Virtual Commercial Card Accounts: Providing Further Ease and Control for B2B Purchasing in the U.S.

Navigator Editions: August 2013, Commercial Payments: Special Edition Navigator
By: Frank Martien and Daniel O’Neill

When one contrasts commercial cards with other forms of business-to-business payment such as check, electronic transfer (ACH in the U.S.), and wire, two of the most important benefits that cards bring to a buying organization are a) the ease with which cards can be used and b) the control and security which cards afford. Sometimes, and increasingly in the U.S. and other global markets, the best way to make commercial cards easy and secure is to not use a card at all.

So-called virtual or cardless accounts have existed in various forms for a long time. One typical product construct is a Central Travel Account (CTA) number, with which a buying organization pays for the expenses of multiple business travelers. The account number is “lodged” at a travel agency and used for air, hotel, and other expenses upon the request of authorized individuals. Another common arrangement in the B2B space is to assign a “ghost card” to a supplier with which an organization frequently does business. When the buyer makes a purchase, the supplier may either swipe a dedicated plastic card at a physical terminal, or simply input the ghost account number into a virtual terminal. For both CTAs and ghost cards, the virtual nature of the account allows for greater ease of use (multiple buying individuals can leverage the same payment device) as well as enhanced control (removes the plastic card, thus reducing the risk of misuse or fraud).

CTAs and ghost cards are fairly mature products, but recent years have witnessed a movement toward a more advanced type of virtual account. This account is integrated with a buying organization’s Accounts Payable system, and therefore managed alongside other payment methods such as check. Integrating cards and card data with A/P allows for consolidation of all payment activity, which helps to provide a holistic picture of the organization’s A/P position. Line-item detail from suppliers who pass Level III data provides the A/P department with enough information to reconcile purchases to invoices, even when multiple invoices are paid at once. This all renders the payment process easier, the first pillar of commercial card use.

Additionally, many virtual accounts are dynamically funded. In other words, instead of an open credit line (which can be quite large for some B2B organizations), the limit is defaulted to zero. When a purchase is made, a transaction is authorized and the credit limit is raised, but only for that particular purchase amount, within a designated date range, and to a specific supplier. This can all be completed from the buyer’s A/P system (often accessed through an online portal provided by the card issuer) without the need for a plastic card that risks loss, theft, and misuse. Setting these parameters around a card transaction greatly contributes to the ability to control purchasing activity, which of course is the second pillar of commercial card use.

A/P integration and dynamic funding are at the core of the virtual account value proposition; and these benefits are available through several product variants. As shown in Figure 1, a virtual account can be either Supplier-Initiated (SIP) or Buyer-Initiated (BIP). A SIP model is similar to the above description of a ghost card; the supplier virtually “swipes” or initiates the transaction. Under a BIP model, the buyer “pushes” the payment to the supplier at will and the supplier receives the funds without taking any action or receiving an account number. This method can be easier and more secure for both parties, given the absence of an account number exchange.

Figure 1: Purchasing Card Adoption by Type
Source: 1 PayStream Advisors “The value of Purchasing Cards” (Q4 2012); sum of categories “Currently Use” (64%) and “Deploying” (3%). 2 NAPCP / First Annapolis Consulting 2013 Supplier Acceptance Survey (n=103).
Note: 3 Inclusive of the 11% of respondents to the NAPCP / First Annapolis Consulting 2013 Supplier Acceptance Survey (n=103) who reported using both SIP and BIP solutions.


As an additional layer of protection, both SIP and BIP accounts will often allow the generation of single-use account numbers; that is, account numbers that are used once and then disappear. A single-use account number is by definition dynamically funded and provides enhanced control over how much a supplier is paid, and when. Choice of virtual account type or types used (SIP vs. BIP; recurring vs. single-use) will depend on a buying organization’s internal processes and preferences, as well the buyer’s relationship with individual suppliers.

Whether supplier- or buyer-initiated, A/P integration and dynamic funding have made buyers more comfortable with putting larger and invoice-based purchases on commercial cards. The continued shift away from paper checks has certainly benefitted purchasing card-related solutions, especially since buyers have easier and more secure options with virtual accounts. As shown in Figure 2, many organizations leverage virtual accounts to make purchases that could be unsuitable for plastic commercial cards. Though acceptance fees are a common supplier objection to acceptance (especially for high value card payments), the emergence of large ticket interchange rates can greatly reduce the discount rate paid by a supplier.

Figure 2: How EAP Purchases Differ from Plastic Card Purchases
Note: The terms “virtual accounts” and “EAP” are synonymous as used by First Annapolis Consulting and RPMG, respectively.
Source: 2012 RPMG Electronic Accounts Payable Benchmark Survey Results; n=4,375 survey respondents.


The plastic purchasing card will not go away anytime soon, and in fact still has room to grow, as evidenced by the 67% penetration rate of large corporates estimated in Figure 1. However, much of the growth in B2B purchasing card spend will likely be driven by virtual accounts for the foreseeable future, as shown in Figure 3. Commercial cards have always provided simplicity and control for buying organizations; and the robust capabilities of virtual cards further enhance that value proposition and allow for market growth.

Figure 3: U.S. Purchasing Card Spend
Source: NAPCP / First Annapolis Consulting 2013 Supplier Acceptance Survey (n=103); 2012 RPMG Electronic Accounts Payable Benchmark Survey Results; n=4,375 survey respondents.; First Annapolis Consulting good faith industry observations; Visa, MasterCard, and Amex annual reports, SEC filings, and investor presentations; The Nilson Report.


For more information, please contact Frank Martien, Partner, or Daniel O’Neill, Associate, Both specialize in Commercial Cards.


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