The way we look at payments is evolving rapidly. With the eruption of the global pandemic, 81 percent of consumers prefer contactless, digital payments overpaying in cash. According to a report by ACI Worldwide, a US-based payment system company, digital payments in India are predicted to form 71.7 percent of the total payments volume by 2025.
These numbers are proof that the rise of digital-first banking solutions has just begun. This boom in banking technology has made virtual modes of payment more popular than before. One such payment instrument is- virtual cards.
The massive popularity of virtual cards has led to approximately 30 percent companies incorporating them into their payments strategy. As more and more organizations invest in contactless payment methods, this number is expected to rise exponentially.
Why are virtual cards favoured by many as a digital solution? The answer is the convenience and accuracy they provide compared to other payment methods. Despite them being the future of digital payments, there’s a lot of fog around virtual cards.
Let’s have a look at some of the myths surrounding them and their actual realities:
They cost more than other payment methods
One of the primary reasons for a relatively low rate of adoption for virtual cards is the misconception that they cost more compared to traditional payment methods. This, however, is far from true. In fact, virtual cards help companies save more.
According to a 2020 study, moving away from paper processes and embracing digital processes helps U.S. businesses save $150 billion annually. Research also suggests that the issuance of 1 million virtual cards can help banks save between Rs 100 to 150 million.
They offer compromised security
Organizations tend to associate virtual cards with high-security risks. In reality, virtual cards are undoubtedly one of the safest payment methods that exist in the market today. They are designed in such a manner that they can be used for specific purchases. Virtual cards have a single-use card number generated for a specific amount. This feature helps ensure that even in case of card data theft, hackers are not able to use them to make other purchases.
They face high payment failure rates
Contrary to popular belief, virtual cards ensure better payment success rates. They allow users to set append limits and provide more visibility and insight into the payment records, thus reducing the chances of a transaction failing.
They don’t offer flexibility with payments acceptance
Virtual cards are one of the most versatile methods of making payments. They are cost-efficient and also act as a great way to pay two highly under-banked segments- suppliers and blue-collar workers.
They block money
There’s a notion about prepaid/virtual cards that in case the balance is not exhausted by the user, the money ends up getting stuck in the card. This is untrue. Virtual cards are meant to be used within a fixed timeframe to make transactions. In case that doesn’t happen, the money gets instantly transferred back to the account without getting stuck in the card.
They offer limited control
The user has the power to fully control their virtual card. They come with the option of getting assigned to a particular vendor and the cardholder gets to decide who gets to access which one of the accounts.
In a nutshell, change can be uncomfortable in the beginning. The gradual shift from the use of physical to virtual/prepaid cards is one such case. When it comes to changing how payments are handled, users are likely to be resistant in terms of acceptance. This, however, doesn’t change the fact that virtual cards are the future of payments and have led to the boom of the BFSI sector. Due to their features like convenience, security benefits and transparency, they have already become a way of life for many and on the verge of garnering more acceptance from others as well.
The author, Murali Nair, is President- Banking at Zeta. The views expressed are personal