Virtual Cards: Safeguarding Your Online Transactions

1. Introduction

Virtual cards are quite important in safeguarding online transactions, as they use numerous security mechanisms to protect against fraud. These cards are merely a 16-digit card number, together with a 3-digit security code and a card expiry date as you would find with a physical debit or credit. The only difference is that these details are randomly generated online and are only valid for a short period. After this, the card details automatically expire and cannot be used again. In addition, the card itself can only be used with a specific company and can only be used if your spending limit is greater than a predetermined sum. This, of course, gives individuals greater control over how their cards can be used. Furthermore, in the unlikely event that your card details are compromised, it’s only the virtual card that is at risk – not any other form of payment. Also, it’s safe to say that virtual cards give peace of mind, as there is no need to carry around physical cards – this can, of course, help prevent fraud or theft in the first place.

1.1 What are virtual cards?

They are online cards that are not issued in physical form. Like physical credit and debit cards, virtual cards are also used for transactions and have 16-digit card numbers, security codes, and expiry dates. But virtual cards can be used to transact only on a limited amount as fixed by the user. Virtual cards are cards that are not physically issued by the credit card company. These cards have the same 16-digit account number that is associated with a traditional credit card but do not have a plastic card that can be used for point of sale or ATM transactions. And, as the name suggests, virtual cards are designed for use online and have some unique security features. Every time a virtual card payment is made, a new random card as well as a new account number is created for that single use. This means that even if you were to be a victim of a cyber-attack when using a virtual card, the stolen information would be useless to fraudsters after that single transaction. Also, as you can set the spending limit of a virtual card to the exact value that you need, even if your details were to be stolen, there would be a very low financial and administrative cost of correcting any issues.

1.2 Benefits of using virtual cards

Firstly, when it comes to virtual cards, most providers offer prepaid cards. This means you have to preload the card with your money before you can spend it. Meanwhile, the majority of virtual credit card accounts offer a single-use facility. This means that fraud is much less likely to occur because even if the data from the purchase is intercepted by a fraudster, they won’t be able to use these details to make a new transaction elsewhere. Often, virtual card providers apply additional security features because transactions are made entirely online. These can involve a unique CVV number being generated for the virtual card. This added security is significant when you’re making a purchase online. This is especially true if you plan to make multiple online purchases and the retailer that you’re shopping with isn’t very well known to you. Cybercrime is a growing problem worldwide, and everyone is at risk of becoming the next victim. Virtual cards provide an extra layer of security that you simply can’t get with a traditional credit or debit card. Not only that, but if someone does manage to use the card details fraudulently, you can simply cancel the virtual card and have a new one with a new number issued almost immediately.

1.3 How virtual cards work

Once you have received your virtual card details from your credit card provider, you can use them to make online transactions. When you make a payment, the payment details that you enter do not include your personal credit card number. Instead, they include the virtual card number that is issued to you. When the payment is processed, the transaction appears to be carried out by the virtual card, not by your personal credit card. This means that your personal credit card number is not transmitted across the internet when you make a payment. If an online fraudster managed to intercept the details of the transaction, they would not be able to see your personal credit card number. They would only be able to see the virtual card number – which is of no use to them without the associated security code and other information. Also, virtual cards are effectively useless for physical point-of-sale transactions, since – unlike your credit card – the virtual card does not exist in a format that can be swiped or read by a card reader in a shop. This gives you added protection from unauthorized transactions that might occur if your personal credit card was lost or stolen in a situation like this. And finally, because virtual cards are typically limited in some way – for example, by setting an expiration date or a maximum spending limit – they can be used to help control, monitor and restrict the transactions that can be made using your personal credit card. So you can set up a virtual card to have, say, a 2-week validity period and a £500 maximum spending limit, and use it to pay for a specific purchase that you know costs less than £500 and is within the next two weeks. Even if the virtual card details were intercepted in an online transaction, they would be of no use to anyone – including you – after the date of expiry or if they attempted to make a transaction of more than £500.

2. Security Measures

One key security measure for safeguarding online transactions is encryption. When information is transmitted, the first safety measure that it takes is called Protected Socket Levels, or SSL. This is a multi-step process that helps to encrypt the information at one end and then decrypt it at the other end, and vice versa. At present, the usual in the industry for businesses such as Visa or MasterCard is to use 128-bit encryption in the SSL. To put this in perspective, it can take a lifetime to decrypt the information – even with the use of the most advanced equipment and complex algorithms – if the correct coding is used. Similarly, tokenization also involves protecting the sensitive information during the transmission between the payment terminals and the banks. This is done by replacing the information – such as the bank account details – with something which is virtually meaningless and random. A “token” represents the stored card on the payment system, and it works in a similar way to encryption, by translating data into a secure object that has no exploitable meaning.

