Kontrol Payables Journal

Electronic Payments 101: The Basics of Virtual Payments Technology

Posted on Feb 20, 2014 3:30:00 PM by Sean Songer

If you're like most who are responsible for making payments for a corporate or nonprofit organization, you're continually seeking to maximize efficiency and minimize the cost of doing business. Virtual Payments Technology does both, offering the opportunity to turn a manually intensive operating expense into an automated process that actually generates revenue for your organization.


The Mechanics of Virtual Payments Technology

The key to this process is a new twist on traditional credit card-based payments: An evolution in payments technology now allows card-based payments to be made through a user-friendly software interface that automatically steers payments to an organization's vendors. The process utilizes the Visa and MasterCard networks to transfer payments to vendors' bank accounts. Organizations that employ this technology are able to enter vendor invoices into their virtual payments platform, and an email notification of the remittance is automatically sent to the vendor. This email includes the total amount of the payment and other specifics regarding the payment. Upon acting on this email notification, the vendor immediately has funds transferred into their account.

Reduce Expenses, Increase Revenue

The most significant benefits to an organization that adopts Virtual Payments Technology are rooted in the expense-cutting and revenue-generating features of this process.

The reduction in expenses results from the seamless interface between a virtual payments application and an existing ERP or accounting system. That means a significant reduction in manual accounting processes, as payments are automatically recorded upon acceptance of the payment by the vendor. A reduction in manual processing means less errors and less re-work. If an organization transitions from a payment process that is majority check-based to one that is powered by Virtual Payments Technology, the savings realized will be even more significant.

The increase in revenue stems from an opportunity to participate in revenue-sharing. Financial institutions that offer virtual payments services to their customers also offer revenue-sharing. This means that every time an organization processes a payment using Virtual Payments Technology, they earn revenue by doing so. Simply put, they get paid by paying their bills.

The Bottom Line

Organizations looking to get more efficiency and effectiveness out of their internal processes would be wise to look closely at what Virtual Payments Technology offers in expense reduction and in unearthing hidden revenue. With no up-front investment, this automated alternative to ACH and checks represents an excellent opportunity for organizations looking to do much more with less.

Interested in learning more about Virtual Payments Technology and how electronic payments work? Download our quick primer on the topic, How Electronic Payments Work, by clicking the button below.

Get the Basics  on Electronic Payments

Topics: Payment Cards, Commercial Cards, Electronic Invoicing, Virtual Payments