A virtual card is a card number with no plastic card, created by software and often used for only one payment. Like any card, it has a card number, an expiry date and a CVV, the three-digit security code. But it exists only as data.
A company creates a virtual card in its card or payments app, within seconds. It sets the rules for each one. For example, a virtual card can be valid for one supplier only, for one exact amount and for one week. After the payment, the card is closed. So even if someone copies the number, nobody can use it again.
Companies use virtual cards in two main ways. The first is to pay suppliers. Accounts payable (AP) automation software can pay an approved invoice by creating a virtual card for that exact amount. It sends the card details to the supplier. The supplier then charges the card, as a shop charges a customer's card. For the paying company, this makes matching easy, because each card was made for one invoice alone. Paying suppliers by virtual card is common in the United States.
The second use is regular online and travel spending. Take, for example, a marketing team in Kozhikode that pays ₹30,000 a month for an online advertising tool. The finance team creates one virtual card only for that tool, with a limit of ₹30,000 a month. If the tool tries to charge ₹45,000, the payment is declined. When the team stops using the tool, the finance team closes the card. Some corporate travel tools also create a virtual card for each hotel stay, for the amount that the company's travel policy allows.
A virtual card is a kind of corporate card. It is not the same as a token. A token is a different number that represents an existing card, for one shop or one device; the real card behind it stays the same. A virtual card is a separate card number of its own, with its own limit. It can be closed without affecting any other card. Each payment on it is approved by the bank's card issuing platform, like any other card payment.
In India, a supplier pays a fee on each card payment it receives, called the merchant discount rate. So many Indian suppliers prefer a bank transfer for large invoices.