Opinion: Virtual Cards Hold the Future — But Consumers Still Need Convincing

It’s one thing to have a better product and know it. It’s another thing to get everyone else to see the benefits and get on board. That’s the challenge credit card companies are facing with virtual credit cards.

The good news is that progress is being made in terms of adoption. According to a recent PYMNTS Intelligence and Elan collaborative study titled “Digital Payments Evolution: Virtual Cards Poised to Take Off,” 4 in 10 consumers are already using virtual cards.

The data also shows an encouraging future: 65% of consumers say they are likely to use a virtual card within the next 12 months. What’s interesting is that a significant number of those consumers don’t fully know and appreciate all the virtues of the virtual cards they are starting to use.

It can be confusing to many consumers who believe using their credit card online is the same as a virtual card.

Here’s the difference: A digital card is just a digitized copy of a physical card. A consumer can have it in their digital wallet like Apple Pay, PayPal or Google Wallet. There is still an actual physical card.

A virtual card exists only in digital form. It can be used for online purchases and be added to digital wallets for in-store payments. The key feature however is that a unique, one-time card number can be generated for individual transactions that are carried out using digital wallets.

But many consumers are adopting it by chance through their virtual wallets when being offered a virtual version of the card, so they aren’t always consciously aware of the difference — and the added benefits.

Things are going pretty well as it is, but if consumers were aware of the added security, benefits and rewards of virtual cards, credit card companies would benefit as well.

The study showed that more than 40% of consumers who use virtual cards are prime loyalty program participants. That’s a group that is critical for credit card companies to engage and retain.

They are younger and more tech forward. Other attractive characteristics are that they are more rewards aware, high value, and digitally engaged.

The virtual cards are also an opportunity to reinforce brand loyalty. They can be set up instantly and get right to work, making for a seamless experience for these highly desirable customers.

The fact that it is so easy to get going — and to earn rewards — can also be a strategic and thoughtful way to get dormant customers back on track and engaged because they start earning rewards right away.

Virtual cards can instantly be linked to rewards, setting up a frictionless way to reconnect with customers who may find the virtual option to be a key differentiator.

And all of those customers can be better leveraged because of the personalization that virtual cards offer. They allow controlled merchant-specific spending incentives.

That can include multipliers, seasonal promotions, limited time offers and more. In the end, that translates into better tracking, which in turn leads to more precision in driving behavior through rewards.

While rewards and perks, along with ease of use, may bring initial adoption of virtual cards, the long-lasting loyalty will likely be tied to the ultimate pain point for customers: security and privacy.

Customers value knowing their information is protected and that the security of their private information is a priority for the company with whom they do business.

If card companies can create messaging and tools that both show and tell their customer that value, they will gain very real benefits from their virtual card offerings.