Understanding and embracing the future of payments with virtual cards

Last updated: 15 March 2024

A virtual card is an instantly created digital payment card connected to an end user’s bank account. It’s stored within an Issuer’s mobile application and works exactly like a physical card for payments both in-store and online.

Virtual cards can have their own exclusive PAN number, expiry date and CVC, and they can be issued at the point of account opening for immediate use.

They can either be for single usage – e.g. a disposable card that is activated for a limited time only or limited number of transactions, or for unlimited usage – e.g. an indefinite number of payments.

Individual cards can also be created to support budget management, created specifically with customised limits on spend and merchants. This could, for example, be cards for specific direct debits or subscriptions such as Netflix, Amazon or Uber.

The rise of virtual cards

Virtual cards are becoming increasingly popular among all types of card Issuers. In fact, new Juniper Research has found that the total volume of virtual card transactions will reach 175 billion by 2028, rising from 36 billion in 2023. This represents an incredible growth of 386%.

Many consumers are embracing them for their convenience. They enjoy the simplicity of being able to leave their physical card at home or in their wallet when they shop online or in-store, as well as being able to get a new or replacement card more easily.

Others are being drawn in by the security benefits of virtual cards. An independent payment card connected to your main bank account, but with separate card information, can provide a huge sense of security to end users who are dubious and concerned about fraud and theft.

Virtual cards can provide major reassurance. This is especially true when making ecommerce payments with a company the end user is unfamiliar with and does not trust, as well as in some shops or restaurants where there is a risk the card may be cloned.

There are big benefits for Issuers, too. End users will no longer have to wait days or weeks for a card – whether it’s brand new or a replacement. When a card is lost or stolen, this can be a hugely frustrating time for consumers, but the real-time issuance of virtual cards will help them get back to normal faster than ever. They can even ‘tokenise’ the card, which means adding it to their Apple or Google Pay.  This will deliver a better user experience so they are more likely to become a loyal, long-term customer.

Further, if an Issuer only issues virtual cards, then this could also reduce costs. It’s a lower fee per card issued – saving on both manufacturing/fulfillment and postage costs. There are also more indirect cost gains, with real-time delivery of cards meaning instant activation and an increased transaction volume. Real-time access means customers are able to make more purchases during that initial time period – and we have seen ourselves that instant issuance can result in a 15% increase in transactional volume.

Finally, for both Issuers and consumers, virtual cards offer green benefits by reducing the manufacturing of physical plastic cards, in additional to postage materials. This transition could therefore help to contribute to both personal and company ambitions to reduce emissions.

Embracing a virtual future

Virtual cards are already solving a lot of problems for consumers and Issuers, but financial services organisations are continuing to innovate with added value services.

Some, for example, now offer smart notifications when a transaction is approved or declined, while others have advanced card controls enabling the end user to instantly modify the card parameters and have full control over how the card can be used.

The potential for innovation is tremendous – but it is the core benefits of virtual cards that make us confident they are here to stay. The simplicity, flexibility and instantaneous access delivers a high-quality user experience, and the security benefits build more confidence in the payments experience.

As traditional financial services companies try to compete with digital disruptors, they will likely turn to modern card issuance programmes to meet the needs of modern customers.

You can find out more by visiting: https://www.thalesgroup.com/en/markets/digital-identity-and-security/banking-payment/digital-first

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