The 3% myth: Why suppliers are willing to pay for virtual cards

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Virtual payment cards are digital alternatives to traditional plastic credit or debit cards designed for business transactions. They streamline corporate purchasing processes by allowing companies to issue unique card numbers linked directly to their business accounts. These virtual cards enhance control and visibility over spending while simplifying the payment processes for suppliers and vendors. But here’s the catch: they typically come with a 3% processing fee.

The surprising truth behind a 3% fee

Imagine you’re a supplier juggling tight margins, long payment cycles, and increasing operational demands. Now, imagine willingly giving up 3% of your revenue to get paid. On the surface, it seems counterintuitive. Why would anyone pay more for something they’ve been doing for less—sometimes for free—for decades?

Here’s the twist: that 3% isn’t just a fee; it’s a ticket to a faster, more efficient, and more predictable payment ecosystem. Suppliers across industries are waking up to the reality that the benefits of virtual cards far outweigh the cost. What may seem like a burden is, in fact, a savvy investment.

But to understand why, we need to unpack the myth. It’s not about the fee—it’s about what you get in return.

The misunderstood pain point

At first glance, a 3% fee feels excessive, especially compared to payment methods like ACH transfers or old-school paper checks. On paper, these alternatives seem “cheaper” or even free. However, this comparison misses the mark entirely because it overlooks the invisible costs that come with sticking to traditional systems.

Let’s start with the hidden price tags of the old ways: delayed payments, administrative inefficiencies, and the expensive ripple effects of unpredictable cash flow. These issues quietly drain resources, cutting profits in ways that don’t always appear on financial reports until it’s too late.

In this context, the 3% fee is not just tolerable—it’s transformative. Suppliers are not paying for convenience; they’re paying to eliminate inefficiencies that cost far more than 3%.

The waiting game: Why faster payments matter

Paper checks have been the backbone of B2B payments for decades but are also one of the biggest culprits of cash flow disruptions. The timeline is slow—checks can take weeks to arrive, clear, and be reconciled. For businesses relying on these payments, the delays can create a domino effect, forcing them to postpone purchases, delay payroll, or dip into costly credit lines.

Research shows that late or inconsistent payments cost businesses an average of 4.6% in annual revenue. That’s more than the 3% virtual card fee many suppliers hesitate to pay.

Enter virtual cards, where payments take one to two days to process. That’s a fraction of the time it takes for checks or even ACH payments to clear. With faster, more predictable cash flow, suppliers can plan better, avoid borrowing, and reinvest in their operations with confidence.

This predictability is a lifeline for suppliers who need to operate on tight schedules. For them, getting paid faster isn’t just a convenience—it’s critical for survival.

The efficiency equation: Time, money, and error reduction

When you break it down, traditional payment methods come with a lot of baggage. Processing checks or reconciling ACH payments is a manual, time-consuming process. Employees spend hours tracking payments, matching invoices, and following up with customers to resolve errors.

Each of these steps introduces inefficiencies and creates opportunities for costly mistakes. When labor costs and error correction stack up, the “cheaper” options suddenly aren’t so cheap anymore.

Virtual cards eliminate these inefficiencies with automation. They provide detailed transaction data that simplifies reconciliation and reduces the likelihood of errors. Suppliers no longer need to spend hours on follow-ups or administrative tasks. Instead, they can redirect those resources to strategic initiatives like expanding operations or investing in innovation.

The shift can be game-changing for middle-market companies. Virtual cards reduce cash conversion cycles by an average of 38%, putting money back into the business faster. It’s not just about saving time—it’s about unlocking capital that would otherwise be stuck in limbo.

Borrowing less, saving more

When payments are delayed, businesses often resort to short-term borrowing to cover their expenses. But borrowing comes at a cost, especially in today’s high-interest-rate environment. Whether it’s a line of credit or a short-term loan, these expenses can eat into profits in ways that are hard to claw back.

Virtual cards reduce the need for borrowing by ensuring faster and more predictable payment cycles. Suppliers can rely on consistent cash flow instead of scrambling for credit. On average, businesses save $181,000 annually in borrowing costs simply by switching to virtual cards.

This isn’t just a bonus for small and mid-sized suppliers—it’s a lifeline that can make or break their ability to grow.

Trust: The currency of lasting partnerships

There’s a psychological side to payments that’s easy to overlook. When payments are unpredictable, it erodes trust between businesses and their suppliers. Suppliers want certainty—they need to know when and how they’ll get paid so they can plan accordingly.

Virtual cards deliver on that promise. Their predictable payment schedules remove the guesswork, fostering trust and confidence in business relationships. Suppliers know they can rely on virtual cards to deliver payments on time, every time.

This reliability translates into stronger, more collaborative partnerships. Suppliers see the 3% fee as a small price to pay for the peace of mind and stability it brings. Over time, these benefits build loyalty and create opportunities for businesses to deepen their relationships with key partners.

Busting the myth: Why the 3% fee is an investment

The myth of the 3% fee is built on a narrow view of costs. When you zoom out, it becomes clear that virtual cards are a strategic tool for unlocking efficiency, improving cash flow, and building trust. The benefits they bring—faster payments, reduced borrowing, streamlined operations, and stronger relationships—far outweigh the cost.

In a world where businesses can’t afford inefficiency, virtual cards stand out as a smart investment. They’re not just a payment method—they’re a competitive advantage.

Getting started with virtual cards

To successfully incorporate virtual cards into your accounts payable (AP) operations, start by researching and selecting a suitable provider. Evaluate different virtual card providers based on transaction fees, security features, and their ability to integrate with your current accounting software. Once you’ve chosen a provider, the next step is to integrate virtual card functionality with your AP automation software. This may require custom integrations or the use of APIs provided by the virtual card issuer to ensure a seamless connection. Training your AP team is crucial for maximizing the benefits of virtual cards. Ensure that they are well-versed in transaction processing, reporting capabilities, and security protocols associated with virtual payments. Begin transitioning your suppliers to accept virtual card payments. Provide them with clear information about the process and its benefits to facilitate a smooth shift. Finally, after implementing virtual cards, it’s important to monitor their impact on your AP processes continuously. Collect feedback from both your team and vendors and identify opportunities to optimize performance and enhance security.

A modern path to financial agility

The integration of virtual cards into Accounts Payable represents a modern approach to financial management, marked by increased security, efficiency, and control over company spending. Coupled with AP automation, businesses can enhance their AP processes, leading to improved vendor relationships and significant operational improvements. By taking the initial steps towards adopting virtual payments, companies can position themselves for greater financial agility in an increasingly digital marketplace.

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Corcentric

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