Benefits of virtual cards

 Prepaid and virtual cards have seen rapid adoption in recent years, especially among digitally savvy consumers seeking more control over their spending. For banks, fintechs, and financial institutions, virtual cards present a major opportunity to meet changing customer needs, drive engagement, and generate revenue through transaction fees.

In this article, we’ll explore the key benefits of virtual cards compared to traditional debit and credit cards.

More Control and Security for Cardholders

A major advantage of virtual prepaid cards is the increased control and security they provide for customers. With virtual cards, cardholders can create temporary or single-use card numbers for online purchases, subscriptions, travel bookings, and other transactions. These one-time or limited cards provide an extra layer of protection against fraud and unauthorized charges. 

Customers also get more control over their spending with virtual card features like transaction limits and merchant blocking. This helps reduce overspending and improves budget management. By issuing virtual card numbers for specific amounts or merchants, banks allow account holders to compartmentalize their purchases for easier tracking.

For top security, virtual prepaid cards are often paired with tokenization. This replaces sensitive card data with randomly generated tokens, so even if a virtual card number is compromised, the actual card details remain protected. Advanced verification like biometrics can further secure virtual card apps and digital wallets.

Frictionless Digital Experience

Today’s consumers expect seamless digital experiences when managing their finances. Virtual cards deliver this through instant card issuance and seamless integration with mobile wallets, browsers, and payment platforms. 

Once registered for a virtual prepaid card service, customers can instantly obtain card numbers without waiting for a plastic card to arrive by mail. New virtual card numbers can be generated on the fly as needed directly within a provider’s mobile app. 

And through digital wallets like Apple Pay and Google Pay, virtual card credentials can be added to mobile devices for contactless in-store payments. No more fumbling through a physical wallet to find the right card. Virtual cards reduce hassles and speed up checkout times.

Banks and fintechs can also embed virtual prepaid card issuance and management directly into their own mobile apps. This creates a more unified customer experience across products and services. Embedded virtual cards keep users engaged within an institution’s own digital ecosystem versus third-party wallets.

New Revenue Streams and Business Models 

For financial institutions, virtual cards unlock various revenue opportunities that plastic cards don’t offer. The most direct is interchange fees earned from virtual card transactions, similar to physical cards. By growing active virtual card users, banks can generate incremental transaction revenue without issuing more costly plastic cards.

Prepaid virtual cards also allow more flexibility around service plans and fees. Banks can charge for virtual card issuance, usage, loading funds, foreign transactions, inactivity, and more. Virtual cards can have lower barriers to entry with lower or no monthly fees, attracting users who might not qualify for a traditional credit card. Offering “freemium” plans with premium add-ons can further optimize monetization.

New business models are possible too, like white label and B2B virtual card programs. Banks can create co-branded virtual prepaid card solutions for corporate partners, small businesses, gig economy platforms, and more. These white-label programs provide incremental revenue through custom card fees, interchange earnings, and branding opportunities.

Operational Efficiencies  

For banks, virtual cards can significantly streamline operating costs versus physical card issuance and management. On the issuer side, virtual cards reduce plastic card production, mailing, and fraud monitoring expenses. Lifetime customer acquisition costs are lowered when new users can be instantly onboarded digitally.

Administrative burdens around card replacement and delivery are also minimized with virtual cards. Lost or stolen card numbers can be instantly disabled and replaced as needed. And there’s no reliance on postal systems or waiting for cards to arrive.

Virtual prepaid cards provide savings on the merchant side too. With lower interchange fees and less fraud risk, merchants benefit from reduced payment processing costs. Settlement times can be faster as well. Overall, virtual cards enhance operational efficiencies for all stakeholders.

Enhanced Data and Insights

The digital nature of virtual cards allows banks and fintechs to gain more granular data on customer behavior and spending patterns. Usage analytics can provide rich insights into merchant categories, transaction types, seasonal trends, and more. 

Unlikе plastic cards, virtual card numbеrs arе intrinsically connеctеd to individuals. This bеttеr links transactions to multi-product customеrs, еnhancing customеr intеlligеncе еfforts. Advanced analytics can identify nеw cross-sell and upsell opportunities to dееpеn account relationships.

Usеr prеfеrеncеs and spending profiles can also inform improved product еxpеriеncеs. Banks can lеvеragе data to introduce customizеd virtual card controls, uagе alеrts, loyalty programs, and othеr fеaturеs that dеlight customеrs. 

Conclusion

By еmbracing virtual card tеchnology, banks and fintеchs can rеducе costs, create new revenue streams, gain customеr insights, and deliver cutting-edge payment еxpеriеncеs. Thе potential business bеnеfits are as abundant as thе consumеr bеnеfits. 

With customеr еxpеctations rising, virtual cards arе sеt to accеlеratе as thе nеw normal in cards. Savvy institutions will stay ahеad of thе curvе and maximizе opportunitiеs.