What Comes After Tap to Pay? Why Bank Leaders Should Prioritize Virtual Cards
What started as a niche fraud-prevention tool in the early 2000s has evolved into a versatile payment instrument offering four compelling advantages: immediate access that eliminates waiting for physical cards, enhanced security through unique transaction numbers, flexible deployment across digital environments, and improved spending control for organized financial management.
By Mark B. Egan
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Virtual cards have for decades kept a low-profile — progressively gaining credibility and finding new use cases, even as they remain very much in the shadow of digital wallets and instant payment services. But as tap-to-pay fast becomes second nature and digital wallets approach maximum penetration, virtual cards may now be emerging as the next strategic lever for issuers.
This is especially true as the battle for cardholder primacy — top of wallet — intensifies. In this context, more financial institutions may see virtual cards as a differentiated offering worth spotlighting, both for their utility and for their potential to advance the conversation on pain points like payments security and digital engagement.
Even within the industry, virtual cards are often misunderstood. At their core, they’re digitally issued payment cards that function like physical credit or debit cards, minus the plastic. First introduced in the early 2000s as a fraud-reduction tool for online shopping, they’ve evolved into versatile instruments with use cases ranging from single-use purchases to subscription management and merchant-specific transactions.
Today, adoption may be further along than many issuers realize. A new survey of 2,250 U.S. consumers — conducted by PYMNTS Intelligence and Elan Credit Card — reveals that 42% of U.S. consumers have used a virtual card in the past six months, and 65% say they are likely to do so in the next year. Most consumers first encounter virtual cards through digital wallets or fintech tools — and the fact that they are sometimes confused with other forms of payment suggests continued adoption will require clarifying their unique benefits. Meanwhile, their use is steadily expanding into other applications and their appeal is growing: Nearly three in four consumers now say they would prefer to use a virtual card in at least one payment situation.
This momentum signals a broader opportunity for issuers. What was once a niche offering is fast becoming an anchor capability for those seeking deeper engagement with key segments, such as small businesses and digitally-minded consumers. For financial institutions aiming to grow in these markets, a new virtual card value proposition is taking shape, one that’s built around immediate access, enhanced security, flexible deployment, and improved spending control.
1. Immediate access. Virtual cards allow issuers to eliminate the traditional waiting period between account approval and card activation — a benefit for both consumers and institutions. Rather than waiting several days for a physical card to arrive in the mail, customers can access and use their account immediately. According to the PYMNTS/Elan report, 31.2% of consumers have used a virtual card to gain instant access to a new credit card. That speed improves the customer experience while also reducing friction points that often lead to branch visits or call center inquiries.
2. Enhanced security. One of the most compelling features of virtual cards is their ability to reduce exposure to fraud. Unlike physical cards or static card numbers stored online, virtual cards can generate a unique 16-digit number for each transaction or use case. This added layer of security resonates with consumers — especially those who’ve already experienced fraud. According to the PYMNTS / Elan report, consumers who have dealt with a fraud incident are 36% more likely to adopt virtual cards. The data also shows that when security matters most, usage rises: one in four consumers have used a one-time card number for an online purchase, 28% have used virtual cards for automatic payments, and 25% have created merchant-specific cards within apps.
Want more insights like this? Check out Elan’s content portal: Credit Card Issuance: Strategies & Solutions
3. Flexible deployment. Unlike physical cards, virtual cards aren’t tied to a single piece of plastic or a single user. They can be generated, managed, and shared within digital environments — making them well-suited for digitally-savvy families, small businesses, or others who want to delegate spending with controls. For example, a parent can assign virtual numbers to children, each with their own limits and usage parameters. Virtual cards also function reliably in mobile wallets, meaning they can be used even when the physical wallet is left behind. The report further highlights their use across a variety of scenarios — from single online purchases to merchant-specific cards and recurring subscriptions — underscoring their adaptability to how people actually shop and manage payments today.
4. Improved spending control. Virtual cards offer consumers and small businesses new ways to organize spending — by separating expenses, assigning specific cards to budgets or merchants, and setting parameters for recurring charges. This level of control makes it easier to track payments and manage cash flow in real time. The PYMNTS/Elan report notes that 28% of consumers have used virtual cards to set up automatic payments, and 25% have created merchant-specific cards within apps — both behaviors that support more intentional budgeting and expense oversight. These features can be particularly useful in contexts where maintaining visibility and discipline around spending is critical, such as managing household finances or separating business purchases from personal ones.
What’s Next
While virtual cards were used in the past six months for more than 45% of online purchases from large retailers and for subscriptions services, uptake is just a little more than 20% at restaurants and in-store purchases, according to the PYMNTS/Elan report.
This convergence reflects both growing comfort with mobile payment options and virtual cards’ versatility. As more consumers store virtual cards in wallets like Apple Pay or Google Pay, financial institutions have an opportunity to promote them not only as secure online tools, but as everyday payment options that meet consumers wherever they choose to shop or dine.
The PYMNTS/Elan report finds that the top features that attract consumers to use virtual cards are digital wallet integration (among the most tech savvy users) and rewards/cash back features for more mainstream users. Adoption is especially high among younger consumers: 62% of Gen Z and 57% of millennials reported using virtual cards in the past six months, compared to 38% among Gen X and just 22% of baby boomers.
The report proposes that education around the benefits of virtual cards will be essential to boosting their use. It recommends a dual-track strategy, emphasizing their innovative features for younger, digital-first users and their applicability to familiar use cases for older, more cautious customers.
“Solving these pain points for cardholders is the new value proposition battleground,” said Adam Winchester, Head of Consumer & Small Business Payments Experience at U.S. Bank, the parent company of Elan Credit Card. “Benefits and rewards can only go so far economically, so it’s crucial to offer innovative capabilities and new experiences that differentiate your offering.”
