Virtual card payments hide your business bank account or credit card number when you make digital payments, keeping your accounts safer. Compared to checks, they also speed up your monthly close, let you pay vendors faster, and help you keep tighter control over your cash flow.
If you think that sounds great, you’re not alone. Juniper Research expects virtual cards to grow by 360% globally over the next five years.
Welcome to the digital-first economy.
This post explains what virtual cards are, how they work, and how they can make your accounts payable (AP) workflows more efficient.
What are virtual cards payments?
A virtual credit card (also known as a virtual card) is a temporary digital card number that is used for online payments. If you’ve ever felt concerned about entering your credit card information into a website for fear that it might be stolen by hackers, a virtual credit card might be an attractive option.
Virtual credit cards are generally not standalone lines of credit—meaning, they’re usually generated in connection to an existing credit account. For example, Bank of America offers a version of virtual credit cards called ShopSafe. Through their system, rather than entering your physical card’s information into a website when making an online transaction, you’re redirected to your online account where a 16-digit virtual number and security code are instantly generated and used to authorize the transaction. Online retailers and services never even have access to the information itself, and the next time you use the feature, an entirely new number is generated in order to help avoid hacking or fraud.
Virtual credit cards have surged in popularity in recent years, thanks largely to the rise in online shopping alongside the rise in cyberattacks and identity theft. Here’s everything you should know about virtual cards and whether having one is right for you.
How does a virtual credit card work?
Virtual credit cards are usually accessed through a request to one’s bank or creditor. This request is usually made through an online account. Once someone has made their request, the bank or card issuer will generate a random card number, expiration date, and security code that’s connected to their existing account.
In some cases, this virtual card information is used for all online transactions. In other cases, a new, randomly generated set of numbers is used for every unique transaction—an approach that obviously offers even more security benefits.
Online retailers where a customer could use the virtual card online aren’t able to see the customer’s account information (or even the temporary card number), but the transaction will still show up on the customer’s personal bank statements as if it was used by their normal, physical card, helping avoid confusion about transactions and where they originated.
Physical cards vs. virtual cards
A physical credit card is the actual piece of plastic issued to employees to use for work-related spend. Some businesses may have just a handful of corporate cards which can be lent to employees for temporary business needs, or physical cards can be issued to each employee (which improves morale).
Physical cards are often necessary for in-person purchases and for travel in your organization.
Smart corporate cards sync physical purchases with software at the point of spend. Instead of swiping your card and then manually categorizing it in your accounting software, smart cards automatically sync with your expense management software to import each purchase, attach categories, and update budgets.
While having a physical card has its place, using a virtual payment card can make your life much easier and keep your data more secure. Virtual cards are safer, easier to control and cancel, and they’re more hygienic. How’s that for convenience?
Here’s a breakdown of the benefits of virtual cards over physical cards:
Virtual card:
- Unlimited credit card numbers
- Easy to cancel one vendor/service without affecting all other payments
- Set spending limits & deadlines
- Online or over-the-phone usage
- Cannot be lost or stolen
Physical card:
- One credit card number
- Canceling card affects all services & subscriptions
- Some cards offer spending limits
- Can be used in person, online, over phone
- Can be lost or stolen
Virtual card benefits
There are many, many benefits of using virtual cards as a payment method over traditional credit cards, traditional debit cards, or physical checks.
Security
As more and more online retailers are experiencing major data breaches resulting in thousands or even millions of lost and stolen financial profiles, shoppers are rightfully wary of entering their card information into websites online where it can be stored and eventually stolen.
A virtual credit card offers an alternative, letting them easily and conveniently make online transactions without having to enter their physical card information into a website they don’t fully trust.
Subscription management
Online subscriptions can be difficult to manage. It’s hard to monitor what you’re being charged for, and when renewals or upgrades may happen. Subscriptions can also be a big security risk if one of the businesses suffers a data breach. Virtual cards can help solve all of those problems.
You can manage all your online subscriptions using virtual cards. Just use a new virtual card for each of your subscriptions, keeping it to one card per vendor. That way you can track all your subscriptions in one place, you’re protected if the card information is compromised, and you can easily see if you’re being overcharged.
