• Nathan Walton, Michael Porter
  • Published: 02 March 2023


Money, like so many aspects of modern life, is becoming increasingly digital. No longer do banks hold hundreds of millions of dollars in cash in their vaults, but rather maintain online system(s) to keep record of the amount of money under their management. Rarely does the average person use paper notes or checks to settle debts between counterparties, rather they tap their phone, swipe their card, or click a few buttons on a website.

These shifts in consumer preferences present a significant opportunity for financial institutions to expand their existing offerings to include more diverse products, such as virtual payment cards in lieu of traditional payment cards.

Ongoing innovation across financial services landscape over the past 20+ years has seen various modernizations of traditional payment cards, including online processing, encryption chips, RFID, and contactless payments. 

However, even with such enhancements, these traditional cards fall short in comparison to the versatility of virtual payment cards. Initially introduced in 2009, such virtual cards operate similarly to traditional debit or credit cards but – being entirely digital – offer benefits traditional cards cannot.

Typically utilized by enterprises through a dedicated provider and by individuals via a browser or web extension, virtual payment cards generate a unique 16-digital card number, expiry, and CVC upon request and are valid for a one-time transaction, ensuring maximum security. Additionally, each card number generated can be coded to a specific supplier and amount and then automatically deactivated once processed.

First brought to market by Mastercard to offer virtual payments for corporate clients, this technology is now available from most major banks, as well as fintech startups focused on accounts payable automation and retail customer privacy. However, while banks remain focused on their commercial clients, these fintechs like have been developing the infrastructure to provide access to retail banking clients.

The virtual payment card market shows no signs of stagnation. The global market is expected to grow up to 5.5x – from $11.7 billion to $65 billion – by 20301. The majority of this growth will be derived from Asia-Pacific countries as digital payment and banking solutions continue to penetrate these markets. By 2026, 71% of virtual card payments globally are expected to be business transactions2.

The projected growth in this space should come as no surprise, as the benefits that virtual payment cards offer commercial clients over traditional payment methods are extensive. Often marketed as accounts payable automation services, these benefits include enhanced spend management services, reduced manual labor, and cash back rebates.

Additionally, since there are not additional fees associated with the service and lower risks attributed to the uniqueness of card data; organizations face lower operating costs compared to alternatives. . Bank of America notes that virtual payment cards can add an extra 25 days of working capital to company’s balance sheets, as the card balance is not due until 25 days after the statement date3. Lastly, due to the way virtual cards operate, they are more secure as there is a reduced risk of fraud or security breaches.

Retail clients have recently been able to access some of the benefits of virtual cards through third-party providers like As that name suggests, while virtual cards are marketed to commercial customers as a means of reducing costs and automating internal functions, the typical retail customer is much more focused on their security and privacy benefits. Unlike a traditional credit or debit card, there is no way to tie a ‘single use’ 16-digit number back to an individual or entity.

Financial institutions are uniquely positioned to benefit from both commercial and retail use cases. Given the fully virtual nature of the card programs, there are naturally less costs associated with maintaining such an alternative. Clearly, when dealing with virtual alternatives, the cost of distribution and plastic is removed entirely.

Furthermore, the institution faces less risk of fraud when their clients use virtual cards for payments. Account and routing numbers stay private within the issuing institution’s systems, and there is minimal risk that an attacker would be able to exploit the card system. Additionally, payments made via virtual cards provide additional transaction details which financial institutions can leverage to enhance their existing product offerings.

“While adoption of virtual cards has increased among consumers, the adoption of ‘tap to pay’ terminals in stores is lagging.  This means that a customer could find themselves unable to use their top of wallet virtual card due a requirement for chip or swipe. The question then becomes whether consumer behaviors change to avoid merchants without tap?  Or will physical cards remain top of wallet?” – Daniela Hawkins, Managing Principal, US Banking and Payments, Capco


It is critical that financial service institutions account for this shift in the payment card landscape and expand their product offerings to include virtual card offerings. In doing so, they will not only be able to provide an enhanced and more secure experience for their existing clients, but they will be positioned to gain a market advantage by addressing the needs and expectations of an increasingly digitized population.


How can Capco help?

Define Future State Platform Capabilities: Identify the functional, operational, and technical capabilities institutions should consider for future state solutions

Market Scan / Vendor Analysis: Perform and deliver a robust and detailed analysis outlining providers and selection criteria for firms to consider as a potential buy, build, or partnership opportunity

RFI/RFP Management: Develop requirements and a corresponding RFI/RFP to send to vendors and create evaluation and scoring mechanisms to satisfy success measures.

Execution Plan: Develop a comprehensive roadmap, corresponding timeline, and playbook outlining how to implement the proposed solution(s)