Digital transformation continues to be a key driver for businesses across various industries, demanding increased efficiency in operations and back-office functions. As the need for seamless and secure payment solutions grows, virtual cards numbers (VCNs) have emerged as an innovative method for making high volume card payments with ease. Offering enhanced security, reduced fraud risk, and simplified processes, virtual cards play a pivotal role in streamlining business-to-business payments.
In this blog, we will cover what virtual cards are, how they work, their benefits, industry applications, and key considerations for businesses looking to adopt them.
What are virtual cards?
By definition, virtual cards are payment cards that exist only in a digital format. Issued by banks or fintech platforms, they have a unique card number for each transaction, expiration date, and CVC code, and are linked to a funding account.
Virtual payment solutions were born during the e-commerce boom of the early 2000s, as businesses sought secure ways to facilitate digital transactions. With advancements in tokenisation, APIs, and encryption, virtual payment solutions have become more widely adopted across industries.
The different ways virtual cards can be used
Businesses of all kinds are turning to virtual payment solutions to bring the ease, security, and efficiency of digitalisation to their operations. There are several ways of VCNs can be used depending on business needs:
- Manual entry VCN: This can be a single or multi-use VCN and its card details are manually entered on an e-commerce page for purchase.
- Tokenised VCN: A single or multi-use virtual card that is enrolled in a digital wallet for in-store payments via Google pay or Apply pay.
- Embedded VCN: This type of VCN is embedded within a payment workflow and automatically issued.
How virtual cards work
Understanding how virtual payment solutions operate is essential to leveraging their benefits effectively. These cards rely on advanced technology to ensure security and usability, making them a versatile payment tool.
The technology powering virtual cards
Virtual cards leverage encryption to ensure data security during transmission. Through APIs and customised dashboards, businesses can seamlessly integrate virtual cards into their existing payment workflows.
The step-by-step process to generating a virtual card:
- A user requests the virtual card number via their payment partner.
- Spending rules such as transaction limits, merchant restrictions, and expiration dates are pre-configured or applied in real-time.
- The card can be used for payouts, supplier virtual card payments, online transactions, subscriptions, or added to mobile wallets for in-store contactless payments.
- Transactions are authorised and monitored in real-time, providing detailed reporting for better financial management and reconciliation.
Virtual cards vs traditional payment cards
How virtual cards compare against traditional payment cards at a glance:
| Traditional cards | Virtual cards | |
| Form | Physical plastic card | Digital, no physical form |
| Security | Static card details | Dynamic, unique card details |
| Control | Limited spending controls | Customisable spending rules |
| Issuance time | Require days for delivery | Instant generation |
| Fraud risk | Higher due to static details | Lower due to limited usability |
| Integration | Manual expense tracking | Automated, integrated reporting |
The benefits of virtual cards
Virtual cards provide a wide range of benefits for businesses and users alike, making them a valuable tool in modernising payment processes.
For businesses:
- Enhanced security: Each transaction uses a unique card number, minimising fraud risk. Unlike bank transfers, compromised cards can be immediately cancelled or blocked.
- Greater control: Business can automate spend rules, transaction limits, restrict usage, and define expiration dates for greater expense management.
- Streamlined virtual card payments: Simplified B2B payments help businesses save time and operational resources making managing cash flow even easier.
- Improved visibility: Real-time reporting enhances budgeting and financial conduct authority compliance tracking.
- Cost-efficiency: Eliminate costs associated with the production of physical cards and regular bank transfers.
For users:
- Convenience: Instantly generated virtual cards provide immediate access to funds, simplifying processes like employee expenses. In this instance, users can spend the funds right away without having to wait for authorisation as it generally happens with traditional cards.
- Simplicity: Virtual debit cards eliminate the need for team-members to hold on to and submit paper receipts/invoices and then wait for reimbursements, as they get direct access to the funds they need.
How virtual cards are used across industries
Virtual cards have diverse applications across multiple industries, providing tailored solutions to meet specific operational needs.
Insurance
- Claims payouts: Virtual cards enable faster claims disbursement to policyholders compared to cheques or bank transfers.
