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The Exciting new world of Digital Cards (and how they work)

Ever since Diner’s Club introduced the first credit card way back in the 1950s, payment cards (including credit and debit cards) have become a mainstay in the lives of all consumers. Embraced enthusiastically by banks and brands alike, cards kept growing, as did their usage by customers enamored by their convenience. That said, the world of cards didn’t see much fundamental change for many years. But a lot is changing now!

Linda Kirkpatrick at Mastercard reveals, “60% of our volume is taking place at merchants that have contactless capabilities.” She talks about digital cards where customers “can use the digital representation of the card at the point of sale within minutes of getting approval.”

In the wake of COVID-19, an exciting trend that has emerged is the growth of contactless cards and payments. Digital-first (or simply “digital”) cards that can instantly be used for any point-of-sale transaction are becoming more common. Released in late 2019, the Apple card is one such digital card that “exists” only inside the Apple iPhone and can be used through the Wallet app. In only a short time, now digital wallets with multiple such digital cards in them are becoming more common.

What are digital cards and how do they work? Plus, how can banks and card issuers use technology to foray into digital cards?

What is a Digital Card?

Also known as a virtual card, digital cards are essentially a digital version of credit cards that exists “virtually” in smartphones. For any payment, a digital card works like any other payment mechanism. What is unique about digital cards is that users no longer need to carry any physical (or plastic) card nor enter any card information when transacting.

How does a digital card work? Just like plastic cards, digital cards connect the payment option (for example, bank account) to the merchant outlet where the transaction is taking place. The only difference is that it makes this connection through an appropriate app on the user’s smartphone.

Depending on the facility available, digital cards can be used as a payment option at many outlets including:

  • Online stores or physical outlets
  • In-app purchases like food deliveries, rideshares, and mobile shopping.
  • ATMs for depositing or withdrawing cash.

In short, a digital card offers a convenient mode of making payments using a smartphone – in place of a plastic credit or debit card.

What is a Digital Credit Card – and how do they work?

Data breaches have emerged as a recent scourge for “traditional” credit cards. Among the more recent incidents, clothing brand, Bonobos suffered a major breach in January 2021 – when cybercriminals stole over 3.5 million credit card records.

Among the latest innovations, a digital (or virtual) credit card offers enhanced security from data breaches and other risks. A digital credit card uses a unique 16-digit number that is generated in digital format.

How does this make them more secure?

In many ways. For instance, virtual credit cards allow users to make transactions on their primary credit card without the need to expose the primary credit card number. Additionally, digital credit card users can choose to limit its use only at selected merchant outlets or specify a low spending limit.

Digital credit cards provide higher security against hackers or cybercriminals. In the event of any card loss or data breach, users need to cancel (or block) the physical card and wait for the bank to issue a new card. With digital cards, the cancellation process is much faster through their credit card account.

How does a digital or virtual credit card work?

In simple terms, virtual card issuers provide each user with a random credit card number, expiry date, and security code that is linked to the user account. On using the virtual card, the transaction details appear on the user’s credit card statement (like with a regular credit card).

How can Card Issuers respond to changing market trends?

The shift towards digital or contactless payment modes is both encouraging and beneficial for banks and card issuers. Having said that, how can these financial service companies adapt to these trends with the right payment infrastructure?

A technology-driven credit transaction processing solution system is essential for implementing a contactless payment infrastructure. As a flexible and agile system, this platform can dynamically respond to changing market trends and consumer demands.

Here are some of the ways how modern end-to-end credit processing solutions can facilitate a digital card infrastructure:

  • Faster processingof new customer accounts – along with real-time integration with other service providers including credit bureaus and payment collectors.
  • End-to-end processing of the complete suite of payment-related services right from operations to customer support.
  • Faster and seamless approvalof score-based credit limits – that can minimize card misuse.
  • Higher flexibilitywith multiple payment options and plans including revolving credit, deferred interest, and cashback.
  • Strict compliance with industry regulationsand standards through certification services like PCI.
  • Easier integration with other existing payment systems and user interfaces.
  • Development of a mobile application framework that enables easy mobile payment through customization and integration with backend applications.
  • Faster processing of transactions including purchases and payments.


Digital cards like the US Unlocked card and Payonner are becoming a part of the growing move towards contactless payments in the post-COVID era. Even established providers like American Express have digital options available for specific target segments. Virtual credit cards also add a layer of security against data breaches and other credit card frauds. To leverage the benefits of contactless payments, financial service providers also need an agile and flexible infrastructure that can adapt to changing market trends.

This seems easy enough to visualize. But the fact is, many core systems in banks and with card issuers are based on legacy technology. They have proven themselves in the field but are hard to change and lack the agility and responsiveness digital programs demand. This is why CoreCard’s credit processing platform is designed to leverage the most modern technology to provide speed and flexibility.

Want to launch your own digital cards program with CoreCard? Contact us today.

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