Virtual Card Payment Alliance Is the New Voice of Virtual Card Payment Industry

June 24th 2015 – Dallas, Texas – Introducing the Virtual Card Payment Alliance (VCPA), a not-for-profit organization designed to educate, inform and promote the value of using virtual cards, a next generation of electronic payment tools for business-to-business (B2B) transactions. VCPA, based in Dallas, Texas, will include membership from across the virtual card value chain.

While electronic payments continue to grow, many commercial transactions are still made using antiquated paper checks and remittances. In industries where checks are still prevalent, such as insurance and healthcare, companies are looking for electronic payment and reporting solutions that address the inefficiencies associated with paper transactions. A virtual card is perfect for B2B transactions, leveraging the advantages of a card network for efficiency, accuracy and easy reconciliation. It can be used for claim payments in group health, workers’ compensation, auto, home and for various other property and casualty payments. Additional benefits include:

  • Cost reduction: There are significant savings on bank-related costs;  stop-pay/re-issues, positive pay charges and item charges are eliminated and reconciliation is greatly simplified. Companies can also use virtual cards in lieu of paper checks to securely pay claims, invoices and A/P disbursements. The result can be as much as a 75% reduction in print and mail costs.
  • Increased efficiency: Virtual cards offer the payee the ability to easily process and reconcile the payment.  Remittance advice can be delivered electronically in multiple formats (depending on the market) or via fax or mail to replicate the remittance advice currently being received with checks.  The wide acceptance of credit/debit cards across multiple markets provides a significant opportunity to leverage “card” connectivity without the need for new platforms or complex integration.
  • Risk and fraud reduction: Virtual cards are for one-time use and are made out for the exact monetary value of the payment amount for which it was issued. Once that amount has been reached, the card is no longer valid. This ensures that the payee cannot  overcharge the card and prevents the  card from being reused. They also include such features as real-time tracking, specialized fraud screening, and zero liability assurance for both the payer and payee.

“Payers and payees continue to pursue solutions that  streamline the payment and receipt process  and virtual cards offer an alternative that mitigates cost and risk while increasing efficiency compared to paper payments. With industry leaders, the VCPA will help bring attention to the many benefits of virtual cards,” says Jarvis Shockey, Chairman of the VCPA. “The VCPA provides a neutral, third-party voice for the virtual card industry, identifies and promotes best practices, and works with appropriate standards organization to ensure virtual cards are included as an approved payment type. We are focused on promoting virtual card solutions, growing our membership and providing members with tools to help them be successful in their profession.”

Leaders in the industry for electronic automation and virtual payments have provided feedback and startup funding for the VCPA to address these market needs. The alliance website is designed to be a source of news, tools and events related to virtual cards and membership is open to all participants in the virtual card value chain, including:

  • B2B payment processing solutions, including revenue and payment cycle management, payment processing networks, and information providers
  • Insurance for property and casualty, workers comp, home and automotive customers
  • Financial and government institutions
  • Consultants, financial services firms and payment solutions providers that provide financial products to corporate and individual clients
  • Clinical information exchange and end-to-end insurance administration systems

Parties interested in the alliance, or in getting more information about virtual card benefits and solutions, should contact the VCPA directly at 972-922-9483 or via the web site at

About the VCPA

The Virtual Card Payment Alliance, a 501(c)(6) tax-exempt not-for-profit organization, is designed to provide education and resources that promote the use and benefits of virtual cards in business-to-business transactions. The objective is to increase adoption rates and use of virtual card payments across multiple industries to help create more value for both payer and payee. The VCPA will do this by providing forums, educational tools, policy and thought leadership across the industry. For more information visit

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New White Paper: Finding common ground – How both payers & providers can benefit from virtual card payments

healthcare costs and virtual cardsWith a shared need to reduce billing and payment costs, insurers and healthcare providers alike stand to benefit from integrating virtual card payments. In this study, written by by Beth Griffen, Vice President and Business Leader, U.S. Healthcare and Insurance and Ed Downs, Vice President and Senior Business Leader, U.S. Commercial Products, healthcare providers share their experiences and insights into all forms of claims payments—and offer candid suggestions on how payers can facilitate greater adoption and usage of virtual card payments.

