Hand holding blank white credit card

Virtual Credit Cards: What They Are & Why They’re So Popular

Corporate credit card theft continues to be a major problem for companies everywhere. To minimize these risks, businesses have turned to a centralized, controlled, convenient digital payment options like virtual credit cards (VCCs).

Should your business use them, too? What should you know to help your business prevent fraud and capitalize on VCC advantages?

Here we’re going to answer those questions. Along the way we’ll help you understand more about what a VCC is and how it differs from your regular corporate credit card.

We’ll also share research and insights into the size of this market and why it’s growing.

Table of Contents

What is a virtual credit card?

Unlike a typical credit card you’ve held in your hands, a VCC is not a physical object. It’s a temporary, random set of 16-digit numbers — also known as a token.

Generated online within seconds, it’s often used to buy a single item using your smartphone or PC. The disposable number changes after each time you use it and expires when no longer in use.

A virtual credit card connects to your actual credit card account but does not replace it. The charge you make on a VCC shows up on your regular credit card statement.

The electronic image of a virtual credit card looks similar to a normal credit card but has a number string that looks something like this: xxx xxx xxx xxx 1234. The “x’s” represent a random assortment of numbers that mask your actual credit card number so fraudsters can’t see them. The cards also have the expiration date (usually no more than 60 days) and a three-digit card verification number.

Numbers are generated by web browser applications or specialized client programs that interact with the card issuer’s computer. The providers of the numbers are virtual card number suppliers, banks or partners of major credit card companies.

Man using tablet with shopping cart icon

Virtual credit cards provide extra layers of security

VCCs amount to “add-ons” that provide businesses with an extra level of security for online transactions from many places around the world.

They help prevent fraudsters from stealing your company’s credit card information or hacking into your online purchases. Why? Because to fraudsters the VCC numbers are useless.

As previously noted, a driving force for growth in the VCC market is the rise in corporate credit card theft. A JPMorgan survey of nearly 8,000 businesspeople found corporate credit card grew by five percentage points from 2018 to 2019.

The survey also polled respondents on the frequency of actual or attempted fraud on different payment methods in 2019. Only in 3 percent of the cases did fraudsters attack VCCs. That’s far less than the cases in which corporate commercial credit cards got attacked – 34 percent.

In another survey, this one by the Global Business Travel Association, 79 percent of travel professionals polled said virtual credit cards were effective against fraud. Meanwhile, only 67 percent had the same faith in coporate cards. 

“Now, more than ever, virtual cards are a clear upgrade over traditional credit cards, especially for fast-growing companies."

Airbase, "Why virtual cards are taking over the business world"

VCCs are valuable for corporate travel expense management

Speaking of travel, businesses can use VCCs to gain more control over their employees’ travel expenses. When an employee travels on business, that person figures out how much the trip will cost. If it’s $1,000, the worker asks the company for a VCC valued at $1,000.

Using a VCC minimizes financial risk to the business by imposing employee spending limits.

“Now, more than ever, virtual cards are a clear upgrade over traditional credit cards, especially for fast-growing companies,” notes an article in Airbase. “These easily created cards help preserve budget, minimize fraud risks, and increase control over expenses, all without sacrificing speed.”

Analyzing VCC market growth

It’s clear from looking at various VCC market reports that this industry is growing. In fact, 2019 was a breakthrough. For the first time, spending on VCCs topped corporate card spending, according to the Research and Markets commercial credit card report.

“The pre-pandemic [VCC market] growth trajectory was quite good overall in North America,” said Steve Murphy, director with Researchandmarkets.com.

VCC growth drivers

There are several factors driving VCC market growth. And not surprisingly, preventing corporate fraud leads the way.

“The security play is still the main [market driver] from the business point of view,” said Juniper Research analyst James Moar. “VCC is an effort to keep people’s payment details separate from their online life and that’s where you’re seeing the biggest take-up in the more affluent markets such as the United States.”

Other drivers of VCC market growth include the rise of online payments, digital payment platforms and smartphones, as well as the need to approve spending remotely.

How is money made in the VCC market?

Businesses typically make money in the VCC market by charging transaction fees for those who use the system. But it’s complicated and continually evolving.

Many virtual card vendors offer rebates as part of their business model. In such cases they provide a portion of fee they charge back to the user to entice them to use the VCC service.

“Revenue in this market is shared between several players, resulting in a complex ecosystem that relies on relatively high levels of fees,” according to Juniper Research. “Should this change, then we can expect rapid consolidation and reshaping of the virtual card market.”

Virtual credit card limitations and challenges

While the benefits of VCC are numerous, the system has a few limitations. For instance, it’s dependent on a high number of electronic payments.

“The number of electronic payment transactions or digital payment transfers has decreased from both enterprises and customers due to the [pandemic] lockdown,” according to Industry Stats Report. “This directly hampers the virtual card market at a global scale.”

The report also points out several cases where a VCC may not be the best option. It’s not that easy, for instance, to use a VCC if you place an item on hold and pay for it in the store. Why? Because a VCC number only protects financial data for online purchases.

There’s another challenge. Juniper Research reveals that only four percent of healthcare institutions globally will use virtual cards because of high processing charges.

As for other potential day-to-day issues, verifying VCC transactions at hotels and rental car companies can be more difficult and time-consuming than a typical credit card.

When you reserve a hotel room online, the hotel desk person will ask you to present your card when you show up in person and you won’t have a VCC to hand over.

You’ll run into the same challenge when you go to rent a car. The rental company may need you to pay with the same card that you booked your reservation with and that VCC number may be difficult to access, if at all.

“VCC is an effort to keep people’s payment details separate from their online life and that’s where you’re seeing the biggest take-up in the more affluent markets such as the United States.”

Juniper research analyst James Moar

How to get a virtual credit card

Regardless of these challenges, if you want to access and use a virtual credit card, here’s what to do:

  1. Get a credit card. Your VCC needs to be linked to the credit card account.
  2. Log in to your online credit card account. You may need to install an online browser extension on your credit card account page.
  3. Go to account settings and select “virtual card numbers.”
  4. Download the VCC’s app to access the card number. You’ll receive a random 16-digital VCC number string tailored for a specific merchant.
  5. Accept the VCC number.
  6. Choose how long you want the number to remain valid.
  7. Get the expiration date and security code generated to complement the VCC number.
  8. Use the VCC like you do your regular credit card when buying things online. When ready to pay, you’ll receive a merchant-specific VCC number.

Final thoughts

Now that you know the latest going on in the world of virtual credit cards, what should you do next? Here are a few suggestions:

  • If your business has been victimized by several fraudulent attacks, VCCs may be a great way to minimize the risks of those attacks. Unquestionably, one of the biggest benefits of using this service is to reduce financial information theft.
  • If your company has problems with overspending by employees on business trips, using a VCC will help control those expenses..
  • Understand a VCC won’t be your answer for all your purchases going forward. In some cases, it may be easier to use a physical credit card. A VCC gives you more security for your online transaction but does not completely replace a physical credit card.

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