2.1 Encryption and tokenization

Encryption is the process of taking information and then scrambling it so that it can only be accessed by certain people. In the case of virtual cards, when payment details are sent online, companies use encryption to keep them safe. The data is encrypted using a key, a piece of information used to make the output truly random, which is stored and transmitted along with the encrypted data. However, the recipient, in this case, the company at which you are making a payment with your virtual card details, has the corresponding decryption key that allows them to unscramble the data and use it as normal. The greatest advantage of using encryption to protect virtual card payments is the fact that the information is not static. Every card payment uses a different combination of keys and this, along with the complex nature of encryption methods, means that even if a fraudster were able to intercept and obtain the payment data from one transaction, this does not mean they would be able to do the same for all future transactions, or even just the next payment from the same user. This emphasis on using dynamic, rather than static, data as a way of protecting virtual card payments has been recognized by strong customer authentication rules now coming into place in the UK. Thanks to tokenization, even the data which is securely stored can be made dynamic and therefore the security of virtual card payments will only increase more over time.

2.2 Two-factor authentication

Two-factor authentication is a highly recommended security measure. By enabling two-factor authentication for the virtual card, you add an extra layer of security to protect your account. It is almost impossible for an attacker to gain access to your account if they do not have all necessary information. Two-factor authentication generally requires: something you know, such as a password or a PIN; and something you have, such as a card or a mobile device. When you add two-factor authentication to a virtual card, it will usually work like this. After entering the PIN, you will be prompted to provide a second, one-time passcode. This passcode may be sent by the card provider to your mobile, or you might use a physical card reader to generate the passcode. These code generators are small, portable devices which help to provide secure two-factor authentication for different types of card transactions. The generators are powered by a battery and rely on a built-in real-time clock to provide a unique passcode for a short time period, typically around 30 or 60 seconds. The chosen passcode is displayed on the generator’s screen and is verified by the card when you enter it. It is important to understand, however, that two-factor authentication will only help to protect card transactions. In some situations, such as making a payment over the phone or providing card details to a trusted organisation, there may be no requirement for two-factor authentication. Two-factor authentication can be expensive and time-consuming for organisations to implement. As such, it is only mandatory for card transactions in the European Economic Area. However, the financial consequences of not protecting your online transactions provide a compelling argument for enabling two-factor authentication wherever it is offered.

2.3 Fraud detection and prevention

To reduce fraudulent transactions through virtual card numbers, state-of-the-art fraud prevention and detection tools are deployed. The most widely used tool by financial institutions is the real-time fraud monitoring system. This system works by detecting and alerting the virtual card provider of any suspected fraudulent transaction attempt for close monitoring and further investigation. The system operates by analyzing various attributes of the online transaction being made, such as the IP address of the computer or mobile device, geolocation or physical address details, type and value of merchandise or services being purchased, and many other specific transaction data. In order to increase the accuracy of fraud detection, the system is configured to use complex decision rules, algorithms and AI-based intelligence that automatically cross-reference and analyze hundreds, if not thousands, of different attributes of any given online transaction. If, for example, during this analysis, something does not add up, the real-time fraud monitoring system will generate and transmit a fraud risk alert or warning to the virtual card provider. The system may also possibly send a separate transaction verification request to the owner/user of the virtual card as an added security measure. Fraud detection through transaction verification is also employed by financial institutions. In this case, if the real-time fraud monitoring system suspects and alerts of a potentially fraudulent transaction, the virtual card provider is notified to take certain actions before any authorization of the transaction can take place. A common action required is for the provider to generate and send a verification code to the owner/user of the virtual card through their mobile device or email address on file, which code must be entered and verified before the transaction can be authorized. By this time, however, a fraud risk alert may have already been communicated, prompting the virtual card owner to act swiftly in order to prevent any further escalation of the suspected fraud. Fraud detection through transaction verification is also employed by financial institutions.

3. Virtual Card Providers

Virtual card providers are financial organizations that offer virtual card services to customers. Some virtual card providers are digital-first banks which offer virtual card services as part of their banking services. Popular virtual card providers include Revolut, Monzo, N26, and Starling Bank. These virtual card providers are app-based banks that provide modern banking services including virtual card services. Additionally, other financial technology firms such as Curve and TransferWise also offer virtual card services as part of their offerings. Curve is a widely used innovative financial technology company that directly competes with the services offered by digital-first banks. The company markets itself as an all-in-one card linked to an app which can replace all of a customer’s other cards with just the single Curve card. On the other hand, TransferWise is more focused on providing services for users who often make transactions across different countries. The multi-currency account and the TransferWise Mastercard work together to cut foreign currency spending and sending costs. These are only two examples of virtual card providers targeting a specific customer base with tailored services. The features and offerings of each virtual card provider are different from one to another due to the unique business strategy and the target customer base of the organization. It is important to conduct a comparison on different virtual card providers in order to select the most appropriate one based on the needs and expectations. By carefully understanding the differences of virtual card providers, customers can benefit the most from the adoption of virtual card services depending on the individual demands.

