Consumers are increasingly bypassing the conventional wallets they carry in their pockets to use digital wallets on their phones. This presents a huge opportunity for brands to provision virtual payment cards directly into digital wallets. Whether a brand is seeking to generate incremental revenue, control costs, or improve customer experience, virtual cards represent the right solution at the right time. In this post, we break down the basics of virtual cards, examine advantages over conventional payment cards, and outfit you with important questions to consider when deciding which modern card issuing platform is right for you.
For a deeper dive, download the ebook, “Making the business case for virtual cards.”
Virtual cards ride digital wallet wave
Digital wallets such as Apple Pay®, Google Pay™, and Samsung Pay store and organize payment information – and in some cases other items such as membership cards, plane tickets, and driver’s license – on a device. Marqeta’s 2022 State of Consumer Money Movement report found 71% of U.S. consumers have used a digital wallet in the prior 12 months.
The rise of digital wallets is a result of their superior ease-of-use, convenience, and payment experience. Nearly nine out of 10 (88%) survey respondents globally said they found their digital wallet simpler to use than they imagined prior to adoption. Meanwhile, 85% of U.S. respondents rated mobile wallets highly for convenience when making purchases. And 78% of U.S. consumers surveyed said they could make mobile wallet purchases everywhere they wanted to, up from 62% in a Marqeta survey of US consumers in 2020.
Meeting growing demand with virtual cards
As described in the article, “Difference between virtual cards and tokenized cards,” there is little difference between a virtual card and physical plastic cards you carry in a conventional wallet. Both have a 16-digit primary account number (PAN). Both have an expiration date and a 3-digit security code known as a CVV2 (card verification value 2). One big difference between a physical card and a virtual card is the physical card can be inserted into a point-of-sale payment terminal, while a virtual card exists in a digital wallet on a device. It can be used for face-to-face contactless transactions as well as making online and in-app purchases.
Another factor that sets virtual cards apart is that they can be issued and used immediately. A common element of the use cases described below is that virtual cards can be issued instantly and pushed into smartphone wallets, which provides life-enhancing benefits. In fact, consumer respondents to the Deloitte 2021 Consumer Payments Survey, conducted in partnership with Marqeta, listed instant issuance among the top three functionalities that elevate their satisfaction with the payment experience.
Commercial use cases for virtual cards typically revolve around three categories: pay suppliers, pay customers, and pay workers. Suppliers recognize the benefits of virtual cards, especially faster receipt of payments. Usually, suppliers receive the virtual card via email, and use it to pay a specific invoice or set of invoices. Virtual cards can also be used to compensate customers for insurance claims or to provide cash incentives or loyalty payments, providing immediate access to their cash. Finally, virtual cards make it easy for companies to empower employees and contract workers to make approved purchases of goods and services.
Advantages of virtual cards
- Protection against fraud – Two thirds (67%) of respondents to Marqeta’s 2022 State of Consumer Money Movement report said they now prefer mobile payments as they have more security features built-in. That is certainly the case with virtual cards, which allow businesses to take preemptive measures to combat fraud through tight spend controls. Factors such as the exact amount, the time of day or day of the week, the merchant ID, or merchant categories where the card is accepted can all be defined in advance. Moreover, these controls can be verified in real time at transaction processing to prevent attempts to misuse the card.
- Customize the experience – Virtual cards provide an exceptional level of flexibility and control. With virtual cards, you can limit the card number for use at a single merchant, or specify a spending limit, or set a particular expiration date. Unique virtual cards can be issued to pay one or multiple suppliers, customers, or contractors, and single-use cards can be configured to terminate upon successful completion of the intended transaction.
- Adjust on the fly – Dynamic spend controls enable businesses to adjust the parameters for virtual card use in real time. This ability to dynamically change authorization controls (limiting when and where a card can be used, and velocity controls (limiting the number of transactions and transaction amount) makes it possible to create new experiences based on analysis of card program data.
Questions to consider
Creating custom payment experiences with virtual cards can streamline reconciliation, strengthen customer loyalty and make life easier for workers. The success of any virtual card program depends on self-service capabilities and flexibility of the platform you choose. Other key factors include the complexity of implementation, and partnerships and integrations with the card networks (e.g., Visa and Mastercard) and the issuing banks. The starting point is identifying the modern card issuing platform that is the best fit. Below are a few questions we encourage you to consider as you explore your options:
- What does the technology stack look like? Is it developer friendly?
- Are their offerings simple?
- How much flexibility and scalability can I expect?
- Will I gain access to open APIs that help our developers increase speed to market?
- How can I protect myself from fraud?
- How long have you been involved in modern card issuing?
With consumer adoption of digital wallets rising steadily, virtual cards represent the right solution at the right time. They have numerous advantages for both businesses and consumers. However, not all virtual card programs are the same. Some require external consultants and long implementation cycles for customization. Others are flexible and adaptable, featuring open APIs to help build and tailor card solutions quickly and cost-efficiently.
For a deeper dive, download the ebook, “Making the business case for virtual cards.”