- Fraud reduction: Funds are restricted to intended purposes, reducing misuse and eliminating the need for policyholders to submit receipts/invoices, which can lead to fraudulent claims.
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Virtual cards for insurance Explore how virtual cards streamline funds disbursement and bring efficiency to the insurance space.
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Payroll and employee expenses
- Employee expenses: Virtual cards control spending for business expenses and related purchases, such as marketing advertising subscriptions or travel bookings.
- Salary payments: Secure and instant distribution of earned wages to employees or payments to freelance and gig economy workers.
Lending
- Loan disbursements: Virtual cards ensure borrowers receive funds quickly, improving user experience, which is particularly useful in short term credit scenarios.
Retail
- Flexible payments: Virtual cards can be issued at the point of sale for the fintech or Buy-Now-Pay-Later provider to pay the merchant.
Considerations for virtual card adoption
While virtual cards offer significant benefits, there are a few key points businesses must consider when adopting them. Let’s take a look at what these are:
- Integration within existing operations: Businesses should evaluate their end-to-end process to ensure virtual cards fit seamlessly into their
- Compliance and regulations: Adhering to PCI DSS, PSD2, and local payment standards is essential.
- Management of multiple cards: Scaling virtual card usage requires robust monitoring systems to monitor and control funds efficiently.
How to choose the right virtual card solution for your business
Selecting the right virtual card solution is crucial for maximising its benefits. Businesses should evaluate their needs against the features and capabilities of potential providers.
Key factors to evaluate include:
- Customisability: Ensure spending limits, expiry dates, and usage restrictions align with business needs.
- Integration capabilities: Compatibility with existing workflow systems is critical.
- Security features: Look for tokenisation and fraud monitoring capabilities.
- Funding features: Prioritise funding models that can handle multiple virtual card account balances in real-time, with minimal complexity.
- Scalability: Choose a solution that can support your current and future business demand.
- Reliability: Work with a reliable and stable platform that can handle card issuance and processing at scale.
- Costs: Evaluate setup costs and transaction fees for overall affordability.
Implementing virtual cards with Edenred Payment Solutions
Transform your payment operations with flexible, secure virtual card solutions designed for modern businesses.
Why choose Edenred Payment Solutions?
- Single account, unlimited transactions: Manage high-volume virtual card payments from one corporate account without pre-funding individual cards.
- Improved cash flow: Our Lean Funding model keeps your capital accessible, not tied up across multiple card balances.
- Fast deployment: Reduce regulatory complexities and get up and running quickly with UK or EU account options.
- Complete control: Create and manage virtual cards instantly via API or web portal with real-time transaction monitoring.
Ready to streamline your virtual card payments?
Talk to our experts today
The future of virtual cards
The future of virtual cards looks promising, with the volume of virtual card transactions set to reach 175 billion by 2028. With a significant growth of 388% since 2023, the market will be accelerated by the adoption of API virtual card issuing platforms.
"Virtual cards revolutionise how businesses handle payments, seamlessly integrating into customer journeys and taking embedded finance to the next level. VCNs simplify and speed up processes, enabling instant access to funds while improving the overall customer experience. Industries like insurance, where quick claims payouts are crucial, show how virtual cards can reduce frustration and build loyalty.
But the benefits don’t stop there. With unique identifiers for every transaction, virtual cards simplify reconciliation and auditing, cutting down on errors and boosting transparency. This precision allows businesses to modernise while staying secure and compliant. As demand grows for smoother, smarter payment solutions, virtual cards are leading the charge."
Rehana Mitha, Managing Director
Edenred Payment Solutions
In conclusion
Virtual cards represent a significant leap forward in payment innovation. Offering unparalleled security, control, and efficiency, they empower businesses to streamline transactions and adapt to the digital age. As industries continue to embrace virtual card technology, the future of funds distribution and payments for businesses will undoubtedly be more secure, efficient, and convenient.
Adopt virtual cards for your business
Talk to our team of experts to find out how you can leverage our expertise and tech infrastructure to make simple, secure, and convenient payments using virtual cards.