3.1 Popular virtual card providers

I will be writing about the main virtual card providers in this section and based on what I research so the fact that after… We will give a detailed review of the popular virtual card providers (all the key players are already listed above) based on our survey results and information from reliable sources, for example, website of the virtual card companies. First of all, we have Revolut. Revolut is established in 2015 and has an active user of about 2 million, according to the information on its official website. It is having a full electronic money license and has provision in app for you to generate virtual card which can be used immediately. Also, for all the virtual cards provided by Revolut, 3D secure transaction is supported. You can also link your virtual Revolut card to Apple Pay and Google Pay. Every card contains a card holder’s name, the sixteen-digit card number, an expiration date, and CV code. For security and privacy, the CV code is not static and automatically changes after a certain period of time. This feature greatly enhances the security level of online transactions. And you can use the virtual card to complete online transactions with businesses that are on the MasterCard or Visa network. For overseas spending or withdrawal, Revolut is offering a free amount of £200 or €200 per month and a 2% fee will be charged thereafter. Additionally, for foreign exchange, up to £5000 or €6000 exchange at the interbank rate per month, and a 0.5% fee will be charged thereafter.

3.2 Features and offerings of virtual card providers

One of the most attractive features of virtual cards for modern businesses is the real-time expense management and tracking offered through most of the virtual card providers. Companies can generate single-use or multi-use virtual card details and set individual spend limits directly via the virtual card platform. They can monitor all expenditure through the virtual card system and link spending directly to individual projects or activities, negating the requirement for manual processing in accounts payable and reducing the need for employee expense claims. Many virtual card providers also offer their own bespoke security in the form of tokenization and end-to-end encryption. This technology transforms the personal and financial information entered by a user into an encrypted code to help protect against unauthorized access or exploitation. When a virtual card is used for a financial transaction, the code is ‘detokenized’ when it reaches the virtual card provider, processed as normal, and then retokenized to maintain security throughout the transaction process. Virtual card providers often use industry-standard security practices in their services, such as compliance with the Payment Card Industry Data Security Standard, to offer further protection for the businesses and users who take advantage of virtual cards. Finally, virtual card providers can help place a greater emphasis on a mobile-first approach for businesses. With a smartphone, a member of staff can create a new virtual card on the go, provide the details to a supplier immediately, and make payments securely and conveniently, whenever and wherever they are needed. Many of the established virtual card companies have dedicated apps offering full virtual card functionality to ensure a seamless experience regardless of the device being used.

3.3 Comparison of virtual card providers

It is a good idea for you personally to check all the providers and find out one you are feeling more comfortable and secure dealing with. Well, the question of safety in online transactions can also be a significant matter. Final choice of providers depends on one’s own preferences and views, furthermore for the reputations on the above providers. However, the comparison on many different providers gives selections and improves the potential for receiving favorable benefits through one’s own choices. In the existing market, 3 main types of virtual card providers are identified and they are Entropay, PayPal and Neteller. From the comparison, sign-up cost for Entropay could be the highest with $5, meanwhile it gives the highest amount in replacements with a total of 3 by comparison to PayPal with 2 replacements which can cost another $5 to replace at the same time as replaces for Neteller. It requires 2-4 days to acquire the physical card to utilize with virtual card for Entropay, however the information on the card is instant. As for PayPal and Neteller, there’s absolutely no waiting time to obtain the physical card because it usually depends upon the location of the card holder. With the comparison in the replacements fees and waiting time to obtain the physical card, Neteller or PayPal could be the more favorable virtual card provider. On the notion of card consumption fees, PayPal will be the finest selection as $1.5 charges on withdrawals when compared with Neteller with $3 replacement fees and 1% charges on withdrawals and Entropay with $6 charges on each single withdrawal and 1.95% charges on loading by credit or debit card. PayPal is a winner in the comparison on the fees it charges for withdrawals and replacements.

