Languages: English Hindi

How the Virtual Credit Card is Disrupting the Payment System in India

According to industry statistics, India’s consumer expenditure (or PCE) is valued at $898 billion, with payment cards (including debit and credit cards) accounting for only 3.9% of the PCE. While only 14.6% of Indians own a debit card, there were just around 18.5 million credit cards in circulation (as of August 2013 statistics).

This is a significant drop from the peak number of credit cards that had touched a figure of 27.5 million in the year 2007-08 before the global financial crisis of 2008. Although the number of credit cards in India has since grown to a sum of 24.5 million (as per March 2016 figures), the overall credit card penetration in a country with a population of 1.3 billion continues to remain low and stagnant.

Even in terms of the value of digital transactions made using credit or debit cards, the overall transactional value grew only by 7% post the currency demonetisation in the year 2016, as compared to a surge of 23% in other forms of digital transactions.

As a suitable alternative to regular credit cards, Indian and international banks are now issuing a virtual credit card (or VCC) to its Indian customers. This article discusses the benefits of VCC for Indian customers and how it is ideal for use for online digital transactions.

Limitations of Credit Cards in the Online Digital Space

While the use of plastic CC (or credit card) has provided users of credit cards with benefits such as free credit, repayment using online banking facilities, reduced dependence on cash, and easy use when travelling in foreign countries, it has also resulted in the growth of online frauds and thefts. Each year, billions of dollars are lost due to crimes related to the theft of credit card information. This misuse is particularly relevant in the online digital space, where fraudsters can easily steal and use your credit card information. Additionally, online users in India, who have subscribed to digital services, often fail to use their credit card to buy apps or games from Google Play Store or iOS App Store. With the phasing out of credit cards without EMV chips in India, credit cards (currently without EMV) or cards issued by domestic banks may work for transactions in India but are likely to fail when making international transactions.

How virtual credit cards can replace traditional credit cards in the online space

Designed as a one-time usable card, a virtual credit card can be used safely for only online transactions. Virtual credit cards, which do not have any physical existence, are valid for a single transaction and are preloaded with a specific amount limit. As the physical plastic credit card has most of the critical information such as credit card number, expiry date, and CVV number permanently printed on the card, it is easier for hackers and fraudsters to obtain this information and execute a fraud. On the other hand, VCCs works on sharing dynamic information with online vendors, so the critical data of the card is different for every transaction. This makes VCCs more safe and secure as even if hackers gain this information, it cannot be misused by them to their advantage.

Major banks in India such as Kotak Mahindra bank offer virtual credit cards as an add-on card to their primary credit card. VCCs, which are either Visa or Maestro cards, is also valid for international transactions and can be used for online transactions in websites outside India. As an alternative, you can get a virtual credit card from third-party services such as Entropay that allows users to create their VCC for free.

Benefits of Virtual Credit Cards

In addition to the enhanced security factor, the following benefits of VCC can potentially be a game changer for the credit cards in India:

  • No short payments or overpayments

Due to high credit limits on your regular credit cards, customers often face the problem of overpayments being charged on the card. On the other hand, virtual credit cards are loaded with a specific amount, thus eliminating the probability of the payment being processed for a lower or higher amount.

  • Flexibility in recharge amount

Unlike credit cards which have a predefined credit limit (which is decided by the credit card company), users of VCCs can load or recharge their cards with whatever amount they need. While there is an upper limit on the recharge amount, flexibility in the lower credit limit is ideal for single-time payments.

  • Easier refunds

As most VCCs are issued as an add-on card to the primary credit card, any refunds from the merchants can be directly credited back to the main card. For example, if a VCC is loaded for 1000/- and the actual transaction works out to just 750/-, the balance of 250/- is credited back to the primary credit card.

  • Specific time limit

Regular credit cards can be used for transaction around the clock until its expiry date, thus increasing the chances of being misused. On the other hand, VCCs are valid only for a specific time limit for each payment. Even if hackers or online fraudsters can gain illegal access to your VCC outside the short time window, they cannot misuse the information for any advantage.


Although virtual credit cards are a relatively new concept in India, they provide a viable alternative to plastic cards, which has experienced stagnant growth in India. Thanks to its enhanced security features, users can be assured that online hackers and fraudsters will not misuse their VCCs.

The growth of both smartphone users and online shopping sites in India augurs well for the future growth of VCCs, which has the potential and capability to disrupt the online payment system for the better.


Contact us: