Virtual payments are becoming increasingly popular for business travel, with virtual cards used to facilitate better hotel expense management, such as settling hotel bills and other expenditures. In such a scenario, payments are made directly from the employer’s bank — eliminating the need for employees to pay first and then request reimbursements later on.

Such a process streamlines finance administration procedures, reduces the need for employees to cover upfront costs, and provides companies with an efficient hotel expense management system.

This blog will explore the basics of virtual credit card (VCC) use for hotel expense management and the many benefits of this innovative payment method. If you’re a Travel Manager looking to improve your hotel expense management system, or a business traveler interested in virtual card use, this post is for you. Keep reading to learn more.

What are Virtual Cards?

Virtual cards work just like traditional bank cards. The key difference is that instead of being tucked away in a physical wallet, they are stored in a mobile digital wallet. Virtual cards are securely encrypted, offering a safe way to pay for purchases.

Depending on the provider, cards may be used online only or both online and in-store. Virtual cards have a unique card number, CVC, and expiry date. Some cards are a copy of an actual physical card, and other virtual cards are “disposable” in nature, meaning they can only be used once. After its purpose has been served, a disposable virtual card can’t be used again.

Regardless of the type, virtual cards provide an added layer of security, especially for online transactions. Many card issuers are also adding the option of generating virtual cards for their cardholders’ convenience, a feat that is expected to become even more widely available as the technology develops.

What are the Benefits of Using Virtual Cards for Hotel Expense Management?

Global payments solution Nium reports that virtual cards are becoming increasingly popular in the travel industry. With 90% of hotels, 94% of travel agents, and 86% of airlines agreeing that VCCs are shaping up to become an essential mode of payment. It’s clear that virtual cards offer an array of benefits.

Aside from convenience and security, virtual cards offer a host of benefits, including:

Greater Control Over Spending

Virtual cards are a godsend to Travel Managers looking to have greater control over their employees’ spending and hotel expense management. With these digital, one-time-use payment instruments, it’s possible to set transaction limits and ensure that employees make no unauthorized purchases. Virtual payments also ensure that business travelers will book via preferred channels, giving Travel Managers better visibility into employee spending.

Reduced Risk of Fraud

A whopping $32 billion is lost yearly due to credit card fraud. This statistic underscores the fact that using just one corporate credit card to pay for hotel stays makes it easy for fraudsters to hijack one’s account and steal money. This also opens up opportunities for internal misuse, as employees can easily share their corporate cards with colleagues. With virtual cards, however, all payments are made directly from the employer’s bank account via a one-time use credential explicitly created for each transaction.

Better Duty of Care Delivery

Travel Managers know that traveler well-being and safety are of paramount importance and that this is impacted by Duty of Care practices during business trips. With virtual payments, Travel Managers can ensure that their employees stay in approved hotels, book with preferred airlines, and receive the best discounts. This makes traveling easier for business travelers and allows Travel Managers to deliver better Duty of Care services to them.

Access to Data-Based Insights

Data provides Travel Managers with the information they can use to improve their business travel programs. With virtual cards, it’s possible to see where and how employees spend while on the road — data that is useful in measuring ROI (return on investment) and identifying areas for improvement.

Ease of Use

Virtual cards are a safe and easy way for business travelers and companies to make hotel reservations. Companies can prepay rooms for employees without needing to use physical credit cards, and travelers can go about their business trips worry-free.

The Challenges of Using Virtual Cards for Hotel Expense Management

With the pandemic speeding up the adoption of contactless, digital payments, VCCs have gained popularity in both the business and consumer sectors, even post-COVID. However, some challenges remain for travel managers who are eager to embrace this form of payment:

Hotel Readiness

Hotel readiness remains a challenge, with some US hotels still heavily reliant on legacy methods like fax to accept virtual cards. In an interview, Marriott International VP of global sales Kathy Mouw explained that the current process leaves front desk staff with no way to determine whether a card is a virtual one or a standard credit card.

And even with fax machines being used as a workaround to send authorizations. Current hotel staff are still not trained in the specific processes of accepting virtual cards. However, the hospitality sector is slowly but surely adopting new technologies, which is expected to further drive the adoption of virtual cards in the coming years.

Technical and Security Barriers

Virtual cards require a certain level of technical know-how for them to be used effectively. This includes having an understanding of fraud prevention and recognition protocols, as well as the ability to manage multiple card accounts efficiently. Additionally, many companies struggle to find a platform that meets both their security and financial needs.

As mentioned, the fax machine remains an unlikely hero in bridging the gap between virtual card acceptance and hotel readiness. As such, more companies may need to look into technology designed specifically for virtual cards to help with adoption.

How to Set Up Virtual Payments

As you can see, virtual cards come with plenty of benefits. So how do you go about setting up a virtual card solution for your business? Here are some steps to get you started:

1. Choose a Payment Provider

You might need to look no further than your current bank for a virtual card solution, as many providers offer them these days. Check the terms and features to determine whether they’re the right fit for you. Some virtual card providers include Sabre and Wise. As for traditional banks, Citibank, Capital One, and Bank of America offer virtual credit cards to their cardholders.

2. Align Your Platforms

Once you’ve agreed with your provider, you can integrate your new solution with your current systems. Integrating your virtual card solution into your travel platforms and systems will also help with better data capture. Some travel application programming interfaces (APIs) include hotel and flight booking APIs like Concur

3. Train Your Travelers

Next, you’ll need to train employees on how to use virtual cards, including informing them of the terms and conditions that apply when using these one-time-use payment instruments. This will help ensure that they book with approved vendors and are compliant with company policies when it comes to expenses. It will also help them utilize the benefits of using virtual cards, such as expedited reimbursements and lower fees.

4. Track Progress and Make Adjustments

Finally, you’ll want to track your progress with virtual payments and make any necessary adjustments along the way. This will help ensure that your business travel program runs smoothly and delivers its intended benefits, such as better cost management, improved security, and streamlined reconciliation. With the right tracking in place, you can also spot potential issues before they become major problems.

Need help setting up your virtual payment solution? JTB Business Travel offers comprehensive services for businesses looking to streamline their operations. With an extensive network of partners and experience in the industry. We can help you set up your virtual payments solution and ensure that it delivers maximum benefits for your company. Contact us today to learn more!