Download the white paper here

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Cost Calculator: The true cost of financial transactions

Need to know what checks, ACH transactions and stop pays are actually costing you? Try our simple cost calculator.

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Diagram: Typical Payment Routing for Virtual Card Transactions

From the diagram below, we can start to piece together what is occurring during a typical virtual card transaction.  For reference, below are a few of the abbreviations used in the diagram:

  • CSC = Card Security Code
  • EOP = Explanation of Payment
  • POS = Point of Service

Below is the typical process for virtual card transactions: Payment Transaction Routing Process

*File may contain data only for providers receiving virtual card payments or may also include data for all provider payment types

**EOP data includes  the 16-digit card number, payment amount, expiration date and CSC

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Electronic Payments: With the Obvious Efficiencies, Why are Adoption Rates Still So Low

Electronic Payments – Obvious efficiencies, so why is adoption still so minimal

fnigers typing on computerTime is money. With escalating costs, competition eating into the bottom line and new regulations affecting profitability, new methods are necessary for creating cost effective needs for payment processing.  Reducing or eliminating paper payments would seem like an easy and natural place to look for cost reductions, but adoption by payees is still very low.  Healthcare is probably the most glaring example, but the issues are certainly real across nearly all B2B markets.  Today, over $2.3 trillion in claim payments are made, but outside of government programs (Medicare and Medicaid), paper checks still make up over 90% of those payments.

ACH Issues

Key to understanding ACH adoption is understanding the business make up of a typical Provider’s office and how they reconcile payments today.

Providers deal with dozens, and in most cases, hundreds of payers.   The 80/20 rule usually applies: 80% of their patients come from 20% of their payers.  So it’s impractical for a provider to enroll in ACH with all their payers, especially the 80% that only make up 20% of their traffic.   Add in the general mis-trust of the Payer by a Provider and it’s even more unlikely they are going to give their banking information to all but their most trusted payers.  So for the 80% of Payers that make up that 20% of the patient traffic, checks were, until recently, the only viable payment method.

What Providers like most about paper checks and Explanation of Payments (EOP) is they are easy to reconcile because they are delivered together – same envelope, same time.  If a provider opts for ACH and Electronic Remittance Advice (835), they are faced with a number of challenges.   The most serious is the disconnection between their money and the remittance data.   First, the money and ERA don’t show up at the same time and are delivered through 2 different channels; money through the banking system and; even the Affordable Care Acts allows for a three day window. Second, it is extremely rare that a bank would provide electronic deposit reports that can be uploaded into the Provider’s billing system.  So the Provider has to check their bank accounts daily to see what ACH deposits have been made.  Then they have to manually reconcile against the ERA’s that have been delivered.

Other factors that discourage the use of ACH/ERA is that Providers generally do not trust the electronic data feed will accurately upload into their billing system, so most will still print the ERA and manually post,   And finally, the cost of setting up to receive ERA’s can range from $500 – $10,000, depending on their system.   Even for the largest hospitals, it is not cost efficient to set up for ERA for all their Payers.

A Payer can’t force a Provider to enroll in ACH and accept an ERA, but they can be proactive and offer an alternative payment – virtual cards.

Imagine your mailing room…empty

The cost savings you realize of virtual cards go far beyond the cost of paper, ink, printing, and postage. There are also significant savings on bank-related costs; stop-pay/re-issues, positive pay charges and item charges are eliminated and reconciliation is greatly simplified.  With no provide or, vendor print, or mailing required, you can refocus your team on other tasks, or pass those savings on to your customers.

Provider Acceptance of Virtual cards

With over 95% of Providers accepting credit/debit cards for payment, there is a significant opportunity to leverage that “card” connectivity.  Provider adoption ranges from 50-70%, as opposed to 10% for ACH.  The reasons for such high adoption are in contrast to the reasons ACH/ERA doesn’t work: no enrollment, easy reconciliation, money and data delivered together, fraud protection, and quicker, more reliable delivery over mail.  While not every Provider recognizes the value of virtual card payments, many do, especially for those payers that represent a small percentage of their patient traffic.

Virtual cards – simple implementation

Virtual cards require no changes or special integration with your claim system. No special payment files are required since most virtual card providers will use your current output file. A simple implementation means minimal IT department involvement and an immediate ROI measured in weeks, not months or years.

