CloudX Blog

5 Myths About Virtual MasterCard Payments

Posted by Chris Cosgrove

Jan 20, 2015 3:21:43 PM



Certain myths are cool. 

Consider the unicorn, defined as a mythical animal typically represented as a horse with a single straight horn projecting from its forehead. While that is definitely not something you see everyday, or any day for that matter, that didn’t stop Scotland from naming it their national animal.  Tam o’ Shanters (aka hats) off to them for having the temerity to choose a mythical beast as their national animal.  I mean we in ‘Murica at least have a living animal, one and granted it’s very cool in the bald eagle, but this piece today is not so much about cool animals as it is cool virtual payments technology, and that by means of virtual MasterCard payments.


With the market being relatively unaware (only 18% of market use this technology as of late 2014) of just what electronic Accounts Payable (virtual payments not front end invoice processing) is, we thought it would be appropriate to dispel some myths about virtual MasterCard and bring some light to what’s real and what’s not with this new modicum of payment. 


These myths are not cool:


Myth #1 – Vendors won’t accept it.  – While this may have been true in the past, it is absolutely untrue today. In our experience, about 1/3 of most mid-sized (multi-hundred million dollar revenue) companies already accept virtual MasterCard as a payment mechanism.  This means that it is conceivable that 1/3 of your spend could be routed through this technology cutting wasteful and costly check processing out of the AP equation. Score 1 for the AP department!


Myth #2 – It’s costly! -  Contrary to popular opinion, virtual MasterCard is not a heavy capital investment play. This is great news when broaching the subject with finance leaders, since the projects that have the heftiest price tag tend to be the ones that have the most significant drag. Because these are typically no to minimal up front fee based projects they can often get the go-ahead assuming they’re in alignment with the organizational direction.


Myth # 3 – Virtual MasterCard programs require lots of process change! – Actually they don’t!  Whereas true purchase cards (p-cards) involve lots of changes to established procurement processes and user training, the advantage of virtual cards lie in their simplicity. It simply becomes an extension by which you can pay vendors who accept it as a form of payment. Therefore the only process change, and that would be an addition to some of the process would be paying by an electronic mechanism, which, by the way, is automated once a payment file is generated.  You get the added benefit of not having to run checks as much which Aberdeen Groups says costs upwards of $7 to process, print, and mail per transaction…so there’s that!


Myth # 4 – You have to onboard vendors yourself! – Well, this, as in all things depends on what you get.  Some programs from banks and other major credit card companies leave you to it in terms of getting adoption from your supplier base.  Other card processors devote legions of people and resources to that effort on your behalf.  All things being equal, we prefer the latter.  It means that the change over is seamless and that the AP staff can focus on what they’re good at…getting stuff done, not soliciting and wooing vendors to a new payment means.


Myth #5 – The juice isn’t worth the squeeze! – Meaning, the effort isn’t worth the reward.  Well, again, this depends on whom you’re getting into partnership with.  We’ve discussed this program with customers who have vendor arrangements in the electronic Accounts Payable space, and who run significant volume through their virtual cards (nearly $17MM / year, not too shabby!). However, their rebate for all that spend was only about $70k, which means they were in effect getting only 41 basis points or so on the spend, which is paltry compared to certain virtual MasterCard programs that are established and that pay between 100-125 basis points (1-1.25% of spend through the card).  This means by simply changing the provider, they get to triple their rebate back.  Tell me the CFO wouldn’t be pleased to hear that a shrewd move by a Finance manager yielded a 300% return with zero cost and I’d be shocked!  In fact, few if any improvement initiatives will yield the kind of financial windfall that virtual payments can, and we should know…we’ve helped businesses solve complex Accounts Payable invoice processing and Accounts Receivable remittance processing issues for years.  We believe this to be the goose that lays the golden egg in the finance area, and that with the sustained wins and rebates from these programs, you have the capital to go down the yellow brick road, improving process along the way at your discretion by paying out from the gains.



We hope you found this helpful and encourage you to check out our eBook on why CFO’s are writing off checks…and if you want to hear more about how to bring virtual payments into your organization then check this out and hit us up!

Free Whitepaper on Why CFO's Are Ditching Checks!

Topics: Virtual Payments, Electronic Payments, virtual mastercard

Subscribe to Email Updates

Posts by Topic

see all