out thousands of pounds in FX fees using this workaround. 

Happy employees

An intangible but not insignificant benefit to virtual cards is that they make employees feel empowered.

Rather than running to the CFO every time they want to pay for a minor business expense, your employees can use their own card.

Virtual cards make team members feel trusted by their business. They ensure no one is left out of pocket and there’s never any awkward discussions about reimbursement.

Not all virtual cards are created equal

Most banks now offer virtual cards. However, although these cards come with basic benefits such as fraud protection and spend controls, they won’t necessarily come with all the expense management features that some FinTechs provide.

Banks also tend to charge higher fees per card issued, giving you less freedom to create and cancel new cards. And you can expect to be charged the usual bank fees when paying in a foreign currency.    

Should you use virtual cards in your business?

There are many benefits to using virtual business cards and not a lot of downside.

Whether you have a large or a small team, they offer an easy way to manage spending, remove bottlenecks and cut down on admin. They also provide you with better oversight over your company’s daily spending and improved accountability when it comes to individual employee expenses. 

Read more

What expenses can I claim through my business?

Related Topics

Financial Management