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What are Merchant Category Codes (MCCs) and how are they used?

What are Merchant Category Codes (MCCs) and how are they used to determine if companies are subject to IRS reporting

IRS Logo

In 2004 the Internal Revenue Service (IRS) published an optional revenue procedure that allows users of commercial payment products to use Merchant Category Codes (MCCs) to determine which payment card transactions are reportable to the federal government on IRS Form 1099-MISC (Miscellaneous Income).

Organizations and government agencies using commercial payment products to
pay for services are required to report payments to the IRS. Historically, determining which payments were for services and which were for merchandise was an difficult, time-consuming process that frequently required a review of individual transaction detail. This IRS revenue procedure and “MCC List” takes the guesswork out of this process allowing cardholders to determine reportable payments based on the supplier’s MCC.

In general, this revenue procedure classifies businesses by Merchant Category Codes (MCCs) according to whether they predominantly furnish services (for which payments are reportable) or predominantly provide goods (for which payments are not reportable). A payment card organization may assign MCCs, or equivalent Industry Codes, to merchant/payees that accept its payment cards and notify cardholder/payors that use its payment card of the MCC or equivalent Industry Code assigned to a merchant/payee. A cardholder/payor may then rely on the MCC or equivalent Industry Code assigned to a merchant/payee in determining whether a payment card transaction with that merchant/payee is subject to reporting under section 6041 or section 6041A.

Virtual Cards are no different than physical credit cards in this manor. Each virtual card payment is tied to a merchant classification code (MCC), used to classify the business by the type of services or products it supplies. These can be used to help identify which transactions need to be reported to the IRS, thus assisting with proper transaction identification and tracking. Merchant ID’s are also captured and used to trace subsequent authorizations.

For a detailed explanation of the Merchant Category Codes and how thy are used to determine reportable payment card transactions, refer to the article below on the IRS government pages.

If you have other uses or applications for MCCs, please let us know.

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Follow the VPCA on social media

Valuable resources to keep you aware of trends and news that matters to you

social-media-iconsVPCA members actively contribute to the social media landscape. With multiple contributors from numerous technology and services providers, you can get answers to innovative new solutions and contribute your feedback to the virtual card payment community. We value our role as an important influencer in the industry, so we regularly post updates and offer valuable resources to keep you aware of trends and news that matters to you. Look for such topics are emerging technology, claims management, cost reduction, compliance, healthcare reform, best practices and more. 

You can also receive important VPCA updates on your computer or mobile device. Visit our website, Linkedin page, Twitter handle, or YouTube channel. Just click the icons to subscribe and follow the VPCA today!

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Target Hit by Massive Card Breach, Hackers Swoop in for Holidays

In a February issue of the Prepaid Press, Arlene Hauben, writes about the Target card breach and the safety and standard of credit cards. Read the article, paying close attention to the last section concerning how banks are mitigating risks and the mention of virtual cards providing the benefit of fraud reduction. Read the full article here.

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Case Study: $85 Million Midwest TPA loses time & money with EFTs, switches to virtual cards

“The Bank is unresponsive to our needs; they don’t understand our business.”
“The Bank forced us, our clients actually, to absorb the costs of forced settlements.”
“We have 1.5 FTE dedicated to supporting this process, mostly unloading cards and converting to checks.”

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The problem with Electronic Funds Transfers (EFT) for small business

Provider enrollment with health plans for EFT is currently inefficient and time-consuming due to non-standard processes that require providers to enroll for EFT separately with each health plan. Providers often receive multiple payments against the same ERA, making it difficult to match payments to the appropriate ERA.

Providers often require that EFTs and ERAs be organized so that separate EFTs and ERAs are received for each provider subpart (components of the larger organization) defined by the internal financial accounting structure of the organization. Often times,

With this lack of standards, EFT adoption rates in the US are less than 10%. That means that realizing a significant reduction to your print and mail costs can’t be made via EFT.

EFT available for over 15 years

Very low adoption rates

  • Providers deal with hundreds of Payers
  • Requires enrollment process (an opt-in service)
  • Payment separate from remittance advice (835 and EFT)
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