By 2027, virtual cards could generate $71B in revenue for US businesses that offer them, according to a recent forecast from Juniper Research.
Perhaps for that reason, virtual cards are expected to continue to surge in popularity. For tech companies and their customers, they provide clear benefits:
If you're curious about whether virtual cards are a good fit for your business and how they work, this guide is for you. In it, we’ll answer the following questions:
A virtual card is a unique sequence of numbers that enables a customer (either a business or a consumer) to make purchases via credit- or debit-card networks, much as they would with a physical card.
To help customers understand the concept, these numbers are often displayed on a digital image of a debit or credit card. But there’s no actual, physical card associated with a virtual card. It’s just a sequence of numbers.
Virtual cards are highly programmable, and your customers can start using them in moments. For you, they can generate robust interchange revenue.
Virtual cards can be used to make purchases online, in-person, or over the phone. Cardholders can also type their virtual card numbers into a form or speak them aloud to a customer-service representative.
Virtual card numbers are typically generated according to the same rules that govern physical card numbers. Like physical cards, virtual cards come with an expiration date, the name of the card network (e.g., Visa or Mastercard), a Card Verification Value (CVV) code, and the customer’s name.
Virtual cards are not to be mistaken with digital cards, which are a separate type of card from virtual cards. Digital cards are commonly associated with Apple Pay and other mobile wallets.
At Unit, we’ve helped leading tech companies design and issue virtual cards. Based on our experience, these are a few common use cases and industry examples for virtual cards.
As with physical cards, the primary way that companies generate revenue from virtual cards is via interchange fees.
Interchange is generated whenever your customers make card purchases. It’s calculated as a percentage of the overall transaction value, as detailed in our interchange guide linked above.
These revenues are typically shared among the card network, the issuing bank, any platform partners, and your business. That said, the lion’s share of the interchange typically goes to the company whose brand is on the card—i.e., you.
If you're offering virtual charge cards and/or credit cards, you may also generate financing revenue. Learn more in our guide to embedded lending.
In general, there are two ways to launch virtual cards:
Which you choose will drastically impact your time-to-market and the resources you need to invest, both up-front and on an ongoing basis.
If you decide to work directly with a bank, processor, and network, you'll need to establish the following:
Once these partnerships and processes are set up, you’re ready to make virtual cards available for your customers to use.
If you partner with a platform, your process will look different. With Unit, for example, once you’re a client with production access, you just make an API call. We’ve already optimized the relationship between the bank, processor, and network, removing much of the complexity and manual labor you would have had to go through to set up a program.
It’s a good question, and there’s no one-size-fits-all answer.
As a starting point, we recommend getting to know your customers deeply and thinking about the decision through the lens of their needs and preferences. You can also ask yourself the following questions:
Want help thinking through your card strategy? Contact us to book a demo—or just sign up for our sandbox and start building.
March 21, 2023
Frequently asked questions
For end-customers, virtual cards can be safer than physical cards. Virtual cards can’t be physically lost, and there are many safeguards on phones, devices, and websites to ensure that the person accessing the card is, in fact, the cardholder. Given the low cost and flexibility of programming virtual cards, it can be easier to program virtual cards to expire after one use, limit their use to specific merchants and merchant categories, and enforce spending limits. All of these restrictions can reduce what can be done with card numbers if they’re stolen.
Virtual card programs are held to rigorous data-storage standards. In fact, many adhere to the same Payment Card Industry Data Security Standard (PCI-DSS) requirements that banks and credit unions follow.
In general, virtual cards require the same level of compliance as physical cards. That starts with a compliant Know Your Customer (KYC) flow. It’s required when a customer opens an account and to continue monitoring the account thereafter. You’ll work together with your bank and any platform partners to build a great KYC flow. At Unit, we’ve pre-built these KYC flows, streamlining the compliance you would otherwise need to build from scratch.
You can choose how your customers request or generate their virtual cards. We’ve seen businesses make it an automatic process; that is, as soon as a customer creates a bank account, they are issued a virtual card. Other businesses make it as easy as tapping a button in an app. You have a lot of freedom here to think through how you’ll create the ideal user experience.
Yes, virtual cards can be added to mobile wallets (like Apple Pay, Google Pay, and more). Virtual and physical cards are both eligible to be tokenized into digital cards that can be added to mobile wallets.
When your customer’s digital card is created, it is "linked" via your issuer’s token vault to its underlying physical or virtual card. Once this process is complete, your customers will have a digital card (which is now linked to their physical or virtual card) in their mobile wallets.
Virtual cards do not require designs. However, if you’d like to create a visual representation of your virtual card, the best practice is to follow the same design guidelines as you would for a physical card. For your visual representation of a virtual card, it’s recommended that you omit displaying physical card features that virtual cards don’t have, like the card chip.
The process of issuing a physical card is a bit more involved than creating a virtual card. Once you’ve found and partnered with a card printer, you’ll need to design the card, get it approved, test it, manufacture it, and ship it to your customers. That takes a minimum of six weeks for standard cards and 12–20 weeks for custom cards.
Because you’ll be working with physical materials, you may run into additional variables. For example, supply chain issues have created a shortage of credit card chips, which can slow down the card creation process.
Working with a platform can streamline this process considerably. For example, we work with designated printers and have established processes with them that streamline card design and testing. This can help reduce your time to market.