As technology continues to advance, our world is becoming more digital by the day. With the rise of e-commerce and online shopping, businesses are looking for innovative ways to power online payments for their customers and keep up with the changing times. One such innovation is the advent of virtual cards. Virtual cards are digital credit or debit cards that can be used for online purchases or other digital transactions.
In recent years, virtual cards have gained popularity due to their ease of use and added security benefits. For example, in 2020, it was reported that payments startup Marqeta raised $150 million in funding to expand its virtual card offerings. Marqeta's virtual card technology is used by companies like Uber and DoorDash to manage their finances and make online payments.
With the increasing popularity of virtual cards, it is important to consider the potential risks and benefits associated with their use. While they offer many benefits, virtual cards may also have limitations when it comes to making certain types of purchases or transactions.
In this article, we will explore the benefits and limitations of virtual cards, as well as their use cases across various industries. By the end of this article, you will have a better understanding of how virtual cards work and whether they may be a good fit for your personal or business needs.
What Are Virtual Cards?
Virtual cards are digital payment cards that can be used for online transactions like online purchases, subscriptions, or any other transaction without needing a physical card. They are similar to traditional credit or debit cards, but they don't have a physical form.
They are a convenient and secure alternative to the traditional payment method of physical cards and are represented by a set of numbers and other information that can be entered online to make purchases.
They can be generated and used instantly, making them a convenient option for online transactions. Some virtual card providers also offer features such as transaction limits, time-based restrictions, and the ability to easily cancel or replace cards if they are lost or stolen.
How to get a virtual card in Nigeria
In Nigeria, virtual cards are typically issued by digital banks, FinTech companies, or embedded finance companies like Bloc and are usually offered in different major currencies like Dollars, Naira, Pounds, etc.
Most times they are issued for free, or with a small issuing fee attached, while some expect you to have your account funded with a minimum balance before issuing. To get a virtual card, you’ll need to sign up with a company that issues cards and then request via their app or dashboard.
Benefits of Virtual Cards
The benefits of virtual cards are numerous and cut across various industries. Here are some benefits of using a virtual card:
- Increased security: Since they are digital, some virtual card providers issue one-time cards that can be generated and used for one-time purchases, making it more difficult for thieves to steal credit card information. This means that if a virtual card is compromised, the risk of unauthorized transactions or fraudulent activity is limited. Additionally, virtual cards can be easily monitored and tracked, allowing individuals and businesses to keep a close eye on their spending and detect any fraudulent activity quickly.
- Convenience: Virtual cards can be used for online payments, just like traditional cards, making them a convenient option for those who need to make purchases quickly. Since they can be used for online purchases, virtual cards eliminate the need to physically go to a store to make a purchase, saving time and effort. This also means that there is no need to worry about the security of a physical card, such as it being stolen or lost.
- Opening new revenue lines for businesses: Issuing virtual cards can allow businesses to earn transaction fees for each purchase made with the card. This can increase transaction volume and provide an additional revenue stream for the business.
- Budgeting: Virtual cards can help in budgeting, with a set amount loaded onto the card for specific expenses such as groceries or entertainment. This helps to limit spending and stay within budget. For example, if you're trying to stick to a budget for groceries each month, you can load a virtual card with the amount you want to spend and use it exclusively for grocery purchases.
- Better control: Virtual cards can be restricted to specific merchants or categories of merchants, giving users better control over where their cards can be used. This can help users avoid unauthorized transactions or prevent their cards from being used at merchants they do not trust or frequent.
- Temporary online payments: Virtual cards are useful as a temporary payment method, such as for a one-time online purchase or while travelling. Once the transaction is complete, the virtual card can be deactivated. This provides an additional layer of security and prevents unauthorized charges from occurring. For example, if you're hesitant to use your actual payment card for a one-time purchase from a new online retailer, a virtual card can provide the security you need.
Example Use-cases of Virtual Cards
Virtual cards have a wide range of use cases across various industries, including travel, e-commerce, and finance. For example, in the travel industry, virtual cards can be used to book flights or hotels, while in e-commerce, they can be used to make online purchases. In finance, virtual cards can be used for online payments or to manage employee expenses.
Some of the things virtual cards can be used for include:
- International transactions: Virtual cards can be used for international transactions, making them ideal for customers who frequently travel abroad or make purchases from overseas merchants. For example, virtual cards can be used for travel expenses such as booking flights, hotels, or rental cars.
A virtual card can be created for each expense, with a limit on the amount available on the card or a restriction to a specific merchant. This way, it helps keep your primary day-to-day debit card safe, so that your actual payment card information is not exposed. To learn more, read “temporary/one-time virtual cards. - Online shopping: Virtual cards are an excellent way to protect your financial information when making online purchases. With a virtual card, you can create a unique card number and limit the number of funds available on the card to the purchase amount. This way, if the card number is stolen or compromised, the damage is limited to the amount on the card. For example, if you frequently shop online for clothes or electronics, a virtual card can help keep your finances safe from thieves and fraudsters.
- Freelancers: Freelancers can use virtual cards like Visa direct to receive payments from clients, providing a secure and convenient payment method that avoids the need to share bank account details.
- Digital Wallets: Virtual cards can be added to digital wallets such as Apple Pay or Google Wallet, allowing for easy mobile payments. This makes it easy to make payments on the go without carrying a physical card.
- Employee expenses: Virtual cards can be issued to employees for business expenses, such as office supplies or travel expenses. Each employee can be given a unique virtual card for their expenses, which can be limited to a specific amount or merchant.This helps to simplify expense management for businesses and reduces the risk of fraud or misuse. For example, if you own a small business and have several employees who regularly incur expenses, virtual cards can help you keep track of those expenses and limit the amount available for each employee.
- Freelancers: Freelancers can use virtual cards like Visa direct to receive payments from clients, providing a secure and convenient payment method that avoids the need to share bank account details.
- Subscription services: Many subscription services, such as Netflix or Spotify, require a payment card on file to continue the service. A virtual card can be used to create a unique card number for each subscription, preventing your actual card number from being shared across multiple platforms. This is especially useful if you have multiple subscriptions or regularly sign up for free trials that require a payment card on file.
Limitations of Virtual Cards
Virtual cards offer many benefits, but there are also some limitations to consider. For example, some virtual cards may not be accepted by certain merchants or may have limitations when it comes to making certain types of purchases or transactions. This can be a problem for customers who want to use their virtual cards for certain purchases.
Also, technical issues can occur when using virtual cards, such as connectivity problems or system malfunctions. These issues can prevent customers from accessing their virtual cards and making purchases.
Some virtual cards may not have all of the features that physical cards offer, such as cash withdrawals or balance transfers and some virtual cards may come with fees, such as monthly maintenance fees or transaction fees, which can be a disadvantage for customers.
Conclusion
Virtual cards offer a wide range of benefits for both individuals and businesses, they provide a convenient and secure payment method for online transactions. By using virtual cards, individuals and businesses can enjoy the benefits of increased security and convenience while gaining greater control over their finances.
Whether you are looking to manage your finances more efficiently or make online purchases with added security, virtual cards are definitely worth considering.
Looking for a trusted and secure USD and NGN virtual card provider in Nigeria? Request access to Bloc Cards here.