Virtual Credit Cards or VCCs for short are gaining more traction. Experts predict that the global value of VCC transactions will reach a staggering number of 6.8 trillion dollars by 2026.
But, will this benefit you? Who are the most common users of this payment method?
Most importantly, what are the drawbacks and what do you need to be on the lookout for?
Understanding how this payment process works lets you stay on top of the latest technological advancements.
Let’s dive right in!
1. What Is A Virtual Credit Card?
This hot new way of payment is a temporary credit card number used to facilitate online charges or transactions. Created as an extra measure of security, these cards use randomly generated numbers instead of revealing real credit card details.
VCCs are not limited to credit cards only but can be referring to and in support of:
✅ Debit cards
✅ Prepaid cards
✅ Credit cards.
This also includes deferred debit cards.
It’s worth noting that, because of a higher security risk, deferred debit and credit cards have higher interchange fees than just immediate debit and prepaid cards.
These unique card numbers can be charged or refunded based on your need. Compared to traditional payment methods, this new payment solution has many benefits.
2. Who Do Virtual Credit Cards Benefit The Most?
The need for a VCN(Virtual Card Number) arose in the market through B2B hospitality. It’s less common for individuals to opt for virtual credit card payments but it’s not impossible. So, who are the users you would most likely need to accommodate?
✅ Business travelers
✅OTAs
✅ Individual travelers.
Let’s look at how using this type of virtual card suits each of them.
1. Business Travelers
Before this new technology, people on work trips had the discomfort of covering the costs of their stay on their personal cards. They would then have to ask their boss for reimbursements.
Imagine the distress. A surprise work trip after a weekend bender could have brought you to financial ruin. Well, those days are over.
With these, travel payment is made directly without burdening the employee.
2. OTAs
There are two ways OTAs charge guests for their booking:
✅ By sending the credit card information to the property and having them charge the guest
✅ By charging them themselves and then creating a VCC used to send the payment to the property
In case of sending information to the accommodation, the hotelier would receive raw card information and would be on the hook for authenticating the transaction. This also sends the guest from one website to the next one and often results in discouraging the guest from making the purchase.
In the latter case, the OTA processes the payment themselves, which makes the guest experience more seamless.
3. Individual Travelers
Guests like to use VCCs because of the security they offer. By making a single-use virtual card, they know they can book a stay at any accommodation without the risk of fraud. This payment card expires once the transaction has been made.
When booking your accommodation through a booking platform, they are allowed to choose their preferred payment option. Their funds are then transferred to a VCC which you can then charge as any regular card.
These cards can be charged or refunded based on your need.
To learn more about the types of guests you could encounter in your property, click here.
3. Benefits Of Using Virtual Payments
1. Enhanced Security
These cards offer a great way to protect card information from fraudulent activities. Since these cards are generated randomly and can be for single use only, they bring peace of mind to all parties involved.
Single-use numbers expire after the transaction is made so even if someone found the payment details, they wouldn’t be able to do much about it.
With spending limits and real-time transaction monitoring, this is a great security benefit.
2. Easy Expense Management
Organizing your expenses becomes easy for business travelers with virtual cards. With detailed reports and comprehensive transaction data, they can keep track of their spending.
3. In Case Of An Emergency
These cards also come in handy if employees misplace or forget their corporate cards. Creating a single-use VCC can be a lifesaver.
If an unexpected expense arises along the way, and traditional payment methods can not be approved quickly enough, this is a rapid solution to the problem.
4. Streamlined Operations With A Channel Manager
Having a powerful tool like a channel manager is what can make your hotel’s business run more smoothly regarding digital cards.
Accommodations benefit from using this tool by having automatic import with other reservation details from booking platforms or OTAs.
4. Drawbacks Of Virtual Credit Card Payments
1. High Interchange Fees
Using virtual cards inside of Europe is regulated by the PSD2 regulation. Broken down, this regulation ensures a 0.2% fee on consumer debit cards and a 0.3% fee on consumer credit cards.
The interchange fees on corporate cards are 1.5%. PSD2 regulation referees only to European-issued cards. Hold your celebration, since the interchange fees elsewhere are usually even higher.
