It is safe to say that digitalization has infiltrated nearly every aspect of our lives. The days of swiping cards have given way to tapping them and walking around with your bulky wallet is no longer a necessity thanks to cashless transactions and e-wallets. Virtual cards are a cutting-edge innovation in the online payment space and small business owners should get familiar with the convenience, security, and superior user experience that virtual cards offer. 

So What Exactly Are Virtual Cards?

Virtual cards, also known as digital cards or e-cards, are essentially online representations of physical payment cards (like your standard credit card), designed for use in e-commerce and other digital transactions. They are issued by banks or other financial institutions and are linked to an active bank account that serves as the funding source. Like their tangible counterparts, virtual cards contain critical payment information such as the cardholder's name, card number, expiration date, and CVV code. However, unlike physical cards, virtual cards exist in digital form only and the card number, expiration date and security code are all unique. This means that every virtual card you use is different and can only be accessed via dedicated mobile apps or virtual wallet platforms. 

Why Virtual Cards Make Sense

There are plenty of reasons why the use of virtual cards by small businesses continues to grow exponentially. 

Less Prone To Fraud

One of the primary advantages of virtual cards is their advanced security features. Traditional credit or debit cards are prone to theft, fraud and unauthorized charges as physical cards can be easily misplaced, lost or stolen. Virtual cards, on the other hand, mitigate these risks by removing the physical card altogether. The absence of a tangible card greatly reduces the chances of unauthorized access to sensitive card information.

Seamless Online Shopping Experience

By storing all payment information digitally, virtual cards eliminate the need to repeatedly enter card details for every online purchase, thereby streamlining the checkout process. With just a few simple clicks, users can quickly authenticate transactions which makes online shopping faster and more convenient. In addition, you no longer need to rely on a merchant for safely storing your credit card details online for future transactions which, in turn, makes the whole experience significantly less worrisome.

Greater Expense Control

One item that sets virtual cards apart is the precise spending controls that they offer business owners. Users can create multiple virtual cards, each with a designated spending limit, and use them for specific purposes such as online subscriptions, utility bills or online shopping. This feature makes it easier to stay within budget and cap spending on certain categories of expenses as business owners can establish spending limits on each virtual card so they don't overspend. Just consider how useful this can be when you purchase recurring SAAS (software-as-a-service) subscriptions. Now, you can take back control of auto-renewal payments by limiting the amount that the card can be charged by the vendor. This means that you no longer have to be surprised by annual subscription auto-renewals for software that you never intended to continue using. 

Increased Purchasing Flexibility

Entrusting purchasing responsibilities in a small business is almost always limited to a select few individuals because the risk associated with having multiple credit card holders has always been too high. Now, however, spending authority can be extended to more employees because you can establish strict spending protocols so only the amount needed can actually be charged to the virtual card. If an employee no longer needs purchasing authority or they leave the company, it’s as simple as deleting the virtual card or changing its authorized spending limit to $0. 

What Makes Virtual Cards So Secure

Unlike payments using traditional credit cards, virtual cards eliminate all of the inherent vulnerabilities of physical cards, such as skimming, card cloning, or interception of card details during online transactions. What sets virtual cards apart from their traditional counterparts are the unique set of security features this type of payment offers. 

Limited Exposure of Sensitive Data

When making an online purchase with a virtual card, the user's actual card details are never exchanged with the merchant. Instead, a unique card number and CVV code are generated for the specific transaction. Therefore, even if the virtual card details are compromised, the attacker would not be able to use them to make any additional purchases.

Single Use Nature and Expiration Settings

Virtual cards typically have an expiration date tied to a single transaction or a specific time period. This attribute further strengthens security because even if the virtual card details are intercepted or stolen, they become useless after the transaction is complete or after the expiration date has passed.

Transaction-Specific Security Measures

Virtual cards may also come equipped with additional security features, such as dynamic CVV codes that change periodically. This frequently changing CVV adds an extra layer of security making it more difficult for fraudsters to exploit the card details.

Suspicious Transaction Alerts

Many banks and financial companies that issue virtual cards offer real-time transaction alerts via mobile apps or email. This enables users to quickly detect any unauthorized activity or suspicious transactions and allows for prompt action to be taken such as freezing the virtual card or reporting the incident to the card issuer.

Are Virtual Cards Too Good To Be True?

The list of benefits is long, but it’s important to mention just one item that might prove to be challenging with a virtual card. Refunds can sometimes be tricky due to the single-use nature of virtual cards used to make online purchases. If a merchant requires refunded items to be credited to the same card that was used for the original purchase, it might result in a merchant store credit being issued instead. The best way to steer clear of this predicament is to refrain from using a virtual card if you think there a chance that you may seek a refund for the purchase at a later date. Despite this less-than-ideal scenario, the benefits of virtual cards from a security standpoint far outweigh any potential inconveniences.     

Virtual cards have quickly emerged as a secure and user-friendly alternative to traditional payment methods for online purchases. By leveraging emerging technology to eliminate physical cards, virtual cards provide greater protection against fraud, offer complete spending controls and a safe and convenient online shopping experience. As the world continues to shift towards a digital-first approach, virtual cards are uniquely positioned to reshape the online payment landscape for years to come.

 
If you’d like to explore firsthand the benefits of virtual cards as part of a streamlined spending platform that integrates with QuickBooks Online, consider getting to know my partner, Ramp, and seeing how it can benefit your small business today. You can find more information here.