Module 1: What Virtual Cards Actually Are
Learning Objectives
By the end of this module, you'll be able to:
Define virtual cards in the context of global payment systems
Understand where they sit in the card ecosystem
Distinguish between physical, virtual, and tokenized cards
Recognize the business and technical reasons to use them
Explain where they’re commonly used and how they’re issued
What Is a Virtual Card?
A virtual card is a payment card that exists entirely in software.
Just like a physical debit or credit card, it has:
| Component | Example |
|---|---|
| PAN (Primary Account Number) | 5078 1234 5678 9010 |
| Expiry Date | 12/27 |
| CVV | 345 |
| Cardholder Name | N. Okoye or your business name |
But unlike a physical card, you won’t receive anything in the mail. It’s created and delivered digitally, usually through:
APIs,
Wallet apps,
Banking apps,
B2B platforms.
It is used mainly for online payments — websites, in-app checkouts, subscriptions, and e-commerce — often called card-not-present (CNP) transactions.
Any licensed card issuer — like a bank or fintech company — can issue virtual cards, if they’re connected to a card scheme.
Virtual cards today are issued on:
Visa — global reach, most common
Mastercard — also global, widely used for corporate and prepaid solutions
Verve — dominant in Nigeria and West Africa, issued by Interswitch
UnionPay — dominant in China and growing globally
Discover, AmEx, and local scheme integrations
Even some closed-loop systems (e.g. PayPal, Apple, Google) issue card-like virtual instruments for use inside specific ecosystems.
So the concept of a virtual card is not brand-specific. It’s an industry-standard abstraction over a payment credential that happens to be non-physical.
How Virtual Cards Fit Into the Card Ecosystem
There are three types of payment cards:
| Type | Description | Use |
|---|---|---|
| Physical Card | Plastic card with chip, magstripe, or NFC | ATM, POS, online |
| Virtual Card | Digitally issued card with no physical form | Online/CNP use only |
| Tokenized Card | A version of a card stored in a secure element (e.g. Apple Pay) | Contactless, in-app, dynamic tokens |
Virtual cards are great for:
Online purchases
Digital onboarding
Budgeting and spend control
Issuing at scale
They are not ideal for:
In-store purchases (unless tokenized into Apple/Google Pay)
ATM withdrawals (unless explicitly supported)
Where Are Virtual Cards Used?
| Use Case | Description |
|---|---|
| Subscriptions | One card per service — easy to cancel or track spending |
| Marketing Budgets | Create a card per ad platform (e.g. Meta, TikTok, Google Ads) |
| Freelancer Payouts | Give remote workers a card instead of bank payout |
| Travel & Expense | Teams use per-person virtual cards with limits |
| Online Shopping | Safer than exposing a full physical card for every transaction |
| App Stores | Used to verify identity or make small purchases during onboarding |
Why Virtual Cards Are Useful
Security
Each card can be frozen or terminated instantly
Cards can be restricted by category (e.g., block betting, crypto)
Merchants never store your main account number
Reduced risk of skimming or POS compromise
Control
Per-card limits
Category-specific usage
Short-lived cards
Full visibility and transaction history via API
Programmability
Cards can be created or destroyed by software
You can issue cards dynamically: for each campaign, project, department
You can run experiments without financial or operational friction
How Virtual Cards Are Created
Behind the scenes, when you issue a virtual card:
A request goes to a card issuer’s system
They reserve a unique PAN (card number), expiry, CVV
The card is created in a card processing system (e.g. Marqeta, Galileo, Interswitch)
It becomes active and ready to use
The system (API, app, etc.) securely returns the card details to the user or platform
Most of this happens in under 5 seconds.
Limitations of Virtual Cards
| Limitation | Explanation |
|---|---|
| Not usable at ATMs | Most virtual cards do not support cash withdrawal unless specifically enabled |
| No POS access | Cannot be swiped or tapped in stores unless tokenized into a wallet |
| Not all merchants accept CNP | Some services require 3D Secure or other KYC-linked verification |
| May incur cross-border fees | Even for USD transactions if settled outside the U.S. or card region |
| Susceptible to merchant MCC blocks | Gambling, crypto, or P2P sites may be declined based on issuer policy |
Recap: Key Takeaways
A virtual card is a digitally issued payment card designed for online use
It's issued by a licensed issuer under a card scheme (Visa, Mastercard, Verve, etc.)
It has all the components of a physical card — but lives only in software
You can program how and when it’s used: limits, lifecycle, spending patterns
It's ideal for modern, API-first financial products, and replacing clunky manual processes
Exercise
Write down 3 real use cases where virtual cards would save your team time or money, and what kind of control you'd want (per-user, per-department, per-merchant, etc.)
Then think: would you want to build this into your product, or offer it as a service?
