Virtual Payment Yields Tangible Benefits
Fraud strikes everywhere, but the travel industry is particularly vulnerable and under increasing attack. According to Forbes, land travel saw a 38% fraud increase from 2018 to 2019. Air travel fraud leapt by 61 percent. And the loyalty programs used by frequent travelers got hit most of all, with an 89% surge year over year.
Virtual Payment Basics
According to 2019 information from the Global Business Travel Association (GBTA), 20% of expense reports contain fraudulent information, resulting in the effective theft of 5% of a company’s revenue. No wonder Yahoo Finance reports that virtual payments are expected to explode from $160 billion in 2018 to $500 billion in 2024.
But what are virtual payments, and why are they gaining in popularity so quickly?
We all know how physical credit and debit cards work. A bank or issuer fronts the money for a transaction, which the buyer must then repay. Transactions are conducted by using a physical card with a string of digits tied to a single user account, confirmed with a three- or four-digit security code. Many users can have physical cards linked to a single account. One prominent danger, of course, is what happens when an unauthorized person gains access to one of these cards or their account and security numbers.
Virtual payment cards also use a string of numbers tied to an issuing partner, an expiration date, and a security code. However, virtual cards are not stamped with account numbers. Instead, a unique card number is generated at the point of sale and tied specifically to that transaction. It’s like getting a new credit account for every purchase. That sounds more complex than it really is, at least to users, who experience transactions as a typical “cardholder not present” operation. As such, they may be issued as physical cards but don’t have to be. And unlike credit cards, companies in control of virtual cards can place restrictions on account use according to criteria such as purchase amount, date range, and merchant category. This can help companies to dramatically lower those fraudulent transactions mentioned earlier.
Virtual Payment Advantages
If you get nothing else from this article, here’s the bottom line: Virtual payments can reduce fraud risk while improving accounting accuracy, accountability, and auditability. Let’s take a closer look at this technology’s high-level benefits.
For travel managers, the optional restrictions they can place on virtual payment accounts lead directly to better compliance with travel policies. The speed and accuracy of virtual payment offerings makes them ideal for amassing more granular detail on travel spending as well as enabling open book accounting practices among partners. Historical tracking and basic analysis can quickly reveal unusual spending patterns among users. And because virtual payment processing is now widely accepted, there will likely be no issue with adopting virtual systems in addition to conventional credit/debit handling among intermediaries and suppliers.
Beyond the inherent safeguarding against fraud and overspending, finance departments will appreciate how virtual payment platforms, once easily linked into expense management, ERP, or general ledger systems, can help streamline payment reconciliation. Most banks now use virtual payment, so there’s little chance of accounting process changes or complications. Not least of all, in part due to lower fraud risk, virtual payment enables lower processing costs for all parties involved.
Virtual Pay Now a Reality With Deem
As consumers grow accustomed to platforms such as Apple Pay and Google Pay, those users increasingly expect to have similar benefits from their companies’ payment platforms. To make this possible for corporate travel, Deem partnered with Conferma Pay, a FinTech leader in B2B virtual payments, and integrated its services into Deem’s Work Fource platform under the name Virtual Pay.
Virtual Pay can become the default for all hotel bookings booked through Work Fource. Travel managers can enjoy more expense tracking detail, speed, and control than ever before, including the ability to make spending codes expire once their allotted amounts have been spent. With centralized and next-day reporting, management and travelers can maintain ongoing awareness of spending conditions rather than be surprised by month-end statements.
With Virtual Pay, companies can replace manual reconciliation and post-trip expense reporting with one quick, automated step, allowing for fewer hours on accounting and potentially fewer staff needing to do it. Adopting Virtual Pay couldn’t be easier, and there are no downsides. To learn more, read up on Deem’s corporate travel services or contact us to have your questions answered directly.