Payment cards are taking on virtual aspects and with heightened security features too. Image Credit: Shutterstock

Traditional, well-established banks that long relied on their credibility, trustworthiness, and diverse financial products to attract and retain customers have been dethroned from their coveted positions.

The emergence of Banking 4.0 has revolutionized the industry by leveraging AI, blockchain and IoT, to cater to the demands of the new generation of consumers. Millennials and the Gen Z are increasingly attracted to digital banks that offer accessible, personalized, and efficient banking experiences.

Enter, mobile banking. By offering all the same services as a traditional bank, but with the convenience of accessibility through an app or website, mobile banks are gaining an edge over traditional ones struggling to keep up with the pace of digital innovation. With just a few clicks, individuals can open an account, make payments, transfer funds, and withdraw cash, reinforcing the Banking 4.0 promise: ‘banking everywhere, never at a bank’.

What really sets mobile banks apart is their customer-centric approach - first identifying the needs, challenges, and pain-points of their customers, before developing a solution. By placing the customer’s wants and concerns at the center of their strategy, mobile banks have opened up new avenues for exploration, broadening the scope of what we can accomplish with Banking 4.0.

The introduction of virtual payment cards is just one example of the customer-centric approach adopted by mobile banks. Virtual cards are randomly generated 16-digit numbers that link to a credit, debit, or prepaid account.

With a unique account number, expiry date and CVC, virtual cards offer an additional layer of security when making online transactions. Unlike their physical counterparts, they can be easily replaced if lost or stolen and a new version can be generated within seconds through the banking app.

Virtual cards enable users to make purchases online without revealing their actual card information, reducing the risk of digital bank fraud, and alleviating the cybersecurity concerns expressed by 94 per cent of consumers in the UAE last year. For even greater protection against fraud and identity theft, spending controls can be implemented on a virtual card to comply with preset parameters such as merchant type, time period, and spending amount.

Cutting down on fraud chances

As a result, even if the digital card number is accessed illegally, there is relatively little chance that it can be used to make fraudulent purchases.

These spending controls have fueled the global surge in virtual card spending, projected to increase from $1.9 trillion in 2021 to $6.8 trillion by 2026. Businesses are estimated to account for over 70 per cent of overall virtual card transaction volume by 2026 as spending controls provide a proactive way for companies to monitor and manage expenses.

Funds can be pre-allocated and assigned for specific merchants or uses so that spending managers can easily track and control legitimate purchases, such as employee travel and expenses. Businesses can account for spending in advance and budget accordingly, and employees do not have to spend money out of pocket or submit expense reports.

On a consumer level, spend controls even allow parents to limit how much cash their children withdraw from an ATM, or how many times. Parents can restrict buying power to only a few stores to ensure a child cannot, for example, buy an airline ticket without permission.

Instant addition to m-wallets

Aside from added security and autonomy, virtual cards also address another consumer pain point: waiting time. Unlike traditional plastic cards that can take days or even weeks to print and ship, virtual cards can be instantly issued to a customer’s mobile wallet.

The zero fulfilment time allows users to begin transacting immediately, ensuring a seamless and efficient user experience. While virtual payment cards are often associated with mobile banks, it’s worth noting traditional banks can also adopt this technology, showcasing their willingness to transition towards a more relationship-based model over a purely transactional one.

At FOO, we specialize in empowering digital transformation through developing financial micro-services and personalized end-products. We do this through a modular, ‘plug and play’ model, that allows companies to easily integrate our bespoke, fintech products into their existing platforms and networks, branded as their own.

If traditional banking providers are to keep up with evolving consumer demands and compete, they must mimic the same shift from a product-centric mindset to an approach that prioritizes the overall customer experience. Those who fail to embrace the digital revolution will inevitably face extinction in the competitive market.