Virtual Credit Cards or Physical Cards: benefits and differences

Credit and debit cards are two of the most popular payment methods nowadays, especially in Europe and the UK. Although alternative payments are becoming more popular, credit cards still remain amongst the most used payment methods, with a penetration rate of almost 62% in 2023 in the UK.¹ Worldwide in the second quarter of 2023, Visa credit cards have been used in over 23 billion transactions²; while roughly 18 billion transactions have been made with Mastercard’s credit cards in the same period of time.³ Moreover, according to the Bank of England in August 2023 the volume of credit card lending in the United Kingdom (UK) grew roughly 12% compared to the same time period the year before.⁴

Now, even though when we think of credit and debit cards our mind automatically goes to physical ones, virtual cards are on the rise. However, how do they work and are they safer than their physical counterparts?

Virtual vs digital cards

Firstly, there is a difference between virtual and digital cards. Digital cards are virtual versions of physical cards that are stored in e-wallets and can be used for contactless payments. The card’s sensitive information – card number, expiration date, CVC number – are the same for both the physical and digital copy of the card. They are useful since they allow more freedom to pay in store without the need for the physical copy but simply with the user’s device.

On the other hand, virtual cards do not have a physical copy. They are temporary credit cards that are virtually issued by banks or providers and come with their own 16-digit number and validation data. What is peculiar is that they are usually active for a specific and pre-determined amount of time and a spending limit can be easily set from the beginning. The expiration date – which can vary from provider to provider – and the limited budget make these cards extremely useful when the access to a bank account or card needs to be restricted due to specific circumstances.

The main use cases are:

• Business
  They are the perfect tool for company expenses, since they reduce the risk that come from passing around sensitive card information for payments. Moreover, by having the option to set a spending limit, there is control over finances.
• Personal
  Virtual cards are useful for subscription payments, since you can easily set them up with a specific spending limit with your preferred recurrence (for example monthly or quarterly). This allows you to keep your sensitive card information private and still sign up to products or services. Another situation in which virtual cards are extremely useful is when card data needs to be shared with someone else, which is never completely secure. By sharing your virtual card with a limited budget, your account and original credit card is safe and protected in case of fraud.

Benefits of virtual cards

Virtual cards have benefits both for Ecommerce and for end customers. Let’s look at the main ones:

• No need for physical cards
  Wallets can simply be forgotten at home and virtual cards used for payments through the user’s phone. In fact, cards can be safely stored in private e-wallets without need for the physical counterpart.
• Safety
  It is easy for people to have complete access and control over their own virtual card and it can be locked and blocked from their phone in any moment, if needed. Moreover, by not sharing sensitive account information or original sensitive credit and debit card data, finances are protected.
• Easy to activate
  It is simple and quick to activate a new virtual card on the user’s provider and phone, without the need to wait to receive the physical card at home.
• Low fees and costs
  Most virtual card issuers do not charge any additional fees for the service and allow to take advantage of a new asset without the need for a new account.
• Easily manage finances digitally
  By activating new virtual cards for different subscriptions and needs, it’s possible to easily have control over finances.

In conclusion, virtual cards are now becoming increasingly popular and are a great solution for secure payments. As seen above they become especially useful in corporate environments where company cards are usually needed by a number of people and for personal use as a safe tool to keep sensitive card data private and to prevent fraud. In fact, although over the decades the solutions to protect buyers and sellers from fraud have multiplied and evolved, today Ecommerce is still not free from risks. You can find out more about alternative payment solutions for Ecommerce and how to keep your Ecommerce safe in our whitepaper on the topic.