Organizations seeking both speed and security in operational purchasing face a difficult balancing act with conventional payment tools. Cher Pearsall, CEO of Pivot Payables, explores how virtual cards’ customizable controls — from merchant category restrictions to single-use tokens — can enable corporate spending security while preserving employee empowerment.
Whether it’s the marketing purchasing advertising for a campaign or the facilities team renting worksite equipment for a project, many areas of a typical business need to have the authority to make operational purchases. Often, purchases are employee-related with organizations allowing employees to make them directly, as opposed to centralized purchases, which are made by a central procurement team or purchasing authority.
Employees need to be equipped by their companies with the tools and resources necessary to perform their roles effectively, rendering operational purchasing efficiency critical. Shifting purchasing decisions to employees who directly oversee operations has been shown to improve efficiency and responsiveness. However, this requires empowering employees to make purchases directly, bypassing time-consuming approval processes. While this approach can certainly boost efficiency, it also introduces risks of fraud and misuse of company funds.
The potential for unauthorized or inappropriate spending remains a constant concern. Traditional corporate credit cards, though convenient, often lack robust control and oversight needed to address these risks effectively.
Virtual cards can offer a viable solution. Virtual cards are digital credit cards that employees use to purchase goods and services, similar to traditional physical cards. However, because they are digital, they can’t be lost or stolen, reducing the exposure to fraudulent purchases.
What makes virtual cards uniquely suited to reducing fraud risk is their ability to be issued for specific purchasing scenarios. Unlike traditional cards, the power of scenario-based purchasing allows virtual cards to be tailored to meet the precise needs of an expense, providing a higher level of control over spending.
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Read moreDetailsThe pros and cons of virtual cards
When deciding if virtual cards may be the answer to reducing fraud in an organization, it is important to examine all angles.
Upsides of virtual cards:
- Spending limits on virtual cards can be set to cap the amount employees can spend in a specific purchasing scenario. This ensures the expenditure remains within budget and prevents large, unauthorized purchases.
- Virtual cards can be issued with specific effective dates, limiting the time period in which employees can make purchases. When a card is no longer effective, it’s no longer valid, reducing the risk of it being used for unauthorized purchases in the future.
- One of the primary benefits of virtual cards is the ability to impose merchant controls. These controls restrict purchases to authorized merchants aligned with the card’s intended use. For example, a virtual card intended for a construction manager to purchase construction materials or tools for a job can be restricted to merchants that sell these items. This ensures purchases remain within the designated merchant category, reducing the opportunity for fraudulent or unauthorized purchases.
- Single-use virtual cards can be issued for one-time purchases. After employees make a purchase, the card becomes invalid, which eliminates the opportunity for fraud. This works well for any purchasing scenario that involves a purchaser from outside the organization, such as HR issuing a single-use virtual card to a job candidate to pay for travel expenses or lunch.
- Like single-use cards, virtual cards use tokens for card account numbers instead of the primary account numbers that fund them. Merchants can’t access the primary account number to make fraudulent or unauthorized purchases; they are restricted to the controls set for the virtual card.
While virtual cards certainly have benefits, there are also valid concerns:
- Virtual cards can be used only for online purchases or at merchants that accept contactless payments or have contactless-enabled point-of-sale systems.
- It may be more complicated to make reservations for services like flights, rental cars or hotels using a virtual card. At check-in, many hospitality properties require a physical card issued to the guest. If a virtual card is used, the guest might have to complete a credit card authorization form, a long-standing process that merchants are only now beginning to adapt for virtual card transactions.
- If a virtual credit card is linked to a browser extension, the user might need to use a laptop or desktop computer to access the virtual card number; a mobile device might not support the use of the virtual card number.
- Certain employees, particularly executives, may resist pre-purchase approval since they are accustomed to unrestricted purchasing authority.
- Implementing virtual cards requires a cultural shift within organizations to align with controlled spending policies.
Making the best choice
For any organization, the decision to implement virtual cards should be made with a thorough assessment of the company’s environment to gain a clear understanding of its effect on budget and time. If more time is being spent than is productive on time-consuming approval processes, as well as incurring unnecessary costs, then it makes sense to consider a solution tailored to meet the precise needs of an expense, yet providing a higher level of control over spending.
By reducing exposure to fraud, organizations can unlock new opportunities to streamline operational purchasing processes and empower employees to make necessary purchases without compromising security.
This not only enhances operational efficiency but also builds trust within the organization. When employees are entrusted with the ability to make purchases, it builds a sense of empowerment and responsibility within guardrails that protect company finances. As companies continue to seek ways to improve efficiency and eliminate fraud, virtual cards, along with other emerging digital corporate payment tools, will play an increasingly important role in the management of operational purchasing going forward.
Cher Pearsall is an expert in accounts payable and co-founder and CEO of Pivot Payables, a fintech company that offers corporate financial operations solutions. Pearsall is a seasoned executive with a track record of helping companies streamline their processes to improve productivity and reduce risk. 
