VIRTUAL Credit Cards (VCC) are seen as an emerging trend in Malaysia, with a growing number of card issuers, such as banks, looking to meet consumer demand for more secure payment options for purchases. online, according to experts and industry players.
Two weeks ago, Alliance Bank Malaysia Bhd announced that it had launched the country’s first VCC for individuals, offered through a lifestyle app.
Elsewhere in the world, banking giants such as Citi and HSBC have issued VCCs and, increasingly, standalone digital banks such as Hong Kong-based MOX and UK-based Revolut.
There are many different types of VCC, but typically they involve a consumer using a randomly generated temporary number that can be used to make purchases online, helping to reduce credit card risk and identity theft.
The security features of a VCC led Alliance Bank to launch its first product, says Gan Pai Li, director of its group’s consumer banking. For now, those with the Visa Platinum VCC Alliance can only make JomPAY and QR code payments and access cash advance services through the MCash mobile app.
However, the functionality of the VCC will soon be enhanced, even as the bank joins forces with more partners, to enable e-commerce transactions, streaming and subscription services.
“In our upcoming launches – because we’re rolling out new features and capabilities every few months – you’ll see we’ve come up with new ways to ‘tokenize’, or dynamic card numbers. The idea is to address customers’ fear of leaving credit card imprints across different channels when shopping online,” Gan told The Edge in an interview.
“We try to position ourselves as the [go-to] credit card for e-commerce usage, and often get this feedback from customers – that they are very concerned about their credit card details being exposed to third parties. So the tokenization feature, where you don’t have to leave your credit card number, is something we’ll be offering later this year.
In the case of Alliance Bank, each consumer can decide on a dedicated security number to use for a particular transaction, Gan says, explaining how the tokenization feature works.
“So if I set up a payment with, say, Astro, every month I’ll use that particular virtual card with the number ending in XXX and I could even decide how many times that card should be used. I can use it for, say, 100 transactions on Astro. So let’s say I set up another payment with Netflix. I can then create a new VCC with a separate number just for Netflix payments,” she adds.
Therefore, a person could end up having more than one VCC, Gan says. Unlike normal credit cards, there is no annual fee for VCCs.
With online transactions, especially in the e-commerce space, going mainstream since Covid-19 hit two years ago, consumers are increasingly open to virtual payment instruments such as VCCs.
“I think there will be an increase in the popularity of virtual payment instruments. This is also in line with changing consumer behavior, especially the younger generation, who actually prefer to transact using virtual instruments, be it a VCC or a wallet. mobile,” said Clarence Chan, director of digital trust and cybersecurity at PwC Malaysia.
He agrees that the main appeal of the VCC is its security features. “But that being said, this is also subject to three things – one, your card number cannot be stored on your mobile device as there is a risk of it being leaked if your device is stolen or unsecured; two, the app [on which the VCC runs] must be secure; and third, if there are third-party actors involved in the operation of this payment instrument, the issuing bank has the responsibility to monitor third-party security and protect customer data. These three big things will be key to making sure fraudsters don’t have a chance to act,” he says.
Chan believes that banks have more advantages in issuing VCCs as opposed to, say, mobile wallets, as they are able to leverage their existing ecosystem of merchants and customers to expand their range. Services.
In the case of Alliance Bank, in addition to MCash, it currently has KK Mart and the insurer Zurich as partners within its ecosystem.
Physical cards won’t disappear overnight
VCCs, or digitally issued cards, have all the benefits of a physical card, but with the added benefit that the consumer can use the card instantly upon approval, says Ng Kong Boon, country manager of Visa Malaysia.
“Digital card details will be securely available on the bank’s mobile banking platform and can be used for online transactions and provisioned to NFC (near field communication) wallets and digital e-wallets” , he told The Edge in response to emailed questions.
“Visa has various use cases for digitally issued cards, including a single-use digitally issued card to further increase the security of online transactions.”
When asked if he sees CCVs becoming a trend in Malaysia, Ng said, “We believe there are opportunities for digitally issued card products for today’s consumers around the world, not only in Malaysia. Accelerated by the pandemic, consumers are becoming more technologically savvy and they are moving away from using cash and no longer relying on a single physical payment form factor to make digital payments.
“As for physical cards, they are not going away overnight, but we will see more and more consumers choosing to pay with a connected device such as an e-wallet or QR Pay. Examples include digital cards which can live in your mobile wallets on your phone the same way your plastic card lives in your physical wallet. And we want people to add their Visa cards to those mobile wallets. »
As in-app commerce becomes more mainstream, virtual cards will be increasingly used, he says. “Another trend we’re seeing is the Buy-Now-Pay-Later fintech increasingly using Visa virtual cards to settle with merchants.”
Nearly seven out of 10 Malaysian consumers (69%) want to use VCCs for their daily shopping and financial transactions, according to the Consumer Payment Attitudes Study conducted by Visa last September in seven ASEAN countries. The total sample size was 6,520, including 1,000 consumers in Malaysia, aged 18-65, with a minimum income of RM2,000.
“Awareness and interest in virtual cards has increased slightly over the past year, with the majority interested in using them if they become available. Millennials and Gen Z are the most informed age groups and the most interested [in them]says Ng.