The growth of online payments and digital commerce has led to the widespread adoption of virtual cards, a trend accelerated by COVID-19 and the increase in card-not-present payments.
As a convenient and secure form of digital payment, virtual cards have much to offer both private users and businesses, and research suggests that total virtual card transaction value may reach nearly $7 trillion by 2026. The travel industry has taken notice, and online travel agents (OTAs) are increasingly turning to virtual cards to optimise payment processing.
So, what are virtual cards and what makes them such a compelling travel payment solution?
Although the technology that enables virtual cards first emerged in the 1990s, primarily focusing on consumers, it’s only recently that digital transformation has opened the market for wider business use in travel, freight and other industries with complex supply chains.
Virtual cards are similar to physical payment cards except they exist only digitally and can’t be used to withdraw cash. Apart from that, they provide the same payment services as credit and debit cards, have expiry dates and 16-digit numbers and CVV codes like physical cards, and connect to the same payment networks such as Mastercard and Visa. They are also usually accepted anywhere that takes physical cards.
Virtual cards are created for one-time use or limited ongoing purchases, and in both cases the credit card data remains highly secure – which is one of the key benefits. While a virtual card is linked to your physical card account, it has a different number which is randomly generated and temporary.
In most cases, virtual card numbers are generated for specific purchases with prespecified amounts and frequency of use. However, you can generate virtual numbers to facilitate several transactions before the card is turned off. You can also assign a virtual number exclusively to one supplier and then turn it on and off when you complete a purchase.
Advancement in technology, evolution in fintech, and the growing use of APIs, is leading to wide used of virtual cards for businesses as they are becoming easy to obtain and set up. Once your payment service provider has installed the card software on your system, you can generate as many random numbers as you need, set uses and spending limits, choose the currency, and apply all the controls and features that your business needs. Let’s explore the features and benefits in more detail, and see why virtual cards are such an advantage for payment processing in the travel industry.
The benefits listed above are useful for any business, and particularly helpful for OTAs. Because virtual cards offer:
Banks may seem the obvious choice for virtual cards but there are now many better options to consider, and you’re likely to receive far better service with a technology-powered payment specialist. For the travel industry, virtual cards avoid the security weaknesses and limitations of other payment methods. Nium can optimise your payments and introduce virtual cards to your travel business. If you want to reduce fraud, lower processing fees, improve accountability, and streamline end-to-end payments, find out how Nium can help with your payments strategy.