Virtual cards: 10 benefits & disadvantages for businesses

Key takeaways:

• Virtual cards are digital payment cards that offer instant issuance, enhanced security controls, and simplified expense management for businesses of all sizes.

• The main benefits include instant issuance, multicurrency access, real-time spend tracking, and customisable controls, while potential challenges include the need for employee training and limited acceptance at some traditional suppliers.

• Airwallex virtual cards eliminate common pain points by offering zero domestic and international transaction fees, instant card creation, and seamless integration with accounting systems like Xero and QuickBooks.

Managing business spend efficiently becomes more challenging as your company grows. You might be handling employee expenses across multiple locations, tracking department budgets, or managing recurring subscriptions, which present numerous challenges for expense management.

Virtual cards offer a modern alternative. These digital cards give you instant control over who spends what, where, and when, all without waiting for plastic cards to arrive in the mail.

In this guide, we'll explore both the benefits and disadvantages of virtual cards, helping you decide whether they're the right fit for your business. We'll cover everything from enhanced security features to potential adoption challenges, so you can make an informed decision about modernising your company's payment infrastructure.

How does a virtual card work?

A virtual card functions just like a physical payment card, but exists entirely in digital form. When you create a virtual card through your banking or fintech platform, you receive a unique 16-digit card number, expiry date, and CVV, just like a traditional card.

Here's the basic process:

1. Creation: You generate a virtual card instantly through your provider's online dashboard or mobile app. Most platforms let you create cards in seconds with just a few clicks.

2. Configuration: You set parameters for the card, such as spending limits, merchant restrictions, expiry dates, and which employee or department can use it. These controls help you manage budgets and prevent unauthorised spending.

3. Usage: The cardholder adds the virtual card details to their mobile wallet (such as Apple Pay or Google Pay) or uses the card number directly for online purchases. Each transaction uses funds from your linked business account.

4. Tracking: Every transaction appears in real-time on your dashboard, with detailed information about the merchant, amount, and cardholder. This data often flows automatically into your accounting software for simplified reconciliation.

5. Management: You can freeze, modify limits, or cancel any virtual card instantly if spending patterns change or if you suspect fraudulent activity. There's no need to wait for physical card replacements.

The digital nature of virtual cards means you can scale your payment infrastructure as quickly as your business grows, issuing new cards instantly whenever needed without the delays of traditional card programs.

Are virtual cards right for your business?

Virtual cards are inherently flexible – your business can instantly create new virtual cards for their employees and set spending limits and usage scope for each card. This gives you control over how much each employee can spend and which expense category or merchant type they can use it for.

To start using virtual cards, simply add the card to a mobile wallet such as Apple Pay and Google Pay and tap to make a contactless payment. No need to wait for the card to arrive in the mail.

As your business grows, understanding what virtual cards can do will help boost financial efficiency and streamline the expense tracking and reporting process. Here are some reasons why your business may need virtual cards:

• Simplified expense tracking for employees: Your employees can use virtual cards for business-related expenses, such as business travel, meals, or office supplies. This eliminates the need for them to submit expense reports and wait for reimbursements, saving time and effort on both ends.

• Ease ongoing team spending: For businesses that have multiple teams or departments, virtual cards can be issued to different departments or projects for simple expense management. For example, virtual cards can be used for recurring software subscription payments and digital ad spend. 

• Reduce accounting administration: Virtual cards can effortlessly integrate with your existing accounting system like Xero or Quickbooks, streamlining the reconciliation process and reducing administrative overhead. By automating expense tracking and reporting, virtual cards significantly lower the risk of errors and employee fraud, which constitutes approximately 5% of a company's annual revenue.¹

• Enhance security: Unlike physical cards, virtual cards cannot be lost and are more secure than physical cards. You can instantly freeze or cancel a virtual card if you suspect any fraudulent activity, providing an added layer of security for company funds.

5 benefits of virtual cards in Australia

Integrating virtual cards into your business operations offers numerous advantages, such as improved financial management, increased security, and enhanced operational efficiency. Here are five key benefits of virtual cards:

1. Global acceptance: If your company frequently engages in international transactions, whether it be for managing SaaS subscriptions and digital ad spend, paying consultants, or covering business travel expenses, multi-currency virtual cards like Airwallex’s Corporate Cards offer you a cost-effective solution for managing cross-border payments or payments in foreign currencies other than AUD. 

2. Instant card creation: Virtual cards can be created instantly and used immediately for transactions, without the need to wait for physical cards to arrive in the mail or having to physically retrieve a card from the office. You can also create cards for new team members or expenses immediately, and cancel cards due to expected misuse without any delays.

