Virtual credit cards and virtual debit cards offer customers increased security and control over their finances. As a result, many financial institutions, app developers, startups, and even companies not in the financial services space are interested in offering — or already do offer — virtual cards.
However, creating a virtual card issuance app requires extensive development time, fees, contracts, and administration. These factors can prevent an app from gaining traction in the competitive landscape. Fortunately, Hydrogen offers a card-issuing program that can provide your business with the virtual cards you need. With Hydrogen, you’ll use our innovative platform so you can enjoy all the benefits of virtual cards without any of the hassles.
What Is a Virtual Card?
A virtual card is a temporary credit or debit card number that can be created through a web or mobile app and tied to a user’s mobile wallet. Virtual cards are becoming increasingly popular for one-time purchases and disbursements, but they can also be used in your everyday life.
Virtual cards are linked to a user’s main credit or debit card account. However, virtual cards minimize the amount of personally identifiable information (PII) the user shares with the place where a purchase is made. Virtual cards are tokenized on a user’s phone, encrypting the account numbers and allowing the user to never worry about losing a physical card.
What Is the Difference Between a Virtual Card and a Regular Card?
With a regular physical card, you make a purchase by swiping in person or using the number online or over the phone. A virtual card, on the other hand, is a series of numbers that can be used over the phone or online, as there is no physical credit card to insert or swipe into a machine.
A virtual card number can be thought of as a substitute for a regular card number. Virtual card numbers are linked to your account, but you can use a different number when filling out payment information. As a result, your regular card number is not given to the retailers where you shop, which adds another layer of security.
A credit card company may provide you with unique virtual card numbers for each website you shop at, and these numbers cannot be used elsewhere. This means if a merchant site gets compromised, your virtual card number can’t be used to make a purchase anywhere else. Your virtual card number also cannot be used by someone else to access your account data on the website or app of your card issuer.
How to Use a Virtual Card
How does a virtual card work? A virtual card can be used just like a regular credit card. You shop online, begin the checkout process, and use your virtual card number to buy an item. Typically, a virtual card number works with any merchant online that accepts payment via credit card. If you can make the purchase online with your regular credit card, you can likely purchase whichever item you’re buying online with your virtual credit card number.
You can create a virtual card with a few simple clicks anytime you need one. You will need to ask your credit card issuer about the availability of virtual cards, as not every credit card company offers creation of these cards. While some credit cards allow for creation of a virtual card via a digital app, others use a browser extension.
With a virtual card, you may be able to create a temporary card you can use once or a subscription card you can use for recurring purchases. You can select the virtual card’s expiration date and spend limits, which gives you control over how long your card will last and how much you can charge on it. Setting the expiry date provides you with a little more flexibility than you’d have with a regular card. You can also review your spending and change the virtual card’s parameters whenever you want.
How Do I Get a Virtual Card?
The process of obtaining a virtual card may differ a little depending on the card issuer. Fortunately, it is typically pretty simple. To get a virtual card, follow the steps below:
- Obtain a credit card: Since a virtual card is attached to an existing card account, you need to have a regular card before you can get a virtual card. Most major issuers of credit cards offer virtual cards, including Visa, Mastercard, and American Express.
- Log into your account and visit your account settings: In your account settings, you may be able to find a virtual card number option. For some issuers, you may have to search “virtual credit card,” and then this benefit should pop up.
- Download the app if needed for accessing your virtual card: Some credit card issuers have an app for virtual cards that is completely separate from their app for online banking. Other issuers, on the other hand, will allow you to access your virtual card through the existing banking app or from the issuer’s website.
- Accept the virtual card number: Some issuers will provide you with different numbers for different merchants. Others will provide you with a new number each time you request one, regardless of whether it is for the same merchant.
- Select the expiration for your virtual card: You can choose to have your virtual card expire after you first use it, or you can hold onto the virtual card for months and use it to pay for recurring expenses. If your card issuer uses different numbers for different merchants, then the expiration date for your virtual card may be generated for you.
- Get the generated security code: After you get your generated security code, you can use your virtual card the same way you use the information on a physical card when you make purchases online.
Most issuers of major credit cards have options for virtual credit cards that you can easily and quickly add to your existing account. Popular options for virtual credit cards include:
- Citibank: Virtual cards are available to all of Citibank’s cardholders.
- Capital One: Virtual cards are available to all of Capital One’s cardholders.
- AmericanExpress: Virtual cards are available to all of Amex’s cardholders.
- Chase Pay: Virtual cards are available to all of Chase’s cardholders.
- Masterpass from Mastercard: Virtual cards are available to all cardholders of Mastercard, Discover, American Express, Diner’s Club, and Visa, including debit, credit, and prepaid cards.
These, among several other larger financial institutions, offer virtual cards for business. Other companies that offer virtual cards are Privacy.com, Divvy, Abine, and Walmart MoneyCard. However, probably the most popular virtual card right now is the Apple Card. While you can get a physical titanium card with a chip, the Apple Card is a digital-first experience that provides a more secure way to make purchases. It is connected to the Apple Wallet.