With the additional controls that many virtual cards offer, like spending limits, card freezes, deleting cards, setting up a recurring payment, etc., you are in control anytime something with the subscription needs to change. And, if a certain vendor is trying to sneak in extra charges, or make it difficult to cancel their service, you simply delete the card. No more painful cancellation processes—just one click and you’re free.
Monthly budgets
Do your team managers need to provide lunch for employees once a month? Is your office manager in charge of stocking the supply shelves? Does your advertising team consistently overspend on their Facebook ads? You can set monthly budgets in their virtual cards to give them a secure way to spend as they need – but not beyond your budget.
Single purchase
If you are only going to make a purchase one time, say for a promotional sample, you can better protect your company’s credit card and offer a layer of security by spinning up a virtual credit card that can complete the virtual payment without leaving you vulnerable to extra or future charges.
Budget analysis
Virtual credit cards and their linked budgets are an accountant’s best friend. It’s faster and easier to see exactly where spend occurred, who spent how much, and stop it as soon as possible when you notice overspending, overcharging, or fraud.
What are the downsides of virtual credit cards?
There are some potential complications with using virtual credit cards. One example is in the case of a returned item. Many retailers require refunds to be placed back on the same card used to make the purchase. If a customer made the purchase on a virtual credit card number generated at the moment of the purchase, that number no longer exists. The customer may have to opt for store credit for their return.
Another example is in cases where cards are used to make reservations or purchases, and then must be used later for identity or account verification. Think of booking a hotel: many require guests checking in to present the same card they used to book the room. With a virtual credit card, this would be impossible.
These are both relatively minor setbacks, but they are worth considering when using a virtual card for online transactions. There are definitely use cases where it makes more sense than others.
Where can you get a virtual credit card?
The best place to start for accessing a virtual credit card is your existing bank or financial institution. Citi, Bank of America, and Capital One all offer virtual card services, though in some cases they’re only available for certain cards. The best way to find out whether one can access a virtual credit card is by contacting one’s bank directly through their online account. Some even have a dedicated section of their account where they can request a virtual credit card to be set up automatically, without having to speak to a representative.
Each financial institution has a slightly different mechanism and branding for their virtual credit card services. Bank of America’s is called ShopSafe. Capital One has a service called Eno. Citi simply refers to their offerings as Virtual Account Numbers. But in essence, they’re all offering the same service: temporary, virtual card information used to securely make transactions online.
BILL Spend & Expense also offers virtual card number generation to mask your actual credit card information and to better control spend. With BILL virtual cards you can create a temporary card for one time use, or a subscription card for ongoing payments.
Are virtual credit cards safe?
The entire ethos behind virtual credit cards is that they’re safer than entering your physical, permanent card information into an online retailer’s checkout page where it could be exposed to hackers or fraudsters. In that way, virtual cards are significantly safer for online transactions than physical card information. That said, they’re not infallible. While one-use virtual cards are more secure, those that are generated for multiple uses could technically be accessed and used by hackers for other purchases.
Virtual credit cards vs. payment processing apps
So, what separates virtual credit cards from payment apps like Venmo or Apple Pay? They both serve a similar purpose. When you make a transaction through one of these apps, the retailer receives the transaction via a single use digital ‘token’ rather than receiving one’s credit card information.
However, many online retailers still don’t accept payment processing apps—they’re more commonly used at brick-and-mortar stores and physical retailers. That said, they’re starting to be accepted more frequently online, but until they’re more widely accepted, virtual credit cards may remain the most accessible and secure option for shopping online.
Virtual card creation with BILL Spend & Expense
Virtual card creation is available to all BILL Spend & Expense customers, and can instantly empower all employees to spend as needed to keep your business running smoothly. Each employee can create virtual cards, but budget owners set the parameters to keep spending within reason.
Like other virtual cards, our cards protect your data and provide the highest level of security for online purchases. We just make it more fun and easy in the process. Our virtual card creation takes just a click or two in our mobile app or online account and you’re on your way. Our virtual card creation offers customization in all fields – budget, expiration, approvals – that aren’t guaranteed with other virtual card creators.
