The resurrection of virtual credit cards
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Remember virtual credit cards? Well they're back, they're more popular than ever — and very few consumers are using them.
Why it matters: A product initially designed for individuals is enjoying a second life in the corporate world.
The big picture: Virtual cards are credit card numbers that aren't on any physical piece of plastic. They were invented by an Irish company, Orbiscom, in the 1990s, as a way of preventing fraud.
- The disposable credit card number was originally designed to be used once so that even if a fraudster obtained it, they couldn't do anything with it.
- Companies like MBNA and Citibank adopted the technology — and then dropped it. The process of generating a card number was cumbersome, and most consumers didn't bother to use it.
- After Orbiscom was acquired by Mastercard in 2009, the technology languished, and virtual cards became mostly a piece of fintech history trivia.
Where it stands: Virtual credit cards are now back — but instead of mostly being issued by consumer-facing banks like Citi or Amex, the biggest issuers are B2B companies like Stripe and Marqeta.
- The idea is to generate card numbers to be given out to employees for corporate expenses while giving the employer fine-grained control over spending limits, which vendors are permissioned, and the like.
Between the lines: One of the more popular use cases for virtual credit cards was subscriptions. By buying a subscription with a credit card number that was set to expire in a couple of months, consumers could avoid automatic future charges.
- With virtual cards now out of favor as a consumer-facing product, Mastercard has instead bought Minna Technologies, a startup that's designed to make it easier to cancel subscriptions.
The bottom line: Your employer is more likely to have a virtual credit card than you are.
