What are Virtual Cards and How do They Work?

image of virtual cards

Feb 25, 2023

What is a virtual card? Virtual cards are randomly generated digitized 16-digit numbers used in place of a physical credit card. Thanks to tokenization and spend controls, virtual credit cards are one of the most secure payment options for business buyers. A study by Juniper Research forecasts that the number of virtual card transactions will exceed 121 billion globally by 2027; increasing from 28 billion in 2022. This represents a growth of 340%.

In this blog, we answer the question, “What is a virtual card and how does it work?” and we highlight the benefits of virtual card use.

How do virtual cards work?

A virtual credit card is a digital alternative to a physical credit or debit card. It is typically used for online transactions and provides an added layer of security. Online virtual cards are often issued by banks, financial institutions, or payment service providers. Here are the components of a virtual credit card:

  • Provider: Some financial institutions or online payment platforms offer virtual cards. For instance, major credit card companies like Visa, MasterCard, or digital payment platforms like PayPal may provide virtual card payments.
  • Generation: Let’s say you have an account with a bank that offers virtual cards. The bank’s website or mobile app, you set up the virtual credit card generator with your existing account.
  • Details: The virtual card comes with a card number, expiration date, and security code, similar to a physical card. However, since it’s virtual, you won’t receive a physical plastic card.
  • Usage: You can use the virtual card details to make online purchases. When you make a transaction, you enter the virtual card information just like you would with a physical card.
  • Security: One of the advantages of virtual cards is enhanced security. Some virtual cards are designed for single-use or limited-use, meaning that they can only be used for a specific transaction or within a certain timeframe. This helps prevent unauthorized or fraudulent use.
  • Flexibility: Virtual cards are convenient for online shopping, subscriptions, or any situation where you want to use a card without exposing your primary card details.

Virtual credit cards are becoming increasingly popular in the United States, with many companies offering them to make it easier for customers to make purchases online.

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What Are The Benefits of a Virtual Credit Card?

Virtual cards offer several benefits to businesses, making them a popular choice for various financial transactions. Here are some reasons why businesses find virtual cards beneficial:

  • Enhanced Security: Virtual cards can be generated for one-time use or for specific transactions, reducing the risk of unauthorized or fraudulent transactions. They are not susceptible to physical theft or loss since there’s no physical card to misplace.
  • Expense Management: Virtual cards can be easily assigned to specific employees or departments, making it easier to track expenses and manage budgets.
  • Cost Savings: Virtual cards can be more cost-effective for handling recurring expenses or supplier payments.
  • Automation and Integration: Virtual card systems can integrate with accounting software and other financial management tools, such as eTreem, streamlining the reconciliation process.
  • Quick Deployment: Virtual cards can be generated instantly, providing a quick solution for businesses that need to make secure online payments without waiting for physical cards to be issued.
  • Customization and Control: Businesses can set spending limits, transaction frequency, and expiration dates on virtual cards, giving them greater control over expenses. Think of it as a virtual prepaid card.
  • Reduced Fraud Risk: Since virtual cards can be restricted to specific merchants, amounts, or timeframes, they offer a higher level of protection against fraudulent activities.
  • Global Transactions: Virtual cards are often accepted for international transactions, providing a convenient and secure way for businesses to make payments across borders.
  • Adaptability to Remote Work: With an increasing trend in remote work, virtual card payment is a practical solution for employees who need to make secure online purchases while working from different locations.
  • Compliance and Reporting: Virtual card systems often come with reporting features that help businesses comply with financial regulations and generate detailed financial reports.

Virtual cards offer businesses greater flexibility, control, and security in managing their financial transactions, especially in the digital and online realms.

Your Virtual Business Card

Still, wondering what are virtual cards or have more questions about how they can help your business? Reach out to an eTreem expert today for assistance! Our platform is compatible with virtual credit cards.