While South Africans have been embracing virtual cards for some time, the use of this digital payment method has seen a dramatic rise recently.
Data from Standard Bank shows that physical card uptake in 2020 slowed significantly, down over 50% from 2019.
Meanwhile, the number of virtual cards issued grew by over 400% in 2020. “We’re seeing a similar trend in 2021, with more than 24 000 virtual cards issued year-to-date,” says Arno von Helden, Co-founder, and Head of Standard Bank’s Shyft Forex App.
“Online purchasing, which has increased exponentially since March 2020 when the COVID-19-induced lockdown commenced, is a significant driver of this growth.”
As the world becomes more global, South Africans are buying more than ever before from international sites like Alibaba and Amazon, while streaming entertainment on Apple or Netflix and accessing content from publications like the Wall Street Journal or New York Times is also incredibly popular.
According to von Helden, South Africans are using virtual cards to make these payments and manage their online subscriptions.
“While physical cards have undergone security innovations, consumers are still at risk for potential fraud and identity theft when they process a payment online or over their mobile phone. This is where the appeal of the virtual card comes in. Essentially, you can shop online without having to expose your credit or debit card details and top the card up with the exact amount you wish to spend.”
This gives users peace of mind that over-spending will not happen on the card. For those ultra-security conscious consumers, it adds an extra layer of security in that funds can be loaded for the exact amount required to make a purchase.
And if an unauthorised individual hacks into an e-commerce site, they will not be able to obtain confidential credit card information if the purchase has been made using a prepaid virtual card.
Standard Bank customers can create specific virtual cards for Zando, Uber, Takealot, and more on the Standard Bank Mobile App, or create a generic card that can be used on any local and international website and app.
Standard Bank’s popular Shyft Forex App, which lets both Standard Bank and non-Standard Bank customers buy, send, sell, and spend foreign currencies, also offers the ability to create virtual cards in rands, US dollars, euro’s, British pounds, or Australian dollars.
Von Helden explains that the ability to create multiple virtual cards for various currencies is the driving force behind the high uptake of the FX app. With Shyft, you can link up to 10 virtual cards per currency for managing multiple subscriptions or various categories of spend.
“Many people may not realise that they are paying for many of their international subscriptions in US dollars. They may also be making purchases on international sites in US dollars or euros, for example. This means that the bank will apply a foreign transaction fee that they may not be aware of when using their domestic virtual card.”
He says that when using a normal rand credit card to make international transactions, customers pay anywhere from 2.75% up to 4% in fees. Furthermore, the FX rate offered by Visa or Mastercard can be much higher and is subject to fluctuation.
With Shyft, however, users can mitigate some of these costs as the user can purchase the currencies on their virtual cards at a much lower rate on Shyft, and at a rate at which they are comfortable with. The app also boasts international charges that are less than half of regular credit cards.
Additionally, up to three multi-currency FX cards can be linked to the account. “This is really handy if you’re travelling with your family, as each person can have their own card,” says von Helden. Up to five physical rand cards can also be linked to the account that can be used in several ways.
Standard Bank has noted a trend in which parents are loading virtual rand cards for their children to manage their textbook, discretionary school, and varsity spend because it is safer and more convenient than cash, and you can monitor the spend from the Shyft App.
“With Shyft, you have complete control over your physical and virtual cards, with the ability to switch the card on and off at the tap of a screen. You can manage the balance on the card directly from the app and set your pin in real time,” von Helden says.
“By contrast, physical credit and debit cards offer limited control should something go wrong. Online shopping exposes card details, card cloning is a frequent problem while travelling and, most importantly, your entire credit balance is exposed. Virtual cards offer a safer alternative.”