If you’re overwhelmed now, there’s unfortunately more coming.
Besides these rates you need to be on the lookout for :
?Scheme fees
?Acquirer fees
?Payment gateway fees.
These are the usual credit card fees but these are NOT included in the already high VCC rates.
2. Limited Use
Based on the booking platform, charging for additional services inside the hotel might be a hassle.
Some VCCs might not allow charging for more than it was booked in advance.
This means you will need to charge the guest’s real credit card if they want to book one of your amenities. Be careful not to overwrite the VCC details in the reservation system when imputing their real credit card number.
There is a way to charge a VCC for add-ons, but it’s going to be complicated.
The process is called incremental authorization or over-capture. Adding a percentage on the VCC charge under the guise of incidentals is how you do the trick.
But not only is this complex to do but it increases the amount of administrative load. This means you need to step away from your usual payment methods and adapt to the requirements of each booking platform.
What a mess.
5. Booking.com And VCC
Most of you probably heard of this term through Booking.com. Let’s take a look at how this card is typically used on this platform.
✅ A new VCC is sent with each new booking you receive that is included in the guest’s reservation
✅ Each one has a unique activation and expiration date, its own CVC, and other details. After expiration, these numbers won’t be used again.
✅ You can charge a VCC using a POS machine.
1. How To Charge?
You can either charge this card by
a POS machine, or
if you use a property management system(PMS), add the payment to your guest’s reservation.
2. How To Refund?
Booking.com is on your side with this one. They are there to offer help and support through this process.
In most cases, if the transaction is completed, you can just send the same amount back to the same VCN.
If you are having trouble with this, contact your bank and Booking.com for support.
6. Online Payment Processor
Payment Processing is based on online billing and processing of card payments. It includes payment information from the customer to complete the transaction.
It does not require POS devices, and customers can pay in multiple currencies.
In addition, full card verification ensures that both your data and the customer’s data are fully protected, reducing the possibility of fraud. Helping your customers feel safe when paying online is a key ingredient in creating brand loyalty and building a reputation of a serious and respectable business.
A key role is played by the reception system (PMS), which is why the Payment Processor must be successfully integrated with your PMS.
7. Benefits Of Integrated Online Payment Processing With A PMS
1. Improving Guest Experience
The implementation of this system allows guests to pay as they wish from booking to check-out, thus improving the user experience and the possibility of repeat bookings.
2. No More Errors
Automation significantly reduces errors and the time required to correct them. Preventing mistakes is very important and beneficial to your business.
3. Faster Transactions
Payment is much faster and more efficient, which we all know is greatly appreciated by any guest.
4. No Need For A Physical POS Machine
If we are being honest, most people do not carry cash on them these days. Paying with a card or even a phone is an easier alternative to going to an ATM. It is simply not in style anymore.POS machines might be a thing of the past, they break easily and might take a longer time to process the payment if they are not connected to the internet properly. Giving this option to your guests will be amazingly appreciated and noticed on the market.
8. Wrapping It Up
VCCs have their pros and cons. They are very secure and convenient for corporate travel on the guest end but carry expensive fees and complications on the hotel’s end.
They are a way to charge a guest’s credit card through an OTA or a booking platform without making it very difficult or unsafe for the customer.
If they are used for a single transaction they expire right after but can be made to have recurring charges.
Using a PMS with a Channel Manager will make dealing with these so much easier.
The decision to integrate virtual cards is on you, but the reality is they are widely spread and commonly used.
9. How OTA Sync Can Help
OTA Sync is an all-in-one cloud-based software solution for managing hotels and apartments. Because of cloud-based technology, costs are drastically reduced, daily tasks are automated, and the overall efficiency and revenues of the property are increased.
OTA Sync software is suitable for medium and small hotels, boutique hotels, hostels, guesthouses, and apartments. The company has over 2.000 satisfied users in 17 countries around the world.
There are four complete solutions for managing hotels and apartments:
OTA Payments is a fully integrated payment gateway that uses automation to instantly process transactions with just a single click.
OTA Payments are quick, easy, and integrated into OTA Sync PMS. Real-time payments are also enabled on your Booking Engine.
For a free trial, click here.