4. Tips for Safe Online Transactions

A tip for secure internet browsing is to never conduct online banking transactions on a public Wi-Fi. What happens here is that a criminal might set up a honey pot – this is a computer set up to look like a legitimate network with the sole purpose of stealing sensitive data. Also, don’t be fooled by other networks that might appear secure – only a network which requires a password for access should be considered a secure network for online banking. It’s also important to ensure that security software is kept up to date. This includes both the computer’s operating system and the internet browser, making sure to include updates and patches for any security weaknesses. One of the things that can be very effective in keeping your computer secure is a firewall, which is a bit like having a security door at the entrance of your house – it helps to keep out a variety of potentially harmful attacks. However, for someone who’s never used the internet for shopping and banking before, this might seem a little daunting! Some helpful things you can look for in a secure site are a picture of a padlock near the status bar at the top of the computer screen, a web address beginning with https:// (the s stands for secure) and possibly a green address bar or a green certificate which verifies the identity of the company providing the site. Last but definitely not least, take care not to fall victim to phishing – that is the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords, and credit card details, often for malicious reasons, by masquerading as a trustworthy entity in an electronic communication. Firewalls can help protect our computers from hacking attacks, and savvily identity thieves can send out links to a false website that looks just like the site you are expecting to use and then steal the information you provide when you respond to their request. So, never follow a link or call a number given in a potential phishing email and always check with your bank. And if you are unsure as to the legitimacy of an email or organization that appears to email you with a request for personal information, contact the company directly using established contact details and never use the contact details in a potential phishing email!

4.1 Keep software and devices up to date

You should install updates as soon as possible – don’t click “remind me later” or “skip” as you could be leaving your device vulnerable to attack. This is particularly important for operating system updates – these small messages which might pop up from time to time are designed to protect devices and information on a large scale. Using old software which has known security issues could make you an easy target for cyber criminals. It’s also necessary to keep your security software activated and up to date – this includes your computer, tablet and your smartphone. Security software really acts as a safety buffer between the internet and your device. It will warn you of potentially dangerous websites and fight off infection but only if it’s updated regularly. Make sure your settings are as such that you get alerted when updates are needed – as with most things, prevention is better than cure and it’s always best to know when to update.

Software and device manufacturers frequently release security updates as cyber criminals continue to find new ways to infiltrate your devices and access your information. That’s why it’s crucial to always keep your software – including your operating system, the software on your devices and apps – up to date. When a new software update is available, oftentimes a notification will appear on your device.

4.2 Use secure networks and websites

Public Wi-Fi networks should be avoided when making transactions or payments online, since the open nature of these networks can allow nearby malicious users to intercept data and access a device. Secure websites are identified through the lock icon present in most browsers, and users should extend this level of security to the checkout process of an online transaction as well. Over-the-top (OTT) mobile payment solutions are relatively new and can offer fast and secure methods to complete transactions. Using services such as Apple Pay or Android Pay allows transactions to be completed by scanning a fingerprint, and the user’s real card details are not passed onto the website or the vendor that the user is buying from; a technology known as tokenization. However, make sure that any web link or site page visited is legitimate, and users should not become complacent and assume that a familiar well-known website is secured just because a renowned company hosts it. If a user is logged into a website and a payment screen suddenly asks for card details again, this may be a sign of a fake or ‘spoof’ website and card details should not be entered.

4.3 Regularly monitor transactions and statements

Criminals often opt for small transactions as they hope that consumers will not spot targeting this method of fraud. As transactions made using a virtual card will appear on consumers’ regular statements, it’s important that they are reviewing these and reporting any unfamiliar transactions to their card provider as soon as possible. This will help to safeguard consumers and prevent fraudsters from making further transactions. Nowadays, many card providers allow consumers to access their statements online, which provides an easy and accessible way to monitor transactions. Regularly checking statements, if they are not monitored automatically and signing up to automatic alerts if this is an option, can be the best way to check for any unusual transactions. By replying to these promptly and reporting any unauthorized transactions, consumers can help to protect themselves from fraud and reduce the likelihood of it happening in the future. It’s also important to ensure that consumers’ personal information is kept up to date and that a current mobile phone number is provided to their card provider. This is because providers may send a text message to customers’ mobiles which will help to verify that the transaction is being attempted by the actual account holder, not a fraudster.

4.4 Be cautious of phishing attempts

Phishing is a method that fraudsters use to acquire sensitive personal information such as usernames, passwords, and financial details. Phishing is usually carried out by emails, text messages, or fake websites which are designed to look like they are genuine and from a legitimate source, in order to trick the individual into disclosing their personal details. There are a number of signs that you can look out for in order to spot a potential phishing scam that include a sense of urgency, asking for personal and sensitive information, containing bad spelling, grammar, and punctuation, or the email does not address you personally, just with a general greeting. Always ensure you are cautious and take careful consideration before submitting any personal information, especially if you are asked to click on a link to provide it. You should ensure your computer or device is up to date with the latest security updates and patches in order to protect against viruses and malware. Always use an up to date web browser or email client which generally will be designed to identify phishing and provide warnings. In addition, install a decent security software and keep it up to date; always remember that banks and other financial institutions will never ask for personal and sensitive information, so be cautious of the requests for such details.