What is a virtual credit card?

Understanding virtual credit cards and how they're used in a corporate travel program

For many companies, invoicing and payment for hotel stays can be problematic. Travelling employees may not have corporate credit cards, may not have the credit limit to pay for the stay, or may make adjustments to the reservation at check-in – all of which create challenges for the business traveller and your accounting department. Trying to resolve these issues through a direct bill arrangement with an individual hotel often results in a challenging financial reconciliation process and delayed payments to suppliers. While using third-party billing is another hotel payment option, this creates extra steps and risk, as often it requires sending a copy of someone’s credit card to the hotel for each stay.

Virtual cards present an alternative payment method. They have a number just like a traditional credit card, but their digital nature affords them many more features than the average plastic. In fact, they could soon become the preferred way to pay for some travel suppliers. Although one survey from the Global Business Travel Association and AirPlus International found that only 11 percent of corporate travel buyers currently use virtual cards, nearly one-quarter of those that don't say they are likely to adopt virtual cards in the near future.

Virtual cards: more features and customization options

The robust customization options of virtual cards are, in part, why they have grown in use in recent years and why we may recommend them to enhance a corporate travel program. Virtual cards provide an additional layer of security because they can be tailored to specific travel purchases and travellers. They also remove the issue of credit limits and help to reduce fraud. Additionally, when a traditional company card is compromised, it is cancelled. This impacts all reservations where the card was used for payment – not to mention the travellers themselves. With a virtual card, if it happened to be compromised, it only affects a single, one-time use card number, thus greatly minimizing any potential impact to your organization.

Virtual cards provide additional functionality

Virtual card technology provides flexible payment solutions, reconciliation efficiencies, and improved spend management. With single-use virtual cards, your organization can set parameters on a payment, assign a certain value to the card, and apply it to a certain transaction at a particular vendor. Through the use of virtual card numbers (VCNs) within a travel program, your travel management company (TMC) is also able to capture any required coding on the reservation, which is not possible when travellers book hotels directly on their own, creating a reconciliation challenge. This technology delivers improved data management, while improving the traveller experience and providing a better overview of your corporate expenditure.

Here's an example: Let's say travellers are going on an overnight journey to another province. The travel arranger can approve the trip and have the rooms booked through your TMC. The TMC will generate a virtual card that is assigned to that specific traveller for that specific property, with parameters to accept charges such as room and tax only – all with the press of a button. Both the hotel and the traveller receive a copy of the reservation and the associated virtual card number from the TMC. Once the stay is completed, the virtual card number is closed and no longer active.

From the traveller’s perspective, virtual card numbers make the process easier. Rather than using their own money to book the room up front, they simply arrive at the hotel and check in – there's nothing more to do. Travel mangers do not need to use their own cards for multiple travellers; nor do travellers, allowing them to save their personal cards for personal use.

Your organization will receive travel data reporting from your TMC and from the virtual card company on a regular basis. These reports speed up the reconciling process as they associate each traveller to their trips and assigned virtual card number, while also capturing all required coding on the hotel charges.

Virtual cards make travel programs more flexible

As the contingent workforce grows, organizations are more likely to contract temporary workers or have guest travellers brought in. As these types of travellers are unlikely to possess a company credit card, they often have to use their own funds and be reimbursed after the fact. This situation can cause challenges as bookings may be made outside your company’s approved channels with no oversight, creating a reconciliation headache. Travel managers need to manually connect travellers to expenses, and the possibility of fraud exists.

Virtual hotel payments eliminate these concerns, making travel easier and more sustainable for temporary travellers. As business objectives change and contract workers move in and out of the organization, the travel program can grow or shrink responsively, without any hassle.

Are virtual cards a good fit for your travel program?

Ultimately, virtual cards can help your organization increase security, reduce fraud, and improve the reconciliation process, while simplifying travel for your employees.

To learn more about payment options for your program and determine whether virtual cards may be a good fit, contact us or schedule a consultation today.