WHAT DO YOU KNOW ABOUT VIRTUAL CARDS?
Per Global News Wire, the digital payment sector would reach a value of over $175 billion by 2026 — a substantial component of the $7.9 trillion global banking industry. The overwhelming adoption of smartphones and increasing internet penetration are giving a significant boost to online payment. A fast-rising trend in the industry is the adoption of virtual cards. While virtual cards have not become as ubiquitous as their physical contemporaries in Nigeria, they are becoming relevant. This article explains virtual cards.
What is a virtual card? A virtual card is a randomly generated 16-digit number that serves as a payment option for online transactions. A virtual card is the online version of a physical credit or debit card that you put in your wallet and pull out at check-out or to withdraw cash at the ATM. It has the 16-digit number on the regular card, the CVV (card verification value), and expiry date.
Virtual cards use encryption which prevents fraudsters from tracing your actual account. This is because the number is linked to your bank account but the transaction only displays the number which is often for one-time use (in the case of credit cards). The bank or financial institution knows the relationship between your virtual card and your account number, but the merchant cannot make this distinction or even trace the originating account beyond the electronic card.
So even though it is called a ‘virtual or electronic card’, it is actually a series of numbers used for banking or payment purposes.
What is the difference between a regular card and a virtual card?
· Regular cards are physical while virtual cards are virtual (online).
· Virtual cards cannot be used to withdraw cash at ATMs
· Virtual credit cards are preloaded with a certain amount of money, unlike physical credit cards which have a set limit.
· Most virtual credit cards have only a 24-hour expiry, once the number has been used for a purchase the card expires and a new number has to be generated. This is different from a physical card that lasts longer.
· Unlike physical cards, virtual cards cannot be used at PoS terminals.
· Virtual cards are considered more secure than physical cards.
· Virtual cards are more convenient as they are not physical and can be retrieved from your banking app on any digital device.
Who needs a virtual card?
Anyone who wants it, especially people who do a lot of online transactions especially shopping. However, as more merchants start to accept virtual cards and more customers request them to ensure the safety of their online transactions, more financial institutions would issue them and adoption would increase. There isn’t data on its current level of adoption in Nigeria.
Who gives virtual cards in Nigeria?
Still a recent innovation in Nigeria’s banking and financial firmament, many traditional banks have not established this service while only a few fintech companies are also providing such service. Wema Bank’s online bank ALAT issues virtual dollar cards as well as Flutterwave’s Barter. Zenith Bank, Guaranty Trust Bank, and First Bank are perhaps the only traditional bankers currently issuing virtual cards in Nigeria.
Where can you use virtual cards?
Electronic cards are now being accepted by a lot of online merchants mostly outside Nigeria. It has not become a common feature in the Nigerian e-commerce sphere. It is also uncertain if any local ATMs have been optimized for virtual cards. Most, if not all, only accept physical cards and contactless services provided by certain banks.
Can hackers steal your money with your virtual card?
It is very unlikely for your electronic card details to be stolen by anyone. In the case of virtual credit cards, there is a one-time token that is used for the payment thus invalidating subsequent transactions without the card owner's input. However, there is still a small chance of theft if the unused details are accessed by a third party. Generally, though, these card type is very safe.
Virtual cards will feature prominently in the Nigerian financial and e-commerce ecosystem as early as 2025. This is because more customers would seek more security online especially as more young people venture into cryptocurrency investment. Many of these transactions are carried out completely electronically which would make more people seek out ways to guarantee the safety of their transactions.
