Virtual credit cards for businesses explained


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  1. Introduction
  2. What is a virtual card?
  3. What are virtual cards used for?
  4. Are virtual cards safe?
  5. Benefits and drawbacks of virtual cards
    1. Benefits of virtual cards
    2. Drawbacks of virtual cards
  6. How to get a virtual card for your business

Virtual cards have grown steadily in popularity in recent years. The worldwide market for virtual cards is expected to increase from nearly US$12 billion in 2021 to US$65 billion by 2030. Virtual cards offer a solution to the evolving needs of businesses, particularly those concerned with remote work, online purchasing and digital security.

Traditional plastic cards, while functional, often have limitations that don't align with the dynamic nature of contemporary businesses. As a payment method, virtual cards offer flexibility and high levels of security, but they also have features that can redefine expense management and vendor payments. Here's what businesses need to know about virtual cards.

What's in this article?

  • What is a virtual card?
  • What are virtual cards used for?
  • Are virtual cards safe?
  • Benefits and drawbacks of virtual cards
  • How to get a virtual card for your business

What is a virtual card?

A virtual card is a digital version of a plastic card, such as a credit or debit card. It has card details that are used primarily for online transactions. Here's an overview of virtual card features and characteristics:

  • Card details: like a traditional card, a virtual card has a card number, expiry date and security code, and usually a card verification value (CVV) or card verification code (CVC). These details are generated electronically.

  • Usage: virtual cards are typically used for online purchases or transactions where the physical card doesn't need to be present.

  • Security: one of the primary advantages of virtual cards is enhanced payment security. Some virtual cards are designed for single use, meaning that once they've been used for a transaction, they become invalid. This reduces the risk of unauthorised or fraudulent use. Other virtual cards might have set limits or can be locked to a specific business.

  • Issuance: virtual cards can be issued instantly, making them faster to obtain compared with waiting for a physical card to be sent by post.

  • Linkage: depending on the issuer, a virtual card might be linked to a traditional bank account or credit line, or it may be pre-loaded with funds.

  • Flexibility: virtual cards can be set with spending controls, such as limits on the transaction amount, total spend, date ranges or merchant categories.

  • Expense management: businesses often use virtual cards for expense management. They can issue a virtual card to an employee for a specific purchase, which provides an added layer of control and oversight over spending.

  • Sustainability: because there's no plastic involved, virtual cards are considered to be more environmentally friendly than traditional cards.

What are virtual cards used for?

Virtual cards have gained significant traction in recent years, largely because of their adaptability and security features. Here's how businesses commonly use them:

  • Online purchases: being digital-first, virtual cards are a preferred payment method for e-commerce transactions. They offer a way to transact without revealing primary card or bank details, reducing exposure to potential fraud.

  • Subscription management: businesses often opt for virtual cards when signing up for software or online services. If a service is no longer required, the virtual card can be deactivated, preventing further charges.

  • Travel expenses: some businesses issue virtual cards to employees for specific travel expenses. This offers precise control over spending and easier expense reconciliation.

  • Vendor payments: businesses can generate virtual cards with set limits for vendors, making it easier to manage and track payments.

  • Single-use scenarios: for transactions in which added security is desired, businesses can generate single-use virtual cards. Once the transaction has been completed, the card details become obsolete, meaning that any data breach would have less of an impact.

  • Employee expenditure: instead of issuing physical corporate cards, some businesses prefer giving employees virtual cards with predefined limits for business-related purchases.

  • Ad campaigns: when running online advertising campaigns, businesses might use virtual cards to allocate budgets effectively. If a campaign's budget is exhausted, the card prevents overspending.

  • Metered billing: for services that bill based on usage, such as cloud hosting, virtual cards can help businesses manage unpredictable expenses by setting a limit on possible charges.

Are virtual cards safe?

Virtual cards offer several safety features that address common vulnerabilities associated with traditional card transactions. Here's a detailed look at the safety aspects:

  • Limited exposure: because businesses often create virtual cards for specific purposes, the primary card or bank details aren't exposed during transactions. This minimises the risk of data theft.

  • Single-use cards: many virtual cards are generated for one-off use. After the intended transaction, the card details become invalid, rendering them useless to potential fraudulent actors.

