Virtual card numbers: What they are and what you need to know (2024)

Over the last decade, fraud and identity theft has nearly tripled. With the rise of cyber threats and data branches, and with check fraud still an issue today, safeguarding your financial information is critical. Virtual cards that depend on virtual card numbers (VCNs) have gained popularity, and for the right reasons. VCNs provide users with a dynamic and secure method of making digital payments.

What are virtual card numbers?

Virtual card numbers work in much the same way with virtual card purchases as physical card numbers do with physical credit cards. VCNs are designed to be used for specific transactions and have controls, including dates of use, types of use, and dollar amounts. Unlike their physical card counterparts, VCNs are unique, randomly generated sets of digits designed for a specific transaction or merchant. Here’s a closer look at their key attributes:

Dynamic generation

Virtual card numbers are generated dynamically for each transaction and/or for specific merchants. They are not tied to the physical card numbers themselves but are linked to the original card account.

Limited validity

Virtual card numbers can be set for single use or a short timeframe. This feature reduces the risk of unauthorized use even if the VCN is intercepted.

Transaction-specific

With virtual cards, you can assign specific spending limits and expiration dates to each virtual card number issued. Each virtual card number is associated with a predefined budget and validity, ensuring responsible spending within approved boundaries.

This level of control empowers you to better manage expenses and reduce the risk of overspending and unauthorized purchases.

Privacy protection

Ever worry about online fraud? Virtual card numbers are generated as needed. This added layer of protection minimizes the risk of identity theft and unauthorized access to sensitive financial information, giving you peace of mind and protecting your valuable business data.

Comparing virtual card numbers and physical card numbers

As a business owner, navigating the world of payments can feel like a high-stakes juggling act. Striking the right balance between security, flexibility, and control is crucial for managing expenses and protecting your valuable financial data. In this arena, both physical and virtual card numbers hold distinct advantages and limitations. Let’s delve into the key differences to empower you with informed decision-making.

Tangibility

Physical cards and their numbers offer the familiar comfort of a tangible payment tool, readily accepted by most vendors worldwide. However, their physical nature exposes them to loss, theft, and skimming risks. Virtual card numbers, existing solely as digital information, mitigate these concerns.

Security

For security-conscious businesses, virtual card numbers stand tall. In 2022, 36% of corporate/commercial cards were subject to fraud, compared to the 9% for virtual cards. Temporary, randomly generated virtual card numbers offer increased protections and minimize damage from breaches. Real-time transaction notifications and instant freeze/disable options offer further peace of mind. While physical cards offer fraud protection measures, their static numbers and information remain a potential vulnerability.

Flexibility

Budget control takes center stage with virtual card numbers. Set spending limits, expiration dates, and even merchant restrictions for each card number, tailoring them to specific purchases or employee needs. This is a game-changer for managing expenses and preventing unauthorized charges. Physical cards, though convenient, lack such fine-tuned control.

Acceptance

Physical card numbers reign supreme in the global acceptance arena. However, virtual card transactions are expected to increase in popularity as more suppliers accept them. Choosing a virtual card provider that has the resources, expertise, and track record of increasing supplier acceptance of virtual cards is crucial to your success.

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.