What are virtual cards and what are their benefits?

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We live in an age where online retail is booming with nearly a fifth of commerce sales taking place online. Online shopping looks to continue to expand at an astonishing rate. Researchers are predicting that up to 95% of retail sales will take place on the internet by 2040. The projected increase in online sales is met by an additional increase in our tendency to voluntarily share our own details with retailers. These details can be e-mail addresses and mobile phone numbers. Aside from essential information, retailers also incentivize shoppers with additional offers and benefits they provide additional data. Shoppers with data privacy concerns may wish for greater levels of anonymity by using virtual cards.

Shopping online has a level of consumer risk

The consumer’s shift from shopping on the high street to shopping on the internet has bought with it great benefits. Benefits are the ease, time-saving, and wide options of the digital marketplace which typically outpace traditional stores. The shift to online retail has also bought with it increasing concerns and important questions. These range from high impulsive spending and product accuracy, to financial security and personal privacy.

More recently a new risk has appeared that poses particular problems for retailers in the online sector: data breaches. Retailers collect more and more of our data to better understand and serve our shopping habits. Consumers often put information in the hands of companies whose data protection measures are not as rigorous as hoped. Hackers pose a consistent threat to not only online retailers, but to consumers who trust those retailers with their data. Consumers should not simply trust the often ineffective data protection practices of retailers. They should take their own steps to protect their personal data.

An important innovative and innovative tool offers additional protection to those of us shopping online; virtual cards. Virtual cards provide additional security against the potential damages of data breaches or using unsecure websites to transact.

How do virtual cards work?

Payment cards, such as virtual, credit or debit, are designed around online shopping. All types of payment cards consist of a temporary and randomly generated combination of card number, expiry date, and sort code. These can be attained by asking your bank or financial service provider. Though the number, date and code are random, the payment itself will be tied to your original bank account, with payments showing up on your own statement. Put simply, the virtual card can act as a mask or a buffer between your personal bank account and the online platforms through which you make your purchases. But whilst you can see the link between your own account and the virtual card, the retailers themselves, and any potential data-thieves only see the disposable, uncompromising details of the virtual card.

Security: renewed financial safety online

Consumers may have concerns about data breaches. Making purchases from large online retailers like Amazon is generally a safe affair. However, with smaller or lesser known companies, there may be potential risks of card or payment information misuse. Smaller, new businesses typically don’t have substantial positive customer feedback to vouch for their good practises or cyber security. Thus, a virtual card is the safest way to shop with such merchants.

Privacy: share only relevant information regarding your order

Virtual card provide an extra layer of privacy. Rather than risk using your full bank account details and personal name and address for a purchase from such sites. Virtual cards can be used alongside alternate names or addresses associated with an online purchase. This enables you to not risk sharing your information with a new merchant you may not fully trust.

In the event that you have made a virtual card purchase through a rogue merchant or company, the fraudsters will only be in possession of a false set of personal details and the disposable virtual card information. Virtual cards allow you to quickly cancel and close the virtual card with no negative effects on your bank account. This enables you to retain access to your funds for easy purchases through your physical bank issued card.

You can quickly generate, freeze or delete virtual cards from your account. Thus, you can reduce the impact of fraudulent activity on your account without hindering your ability to transact. One other obvious benefit of the virtual card is that it is not physical. Thus, you will have the risk of losing or misplacing a virtual card as you would a physical card. Misuse by unauthorized persons is an increasingly common worry in the days of contactless, PIN-less payments card payments.

Accessibility and Control: the benefits of virtual spending

Banks and financial service providers that offer virtual cards give their users a large amount of control over the cards limits and controls. This makes the cards more effective and resistant to fraudulent activity and personal data theft. When creating the card, the user is often given the option to set an expiry date themselves. Thereby allowing just a short lifetime on the card if need be. Additionally, a spending limit for a single transaction can be set on the card. Thus, expenses or spending that exceeds your account limits are cancelled or blocked. Therefore, theft of personal details can be rendered ineffective.

Additionally, virtual cards are designed to be used online where debit or credit cards would normally be. A large majority of virtual cards are Mastercard or Visa, making them acceptable across online retailers worldwide.

Restrictions: some of the cons of virtual cards

Virtual card spending limits

For all the privacy and security benefits of virtual cards there may be some down sides for some people. Many security measures bounce back on the user as rather restrictive limits on their freedom to spend. Limits on spending for example do help prevent fraud. Unfortunately, these can make it difficult for a genuine virtual card user to make large scale anonymous purchases. Large purchases can be holiday expenses or a new vehicle.

Virtual card deposit limits

Another downside can be the deposit limit that comes with some new virtual cards. New virtual cards usually have a limit on the funds that can be added each day, week, or month. These limits are often eased with usage or over time. However, they may make adjusting to using a virtual card a slower process. Particularly large transfers to virtual cards may require a conversation with the card service provider to work out the compatibility of your incoming finances with the virtual cards pre-set, default limitations.

Virtual cards as an acceptable payment method

One final downside of the virtual card is the potential for ambiguity or confusion when dealing with certain online merchants. This typically happens when you are either pre-ordering items, booking events or rooms, or seeking to return unwanted goods. When returning items to retailers for example, the retailer may only refund to the same card that made the purchase. If your virtual card was only for short term use, and you have since closed it, the refund may only be given as in store credit for future use rather than being sent back to the personal bank account behind your virtual card. A similar problem might arise in the event that you rent a hotel room or car. The additional verification required on arrival for your reservation may create an additional hassle.

The Sum Total: why virtual cards might be the best bet for the future

Despite these small limitations, the safe-guards and additional helpful features of using virtual cards makes them an effective option for more secure financial interactions with the world of online retail. Some minor hassles may occur in the attempt to make larger purchases or pre-arranged transactions. Yet the accessible and adaptable way in which the account holder can create, suspend and delete virtual cards keeps them handy in many situations both for ease of use and security.

Most importantly, the privacy offered by the virtual card provides more assurance for the consumer at a time where the volume of people shopping online is larger than ever. Unfortunately, company data breaches are becoming more high-profile and common. Few of us would relinquish the ability to shop online, even in the face of concerns over our data. Thus, the virtual card offers the perfect remedy to consumer worries.

Wrap up

Finally, as with all innovative technology, the virtual card is still a young concept, and additional developments in their deployment and application will likely iron out their small pitfalls in the future as they become more common as more consumers realise the benefits that they bring to financial and personal peace of mind.