3. Empower employee spending: Businesses can create unlimited virtual cards tailored for various purposes and employees. Virtual cards provide employees with a convenient and secure way to make purchases on behalf of the company, such as flights and hotels for business travel and entertainment expenses. Recognising these advantages, Australian digital agency Dovetail uses Airwallex to create virtual Visa cards for each of their teams. Dovetail’s approach eliminates the need for their teams to use personal cards and wait for company reimbursement, and also streamlines expense management, saving 3 hours per week by setting tailored spending limits and real-time transaction tracking on each card.

4. Streamlined expense management: The integration of virtual cards into expense management systems offers businesses a more efficient way to track and control spending. On average, it takes businesses 20 minutes to complete one expense report.²  When a payment is made with a virtual card, the transaction details are immediately recorded in the expense management system, freeing up the time needed for collecting receipts and manually entering data. This real-time visibility enables companies to monitor expenses as they happen, allowing for more accurate budgeting and financial planning. As virtual cards provide comprehensive transaction data, including merchant information, date, amount, and category, they streamline the process of categorising expenses and provide more insights into company spending. The detailed collection of data, in addition to real-time monitoring, aids businesses in a much faster and more precise reconciliation of accounts.

5. Enhanced security: Virtual cards offer real-time visibility into employee spending, allowing businesses to track expenses as they occur. This enables quick identification of overspending or any fraudulent activities, reducing the risk of financial loss. Virtual cards can also be issued for specific uses with set limits and narrowed down to specific merchant types if needed, and can quickly be frozen or cancelled if needed. 

5 disadvantages of virtual cards in Australia

When rolling out virtual cards to your company, you may face a few hurdles, such as providing employee training, card fees, and limited card acceptance. Here are some potential disadvantages of virtual cards to consider:

1. Employee resistance: Some employees may be accustomed to using their own personal cards or physical corporate cards and are hesitant to adopt virtual cards. A seamless transition to virtual cards necessitates company-wide training to ensure all employees are comfortable with the new system. Luckily, most virtual cards are easy for employees to learn and use. They can simply add the cards to their phone’s Apple Pay or Google Pay to get started.Virtual cards also have the benefit of streamlining the expense tracking and reporting process for employees as an added incentive for them to switch over.

2. Reliance on an employee smartphone: Virtual cards must be stored on mobile wallets or payment apps and accessed through the employee’s phone. This might require the employee to download a new app and also ensure their phone is fully charged to use the card. However, if the device is out of battery or has a poor connection, the virtual card won’t be able to be used. 

3. Regulatory and compliance issues: Regulatory standards can vary significantly between different regions and industries, meaning businesses must invest time and resources to ensure their chosen provider is fully compliant. These regulations are also subject to change, meaning continuous monitoring and updating of policies to maintain compliance is required.

4. Fees: Some virtual card providers may impose various fees that add to the overall cost of using these cards. Issuance fees may be charged each time for creating a new virtual card, while transaction fees can be incurred each time the card is used for a purchase. Maintenance fees may also be levied on a regular basis simply to keep the card active. Using Airwallex in Australia, businesses can create an unlimited number of virtual cards for free with no maintenance fee and enjoy 0% domestic and international transaction fees on all spending. 

5. Acceptance: While becoming increasingly popular, acceptance of virtual cards is not universal. Businesses that work with a broad range of suppliers may encounter resistance to virtual payment methods. Traditional payment systems like bank or SWIFT transfers remain the preferred choice for many suppliers, owing to their established reliability and widespread recognition. To get around this, businesses may need to maintain multiple payment solutions to accommodate varying supplier preferences and address their own payment needs. In addition to their virtual Visa cards, Airwallex offers international money transfer services to 200+ countries to help businesses send payments seamlessly, regardless of what their suppliers may prefer.

Virtual cards vs. Physical cards

When comparing virtual cards to physical cards, the main differences lie in their form and functionality. Virtual cards offer enhanced security features and flexibility, making them ideal for businesses that seek more efficient budget control and expense management. Physical cards, traditionally issued by banks, usually offer less room for customisation and take a longer time to be issued.

1. Form: Virtual cards exist purely in a digital format and are accessed via mobile wallets or payment apps on your phone or computer. Physical cards are tangible and plastic, designed to be carried.

2. Security: Virtual cards are often deemed more secure, offering users the ability to freeze or cancel them instantly. This feature helps in preventing unauthorised transactions and reducing fraud risks. Unlike physical cards, which can be lost or stolen, virtual cards require login or biometric authentication for use, adding an extra layer of protection.