If your bank does not offer a virtual credit card option, you can choose a provider that can work with your existing account.
Pros of Virtual Cards
Is your business interested in virtual card offerings? Virtual cards can provide your business with several benefits, including:
1. Virtual Cards Provide Privacy and Protection Against Fraud
One major benefit of a virtual card program is that it provides privacy and protection against fraud. Data breaches happen frequently, so using a virtual prepaid card can protect a consumer from being the victim of fraud or an attack. Since the virtual card limits the amount of PII and can’t be connected back to the main credit or debit card, the virtual card is useless to a hacker or someone trying to use that card number.
With physical cards, the magnetic strip or chip can be mimicked by sophisticated thieves. The card numbers can be written down by less sophisticated thieves who you hand your card to, such as the waitstaff of a restaurant. A virtual card, in contrast, is used at the point of sale, requiring a face scan or pin to unlock the phone. Then, it needs a face scan or pin to make the payment.
If a thief steals or mimics a physical credit card, they can swipe the card and don’t need to provide any extra security that proves they own the card. Conversely, the virtual card is never handed to anyone, and there are no magnetic strips or chips that can be cloned by a thief.
2. Virtual Cards Allow for Easy Payment to Vendors and Suppliers
Virtual cards can also be used to pay vendors and suppliers. Instead of writing checks, businesses can use virtual cards to make payments, reducing the chance of fraud and human errors. At the same time, virtual cards can help your business become more efficient. This method of paying vendors and suppliers is becoming more popular with the explosion of the “gig economy.”
Rather than needing to reenter your regular card number every time you check out, virtual cards allow you to auto-fill your payment information, saving you time.
3. Virtual Cards Offer More Control
Another benefit is the ability to close the virtual card at any time without it impacting your main card. You can also set spending limits and even limit the virtual card to only be used at a specific merchant. Set budget constraints on each of your virtual cards to prevent overspending. All of this can be done through popular wallets native to the iPhone and Android devices.
Virtual cards also have forced expiration, which means you won’t be unexpectedly charged for an extra month. With merchant locking, your virtual cards can also be locked to work exclusively with one merchant or account. This means you will have more control over how your business virtual cards are used.
4. Virtual Cards Are Safe
Because a virtual card creates a temporary 16-digit code to substitute your actual card information, a virtual card is safe and protects your data. Online merchants can often experience data breaches, and because most of these merchants also store their customers’ data, your financial information can be vulnerable if you make purchases online with a regular card.
Physical cards can also be vulnerable to theft or loss, and your information can also be stolen if an in-store card reader is compromised. Virtual cards are safer than physical ones, as they are easier to cancel and control and reduce the chances of PII theft. They are also more hygienic than physical cards, meaning you won’t have to pass them between multiple people when completing purchases.
Safety should be a primary concern for a business, as multiple parties may be using the same account for a wide range of purchases across the company.
Cons of Virtual Cards
While virtual cards have several benefits, there are some limitations. If you are interested in virtual cards for your business, you may want to first consider some of their disadvantages:
- The requirement of frequent monitoring: One con of a virtual card is the need to frequently monitor its expiration date and available funds so you can prevent incomplete payments.
- Complications with returns and tracking: After you complete a transaction, your purchase will likely be traced by the credit card number you used. This can result in complications if you need to return the item and the return requires the swipe of a physical card. Similarly, a virtual card may not be ideal if you plan on picking up online purchases in person.
- Need for some tech-savviness: Using virtual cards requires you and your employees to be familiar with modern technology. If your organization isn’t familiar with modern technology in the financial industry, this may create some challenges for your business. However, you can still take the initiative to learn how these technologies work so you can use them to your advantage.
Why Use Hydrogen to Build Your Virtual Card Issuing App?
Is your business looking to issue virtual cards? To help organizations create virtual credit and debit card issuance, Hydrogen offers an application programming interface (API) or no-code offering for issuing virtual cards. Our API platform makes getting started with development simple and provides the storage space, user interface (UI), analytics, and business logic you need to make your virtual card issuing component a success.
Our offerings allow you to do more than issue virtual credit cards — along with debit and prepaid cards. When building your app, you can use Hydrogen’s powerful platform to incorporate useful functionalities like intelligent spending and overdraft alerts, anti-fraud alerts, credit and lending decisions, deposits and withdrawals, and much more.
Hydrogen also integrates with banks, issuers, program managers, and Banking-as-a-Service (BaaS) through popular vendors such as Marqeta, Cross River, Q2 CorePro, EML Payments, Apple Wallet, and Google Wallet. All these integrations work together to improve the user experience and make your product more competitive in the market.
With Hydrogen’s virtual card issuing API and configurable no-code solutions, you can start building your card issuance app quickly, regardless of whether you have years of experience in the industry or are just starting out. Sign up for Hydrogen access to start building today!