Are Virtual Cards a Safe Option?
Alex Roha
Decades of evolution gave companies what is considered the modern-day credit card. Today, cards come with smart chips, encryptions, and copious rewards. And the latest iteration, virtual credit cards, are spreading in popularity across organizations looking to securely and rapidly control business expenses.
But with any new technology comes some wariness of adoption. How safe are virtual cards and virtual payments when technology and information lie solely on desktops and mobile devices?
Virtual Card: Defined
Though it may look like a typical credit card on a mobile device, a virtual credit card is a unique 16-digit virtual card number generated digitally. This card number can be used for online checkouts and downloaded to a mobile wallet for in-store purchases where virtual cards are accepted. And, like a physical card, transactions made via virtual cards appear on bank statements.
Keep in mind that a virtual card is different than a “digital card.” A digital card is simply a copy of a physical bank card stored on a personal device. But a virtual card will have a unique expiration date and CVC separate from personal credit or debit cards.
The Safety Behind Virtual Cards
According to data gathered by Trading Platforms, 25.7% of all point-of-sale payments were made using mobile wallets in 2020. By 2024, this number is expected to jump to 33.4%. That’s a lot of recorded transactions in providers and card-issuers systems.
Similar to credit or p-card (purchase card) products, virtual cards provide tools like spending controls, fraud protection, and reporting technology to manage, track, and secure expenses and projects. Virtual cards can connect directly to personal or business bank accounts, depending on the card issuer.
Fraud Protection
Virtual cards offer heightened security against fraudsters. That’s because the virtual credit card number is untraceable unless there is access to a cardholder’s identity or computer system. This feature is especially beneficial to companies looking to pass out dozens or even hundreds of corporate cards to employees. Rather than worry about users losing physical copies of cards—or a bad actor getting their hands on one—virtual wallets encrypt virtual cards, which makes them more difficult to access.
Depending on the controls put in place and the virtual card issuer, virtual card numbers can be uniquely generated for specific merchants and vendors for in-person or online purchases. This process allows companies to generate a new card number with unique card details each time, shrinking the window of opportunity for a hack. Companies can also generate virtual cards for one-time use cases when making a single-use purchase.
Spending Limits
Like their physical card counterparts, virtual cards offer an extra layer of financial protection for companies looking to curb overspend. Some modern virtual cards offer spending limits with automated controls that can track, approve, and deny every transaction made via a virtual card.
Virtual cards with built-in controls mean financial leaders and business owners can confidently give employees access to appropriate company funds for everything from travel to software subscriptions to office supplies without worrying about misallocated funds.
Suppose a leader determines an employee, team, or department no longer needs a virtual card. In that case, companies can instantly block or freeze these cards without retrieving the physical card or going through the painstaking procedure of waiting for a bank to process the same request.
Industry Standards
Virtual credit cards and purchase cards are subject to the same Payment Card Industry Data Security Standards (PCI DSS) as physical cards. These cards adhere to policies and rules specially designed to protect credit or debit transactions and prevent the cardholder from misusing personal information for in-person or online payments.
The PCI standard established by major card networks like Visa, Mastercard, and American Express forces merchants to uphold protective orders around sensitive information for every card account and transaction. Virtual card offerings that come directly from banks are also protected by the FDIC (Federal Deposit Insurance Company), just like their plastic card counterparts.
Standards like maintaining an ongoing firewall to protect cardholder information, consistently testing network connections, restricting access to untrusted networks, and encrypting cardholder data when transmitting it across open public networks fall within the framework.
Pivot to Protection
Heightened security, streamlined and real-time spend controls, and industry-backed standards create a safe and effective environment for virtual spending. Companies that have access to virtual cards via their card provider have no reason not to test the capabilities of these cards for different use cases where comfortable.
So, are virtual cards a safe option? This new technology is a valuable tool that simplifies fluctuating payment processes, creates new efficiencies for businesses, and eliminates numerous security and fraud issues.
Utilizing an expense management system with heightened security controls in tandem with virtual cards can help companies up the ante around financial protection. With the right technology stack, finance and accounting teams can rely on automated reconciliation for all virtual card payments on everything from a travel booking to a software subscription—all while preserving sensitive employee and user data.
Interested in streamlining company spending and eliminating expense reports with supercharged virtual card offerings? Schedule a demo or get up and running with Navan in just 5 minutes.