3. Issuance: Virtual cards can be generated instantly online, offering immediate accessibility. Physical cards require a much longer processing time and may involve additional steps such as mailing the card to the user's address.

4. Tracking and monitoring: Virtual cards allow for real-time tracking of transactions, with detailed information on each purchase. They can also easily integrate with accounting systems like Xero or Quickbooks, making expense management and budget tracking more efficient. Physical cards, on the other hand, may require manual entry of transactions into these systems, which can be time-consuming and prone to errors.

5. Customisation: Fintech providers such as Airwallex offer virtual cards that are highly customisable with adjustable spending limits and specified merchant types. While all Airwallex cards come with a default transaction limit of AUD$15,000 (or the equivalent in another settlement currency), businesses have the flexibility to set lower limits as needed. This feature allows them to allocate different spending limits to various teams or projects according to the company's budget. In contrast, physical cards provided by traditional banks may impose spending limits based on your business's financial standing and offer limited customisation options.

With their convenience and real-time tracking capabilities, virtual cards are fast becoming the go-to choice for many business transactions. For those looking to leverage the benefits of virtual cards, the Airwallex Corporate Card allows users to make transactions across multiple currencies without worrying about hidden fees. 

You can create as many virtual Visa cards as you like at zero cost. For businesses requiring physical cards, Airwallex also offers free issuance, ensuring flexibility and convenience for all. With one centralised platform, you have better visibility over your team budget and can streamline your expense management more efficiently.

Virtual cards: Frequently asked questions

How secure are virtual employee cards?

Virtual employee cards provide strong security features that reduce common payment risks. Since they're digital, they can't be physically lost or stolen like traditional cards. Each card requires authentication, typically biometric like Face ID or fingerprint, before any transaction goes through.

You maintain full control with custom spending limits and merchant restrictions on every card, so employees can only spend within approved parameters. If suspicious activity occurs, you can freeze or cancel a card instantly through your platform.

All transactions are tracked in real-time and linked to individual employees, giving you complete transparency over who spent what and where. This visibility helps you quickly spot unusual patterns and take action before small issues become larger problems.

How do I freeze or cancel a virtual card quickly?

Freezing or cancelling a virtual card takes just seconds through your platform's dashboard or mobile app.

To freeze a card, which temporarily blocks all transactions, log in to your account, find the card in your list, and select the freeze option. The card stops working immediately, but you can unfreeze it later if needed. This is useful if you're investigating a suspicious transaction or want to pause spending temporarily.

To permanently cancel a card, follow the same steps but select "Cancel" or "Terminate" instead. The card becomes permanently inactive and can't be reactivated. You'll typically want to do this if the card was compromised or if the employee or project no longer needs access.

Both actions take effect in real-time, giving you instant protection against unauthorised use. Many platforms also send you confirmation notifications, so you know exactly when the change has been applied.

Which corporate card solutions best support digital ad-spend management?

Digital advertising requires precise budget control across multiple campaigns and platforms. While there's no single "best" solution for every business, platforms commonly used by marketing teams include those that offer dedicated virtual card creation for specific campaigns.

Virtual card providers like Airwallex enable you to generate unique card numbers for each advertising platform or campaign, with custom spending limits on every card. You can restrict merchants to only approved ad platforms, preventing accidental spend elsewhere.

Real-time spend visibility shows you exactly which campaigns are consuming budget, making it easier to optimise performance and reallocate funds quickly. These controls help marketing teams stay within budget while automating the manual work of tracking spend across dozens or hundreds of active campaigns.

What tools allow companies to track and manage performance-based bonuses via virtual cards?

Several payment platforms support bonus distribution through virtual cards, though the right choice depends on your specific reporting and compliance requirements.

Platforms like Airwallex let you issue virtual cards designated for bonus payments, with controlled spending limits based on individual performance tiers. You can track these payments separately from regular expenses, with real-time monitoring of how bonuses are being used.

Integration with expense management software allows you to categorise bonus payments correctly, generate reports for finance reviews, and maintain compliance with your internal policies. This creates a transparent audit trail for bonus distribution while giving recipients immediate access to their rewards without waiting for bank transfers or physical vouchers.

The ability to set clear parameters, such as valid merchants or expiry dates, also ensures bonuses are used appropriately and within your intended timeframe.

Sources:

1.  https://s3-us-west-2.amazonaws.com/acfepublic/2018-report-to-the-nations.pdf

2. https://www.gbta.org/how-much-do-expense-reports-really-cost-a-company/