All about virtual cards and the benefits they offer to issuers

Avoid waiting for a physical card to arrive to make a purchase. Quick and easy access to the world's most popular payment method. New card numbers for even greater security. All of this is possible with a payment method increasingly adopted worldwide: virtual cards.

Digital transformation in the payment media sector is already making clear the great success of virtual cards: the strong growth of this payment method in 2023 has led Juniper Research to estimate that the volume of transactions with virtual cards will reach $175 billion in 2028, which represents a 388% increase from current figures.

In this post, we tell you what virtual cards are, how they differ from physical cards, and what advantages they bring to the companies that adopt them and offer them to their customers.

What are virtual cards?

Virtual cards are simply credit, debit, or prepaid cards that function entirely digitally, without the need for a physical plastic version. They are issued by the same banks or financial institutions that offer physical cards to their customers, usually at no additional cost. Their payment data is always stored securely in the bank/institution's app or website.

There are different types of virtual cards:

• Some may have a fixed number, just like a physical card;
• Others are valid for a limited period or based on usage: they can be used for a single purchase made by the user, or for specific purposes such as subscription services, use abroad, among others. Their numbers are likewise generated in the bank's app or website.

Virtual cards and those digitized for wallets like Google Pay and Apple Pay are not the same

They may seem the same, but they are different things. Both virtual cards and tokenized cards (i.e., digitized for use in digital wallets like Google Pay and Apple Pay) are versions that can be used to pay directly from a smartphone, for example. However, they have some clear differences:

• Virtual cards do not have a physical version. To use a virtual card in a physical purchase, the point of sale terminal (the acquirer's POS) must have NFC technology enabled (which allows contactless payments);
• Tokenized cards, on the other hand, can be versions of both physical and virtual cards. In their case, the card stored in a wallet such as Google Pay or Apple Pay is an encrypted version (a token). For security reasons, this token is only activated when a purchase is made, making it even more fraud-proof.

The differentiators that make virtual cards a super payment method

Virtual cards feature a series of differentiating characteristics that constitute true advantages—both for those who use them and for those who offer them to their users.

We spoke with our Product Director for Brazil, Bruno Martucci, and our Biz Dev Lead for the Andean Region, Enrique Fadul, to learn about some of the advantages offered by virtual cards. Among them, faster access for the user, greater ease of use, and better security mechanisms.

Easier and faster issuance

Issue, block, unblock, request another card... all live! Virtual cards are managed entirely in real-time through the issuer's app or website, without the need for the user to carry a physical version to activate it. Once the user has an account with a bank or fintech issuing the card, they can already have their virtual card. Accessing the product is very fast, as there is no need to wait for the card to arrive by mail. If I complete the onboarding and have access to my account, for example, I already have the virtual card, so I can at least make online purchases immediately. It's a great advantage.

With this instant issuance, the virtual card also significantly reduces costs when it needs to be replaced after a fraud attempt, for example. In the case of a physical card, when it is blocked due to reasons such as loss, theft, or fraud attempt, there are reissuance costs of the plastic and days—or even weeks—until the new card arrives. Bruno Martucci, Product Director of Pomelo in Brazil, points out that if the user has access to Google Pay or Apple Pay, they can practically use the virtual card in the physical world. Thanks to push provisioning, a process that many issuers use to centralize and expedite integration with wallets, the user simply registers the card in their wallet and is all set, avoiding the lengthy onboarding in the tokenization process.

Greater security

Virtual cards are a secure option for online purchases. First, because they have a different number than the physical card, as we have already mentioned. In contrast, a stolen physical card could continue to be used until it is permanently blocked.

Furthermore, virtual cards have other specific layers of security:

• More and more banks and fintechs offer users simultaneous virtual cards (allowing the user to have several numbers at the same time), with limited validity (by months or number of uses) or single-use. The risk of fraud is even lower for the user, who can, for example, choose a card number for each type of purchase.
• It is also possible to offer users additional security layers, such as dynamic CVV, which makes the card's three-digit security code continuously expire (with each purchase or every few minutes) and be recreated with another number.

Convenience, practicality, and cost control

Thanks to push provisioning, many virtual cards already work for physical purchases, not just e-commerce. As the vast majority of current ATMs already operate with NFC (contactless) technology, a tokenized virtual card can be used directly through users' digital wallets.

Virtual cards also have all the advantages of physical cards, such as credit lines, benefit programs, and international use. All of this can be managed directly from the application or the website of the bank or issuing entity, in real-time—just like expense control, limit management, and other related spending issues. Ultimately, the great advantage of virtual cards is that they lead to processes migrating more and more towards digital and self-service, allowing for much more practical, fast, and efficient management.

Offering virtual cards to clients elevates the level of financial services

For those offering financial services and products, there are quite a few advantages to adopting virtual cards in an increasingly digitized world. In fact, companies from different sectors are betting on launching their own virtual cards to improve the user experience, something already widely seen in cases like corporate cards, agricultural cards, and crypto cards. Moreover: according to Javelin Strategy & Research, more and more companies making B2B (business-to-business) payments are betting on virtual cards.

Other advantages for companies offering their own cards are:

• Being able to offer a gateway product to the financial world that is easy to manage and can connect to the company's wallets and digital accounts;
• The fact that payment and purchase processes for users are not interrupted, since virtual cards operate uninterruptedly (because they can be issued and reissued instantly). This generates more stability and revenue for the issuer: The fact that the virtual card operates continuously is an advantage for the issuer, as there is no temporal gap where transactions cannot occur. Being an immediate process, the proposal of virtual cards is precisely the provision of service and the imminent generation of revenue.
• Time and cost savings in the issuance of physical cards;
• Access to revenue sources that are also present in physical cards, such as the interchange fee on transactions conducted by users;
• Reduction of demands on customer experience (CX) teams, thanks to the increasing customization of self-service with the digital channels of the issuing bank/fintech.