How virtual cards make banks more competitive

After two thousand years of dominance, cash is losing its position as the default way to pay. In Germany, over 80% of physical stores now accept card or smartphone payments, and more than 60% of in-store sales are made by card. With card payments accounting for over €570 billion of spend in Germany each year, the days of ‘cash is king’ seem to be drawing to a close. But as well as becoming digital, expectations around speed, security and control are changing too.

Virtual cards, which exist only in digital form, are redefining what customers expect from payments. A natural extension of your bank’s digital ecosystem, virtual cards can be embedded in your digital banking app or integrated into popular mobile wallets like Apple Pay or Google Pay. They can be issued instantly, controlled in real time and used anywhere online or in-store, replacing the need to carry a physical card.

Neobanks have already shown how powerful this can be. Revolut (UK) attracted two million customers in Germany and around one million in Switzerland partly thanks to offering virtual cards seamlessly within its banking app. For product designers, UX teams and digital transformation leaders, virtual cards are becoming a must-have to enhance your bank’s digital offering and improve customer engagement.

In this article, we’ll explore why virtual cards are becoming essential, how they benefit both customers and banks, and what to consider when integrating them into your bank’s digital channels.

Europe became the largest market for virtual cards in 2022, when it accounted for a 38% share of the global market. Germany’s virtual card market is already worth over $1 billion, with growth forecast at over 22% each year until 2030.

The speed of this adoption reflects a broader societal shift in how people want to pay - today’s customers expect payments to be fast, flexible and secure. Virtual cards deliver on all three, which is why digital-first players like Revolut and N26 (Germany), who integrated virtual cards into their banking apps, have seen such strong uptake.

Some large European banks have also introduced virtual cards, including Santander, BNP Paribas (for business customers only) and BBVA (pre-paid only). But the majority of traditional European banks are yet to add virtual cards to their offering, leaving a gap for neobanks to capture market share by providing a more modern, app-centric payment experience.

Virtual cards combine the familiar benefits of physical cards with new, enhanced features that physical cards can’t provide:

• Instant issuance: Instead of waiting for a plastic card to be delivered, customers can start using their card in seconds, straight from their banking app or digital wallet. As well as saving time, this also reduces the environmental impact of producing and shipping plastic cards.
• Real-time controls: Customers can set spending limits, restrict certain merchants (eg. gambling or adult content) and easily control where their card can be used geographically - activating only Europe while at home, or enabling specific countries when traveling. They can also disable their card for certain transaction types, such as ATM withdrawals or e-commerce, for added security and flexibility.
• Built-in security: Virtual cards function like traditional cards, with a 16-digit number, expiry date and CVV, but their details are randomly generated and unique to each transaction. This means if virtual card information is compromised, it can’t be used to access the user’s actual funds. Tokenization and dynamic card details greatly reduce the risk of fraud and unauthorised transactions, cutting down on chargebacks and disputes. Many virtual cards are also temporary or single-use, limiting the potential for misuse even if details are stolen.

Virtual cards offer banks plenty of benefits, too:

• Less fraud: Because virtual card details differ from the underlying funding source, they provide an extra layer of security. Tokenization replaces sensitive card details with unique digital tokens, making every transaction more secure. Single-use virtual cards for online purchases reduce exposure to fraud even more, protecting both customers and issuers.
• Lower operational costs: Banks no longer need to produce and post plastic cards to customers, including complimentary replacement cards. This not only reduces costs but also aligns with sustainability goals by cutting down on plastic waste and transportation emissions.
• New ways to engage users: Being able to issue virtual cards instantly, providing spending analytics and integrating loyalty programmes can keep customers returning to your banking app.
• Global reach: Virtual cards are particularly valuable for international ecommerce, as they allow customers to make secure card-based payments even in regions where physical card infrastructure is limited.

Product designers and UX teams should bear in mind that virtual cards must be intuitive to use and accessible. They should feel like a natural part of your bank’s digital experience, whether in your banking app or a third-party wallet. This includes allowing customers to create, manage and use their cards easily - clear interfaces, simple controls and seamless integration with your existing banking app or wallet are therefore essential.

At a minimum, virtual cards should include:

• Instant issuance
• Easy activation
• Straightforward spend management (e.g. setting monthly spending caps or categorising transactions)
• Temporary and permanent card blocking

But the best experiences allow users to:

• Set custom limits (e.g. daily, weekly or per-transaction spending caps)
• Generate single-use cards for online purchases
• Track spending in real time
• Receive real-time transaction notifications (e.g. instant alerts for purchases or declined transactions)
• Add virtual cards to everyday payment wallets like Apple Pay or Google Pay, ensuring they’re always accessible

Business customers may also appreciate:

• Automated expense tracking (e.g. auto-categorising transactions for accounting or exporting spend reports for reimbursements)
• Real-time budget controls (e.g. setting department-specific limits or blocking certain merchant categories)

The key to success is making sure virtual cards are fully integrated into your bank’s digital ecosystem, providing a cohesive and user-friendly experience. The technology to make this happen is already here, allowing you to embed virtual cards into your digital channels quickly using APIs and tokenization. And with the right analytics, you can give customers insights into their spending - helping them budget better and building stickiness for your banking app.

For retail customers, virtual cards are ideal for online shopping (where, for example, single-use card credentials add an extra layer of security), subscriptions and family spending where parents can issue cards for their children with custom spending limits and merchant restrictions. When integrated into your banking app, these features become even more powerful, providing a seamless and secure payment experience. Shoppers can create single-use cards for extra security. And travellers can get instant digital cards to make bookings, without worrying about losing or having stolen their plastic card.

For SMEs and larger companies, virtual cards can be set up as employee expense cards with real-time budget controls - helping finance teams stay on top of spending. Single-use virtual cards can be used for procurement and travel to reduce fraud and simplify accounting. And for B2B payments, virtual cards can be used to streamline vendor transactions, with full visibility and control over every purchase.

Ultimately, virtual cards offer more flexibility than plastic cards and cash. They adapt to how people and businesses actually use them (eg. for one-off online purchases, recurring subscriptions or secure business expenses), and this is why they’re quickly becoming a standard expectation amongst customers.

Neobanks are already setting the pace, with some having offered virtual cards within their banking apps for many years. By raising customer expectations, neobanks have set traditional banks the challenge of keeping up with digital-first innovation. Customers now expect virtual cards to be a standard feature within their banking app, and banks that don’t offer this risk falling behind.

Over the last few years, virtual cards have become a mainstay of banking. If your bank hasn’t yet integrated virtual cards into its digital offering, now’s the time to make it a priority. This means ensuring virtual cards are a core part of your banking app and wallet strategy, providing a seamless and engaging user experience.

Fortunately, you don’t have to do it alone. G+D Netcetera helps banks design, deploy and scale virtual card solutions that are secure, scalable and tailored to your customers’ needs. We can help you integrate virtual cards into your banking app and wallet ecosystem, making sure they enhance your digital offering and meet your customers’ expectations.

Ready to make virtual cards a reality for your customers? Get in touch with our team today.