The growth of e-commerce growth and data breaches are reviving virtual cards.
Citibank, Bank of America, Capital One and American Express were among the pioneers offering virtual credit cards, with Capital One debuting its version at the annual South by Southwest event in 2018.
But they never really caught on with consumers, and high processing charges made retailers reluctant to accept them. Now e-commerce growth and a rise in data breaches—not to mention the global pandemic—are giving virtual cards a second life. These digital alternatives to credit cards are essentially codes used for spending, but digital capabilities make it possible to set strict limits on when, where and on what they are used.
Here’s how it works at Capital One: The bank provides a free Eno browser extension that generates a random 16-digit card number, which stands in for a credit card. This temporary cloud card is stored in a mobile wallet and can be used to pay online, to make contactless payments on-site at a retailer or to transfer money.
The customer can set limits on how much can be spent or on the shops where it can be used. The customer can set an expiration date or limit the number of transactions allowed. Some can be only used once. Hackers and crooks seeking usable card information are wasting their time. The temporary numbers are quickly obsolete; and even if the card still carries a few uses, it can pay only designated merchants.
Business executives say they appreciate the enhanced payables process and optimized spending control.
According to Juniper Research, the value of transactions processed by digital cards globally reached $1.6 trillion in 2020–and it will be over $5 trillion by 2025. Business to business payments will seize the bulk of transactions, since they will represent more than 70% of the total value.