  • Spending controls: users can set specific limits on virtual cards, in terms of the total amount, validity period or merchant category. This offers an added layer of control and reduces the potential damage from unauthorised transactions.

  • Business-specific cards: some virtual cards can be locked to a particular business. Even if the card details are compromised, they won't work elsewhere.

  • Immediate issuance and termination: virtual cards can be generated instantly and terminated at a moment's notice. If there's any suspicion of a breach or misuse, the card can be deactivated promptly.

  • Real-time alerts: many platforms offering virtual cards provide real-time notifications for every transaction, making it easier to spot and report unauthorised activities.

  • No physical risk: without a tangible card, there's no risk of losing it or having it stolen conventionally.

Although robust safety mechanisms exist for virtual cards, no payment method is immune to risks. Best practices, such as using trusted networks, keeping software updated and monitoring transaction history on a regular basis, can increase the safety of virtual cards.

Benefits and drawbacks of virtual cards

Virtual cards offer a solution to a variety of financial challenges that businesses commonly face, but there are still downsides to using this payment method. Before deciding whether virtual cards are a good option for your business, weigh up their benefits and drawbacks:

Benefits of virtual cards

  • Risk mitigation: virtual cards, especially single-use types, reduce the chances of fraud significantly. Once used, these card details become redundant, leaving no opportunity for unauthorised transactions. For businesses, this reduces the need for damage control related to financial breaches.

  • Budget control: businesses can issue virtual cards with predefined limits. For instance, if a department is allocated a specific budget for software purchases, it can set a virtual card with that exact limit, thus preventing overspending.

  • Instant issuance: waiting for physical cards can cause operational delays, especially when immediate transactions are required. Virtual cards eliminate this wait, which is beneficial in fast-paced business environments.

  • Custom use: users can set virtual cards to work with specific businesses only, reducing misuse or misallocation of funds.

  • Easy reconciliation: for accounting teams, virtual cards can increase efficiency. A business can associate each card with specific projects or departments. As transactions occur, they are categorised automatically, simplifying end-of-month reconciliation processes.

  • Environmental impact: with no plastic production or delivery involved, virtual cards represent a more sustainable choice, aligning with many corporate social responsibility goals.

Drawbacks of virtual cards

  • Not universally accepted: despite the growing popularity of virtual cards, some businesses don't accept them and still require a physical card to be present.

  • Overreliance on technology: while the digital nature of virtual cards offers convenience, it also means that businesses are dependent on the issuing platforms. Any technical glitches, outages or cyberattacks could disrupt operations.

  • Learning curve: introducing virtual cards into a business might require training for employees, especially those who are not tech-savvy. This could lead to initial resistance or mistakes.

  • Integration challenges: not all accounting or expense-management systems support virtual cards, potentially complicating the integration process. This could require additional investments in software or manual workarounds.

  • Loss of physical card benefits: some physical corporate cards come with perks such as airport lounge access or travel insurance. Switching entirely to virtual formats might mean sacrificing these benefits.

How to get a virtual card for your business

Acquiring a virtual card for your business can be straightforward, although the process might vary slightly depending on the provider. Here are the general steps that most businesses can follow:

  • Research providers: a variety of virtual card services are available, each with unique features, fee structures and integrations. Take the time to understand which service best aligns with your business needs.

  • Account setup: after selecting a provider, you'll typically need to set up a business account. This often requires providing details about your business, including its legal name, address and tax identification number.

  • Verification process: most providers will conduct a verification process to authenticate the legitimacy of your business. This can involve submitting documentation, such as business licences, bank statements or tax returns.

  • Determine card controls: once verified, you can customise your virtual card settings. This includes setting spending limits, determining which employees have access and specifying merchant categories, if necessary.

  • Integration with accounting software: many virtual card providers offer integrations with popular accounting and expense-management tools. Connecting these can simplify expense tracking and reconciliation.

  • Issue cards: after configuration, you can begin issuing virtual cards to relevant employees or departments. Most platforms allow for the quick generation of these cards, granting immediate access.

  • Ongoing management: regularly review transactions, adjust card settings as needed and monitor for suspicious activity. Most platforms provide real-time insights and reports to aid in this oversight.

Virtual cards are not just a trend – they're a tool that businesses can use to increase security and improve the transaction experience. With virtual cards, businesses can monitor their expenses more closely and adjust quickly based on real-time data.

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