According to the BAI Banking Outlook, digital customer experience is the top business challenge and investment priority for financial institutions in 2022 – only 9% of financial services leaders rate their digital customer experience as “excellent”. As banks look to new innovations to improve this area, it’s crucial to look beyond the surface and leverage specific capabilities to achieve tangible results.
The digital experience doesn’t have to stop at retail banking. With higher growth potential in business banking, virtual cards are a capability that can enhance the digital experience for business customers. Likewise, the pandemic has accelerated the need to offer digital payments.
Community Financial Institutions focus on supporting small businesses and local businesses by offering products that are important to the continued success of these organizations. Virtual cards can be integrated with commercial cards for cash management services. These can be recurring or on-demand digital card numbers that allow accounts payable managers to limit usage to a specific amount, vendor, and time period to pay an invoice.
Here are four important benefits of virtual cards for business customers.
Pay faster
Businesses can streamline their accounts payable process by using virtual cards. Vendors and vendors don’t have to wait for stale paper checks to go through a manual system – instead, virtual card payments are processed immediately. Businesses can provision and instantly pay the exact amount due to a supplier via virtual cards.
With the ability to pay faster, AP teams become more efficient in processing payments to multiple vendors. Besides saving time, using virtual cards can reduce or eliminate human error through a streamlined accounts payable process.
Reduce processing costs
Virtual cards can help reduce payment processing expenses and facilitate reconciliation with financial systems. Not only do corporate customers save money on processing costs, but the cost of supplies as well – check stock, MICR toner, envelopes and postage can all be reduced or even eliminated.
According to industry estimates, payments made with virtual cards cost $8 less than the expenses associated with printing and handling a check. In addition, virtual cards save the cost of creating and sending physical cards. Financial institutions also offer rewards on payments made through virtual cards that can benefit business customers.
Improve cash flow
Several moving parts surround cash management processes. Businesses must pay vendors, suppliers, and employees while receiving payments. Using virtual cards gives the freedom and management of cash flow through instant reconciliation of payments, which leads to improved reports that allow accounts payable managers to always have the most up-to-date figures at their fingertips tomorrow.
When a business uses virtual cards for instant payments to its suppliers, it improves its working capital and cash flow. There is also less risk of fraud through the use of single-use virtual cards by reducing exposure or unauthorized use.
Improve internal controls
Accounts Payable Managers can have the authority to create individual cards with specific controls such as amount, date, merchant name, merchant category, etc. Virtual card payments are processed the same way as traditional card payments, but without the need for a physical card.
Through a streamlined process, purchases are automatically entered into the system without additional paperwork or manual entry. Virtual card payments also offer the option to include custom data entry fields. Traditional ACH and check processing cannot support the volume and quality of remittance data and audit controls that virtual cards can provide.
Providing virtual cards as a service to your local small business can increase your financial institution’s visibility and reputation as a key member of the community. By leveraging a turnkey card issuance program, community financial institutions can fully own their credit program, allowing them to retain interchange and commission revenue, among other benefits in cash management capabilities.
As financial services leaders innovate in 2022, it’s crucial to drive continued growth for professional clients. Enterprise digital user experience is equally valuable and should be addressed alongside traditional consumer digital user experience. As instant digital payments become the norm, more of your business customers will need virtual cards for their disbursements with their suppliers.
Anil Goyal is president of Corserv Solutions.
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