Innovations and Payment Systems

Despite lingering online fears, virtual credit cards stall


Although the paranoia that spawned them and the hoopla that accompanied their birth have died down, virtual credit cards are still available for those who want extra assurance

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To ease consumers’ fear of having their credit card numbers stolen when shopping online, virtual credit cards were introduced several years ago to security-sensitive shoppers. Although the paranoia that spawned them and the hoopla that accompanied their birth have died down, virtual credit cards are still available for those who want extra assurance.

Americans have largely overcome their fear of using credit cards online. According to research by the Pew Internet & American Life Project, the percentage of Americans who have made a purchase online has risen from 22 percent in 2000 to 49 percent in 2007. But some fear lingers — enough to deter part of the public from engaging in e-commerce. To quell those fears, virtual credit card accounts — temporary card numbers linked to a primary account — were created.

A virtual credit card “offers wary consumers a peace of mind when shopping online and eliminates the risk of credit card fraud and identity theft, since the user will never have to reveal their account number,” says Liza Landsman, senior vice president of Citi Cards.

Protecting account numbers
Virtual credit cards allow users to complete online purchases with a unique, temporary credit card number that functions solely at one website or for one transaction. Cardholders obtain these temporary numbers by logging on to the card company’s website and applying for the virtual numbers online. These 16-digit virtual numbers can expire within a month or last up to a year, depending on what the user requests.

Launched in 2002, Citi’s Virtual Account Numbers program generates a unique account number for every online purchase and once used, it is no longer good at any other merchant site. Using downloadable or browser-based software, cardholders can log into their account and generate as many virtual account numbers as they need with expirations that can be set from one to 12 months. By linking back to the cardholders’ real account number — which is only known by Citi — virtual account numbers allow consumers to shop without revealing their true account numbers.

“Neither the merchant nor any potential e-hacker can distinguish a Virtual Account Number from a real credit card number. Once the number is used for a purchase, it cannot be used for another merchant site,” says Landsman.

Shopping and credit cards
Shopping and credit cards

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Virtual credit cards are especially useful for people who use subscription-type services or websites that have recurring billing. Rather than leave their real credit card number spread on a dozen or so websites, cardholders can have one for each provider and leave it on a merchant’s site with confidence that the number cannot be used elsewhere.

An extra step for security

At Citi, Landsman says that while many consumers find online shopping convenient, some still remain nervous about their security and privacy. One of the biggest barriers to online shopping is consumers’ concern that their credit card number will be stolen, followed by identity theft. Virtual credit card services take that risk exposure out of the equation.

Linda Foley, founder of the Identity Theft Resource Center in San Diego, was a victim of identity theft and credit card fraud herself before opening the center. While she supports the idea of virtual credit cards, she said they may not be necessary because cardholders are already protected and have rights regarding fraudulent use. She also said that monitoring existing credit cards for theft is fairly easy by simply staying on top of monthly billing statements.

Foley says that most online shoppers are more interested in convenience and may not take the time and effort to generate new numbers for every new purchase. As an easier alternative to virtual credit cards, Foley recommends having one card strictly for online shopping so that risk can be minimized and the card can be monitored.

Virtual numbers “are for people who want to go that extra distance. It’s all about how much time and effort you want to spend in reducing your risk. We have to weigh convenience versus risk and the reality is that people just want more convenience,” says Foley.

"The reality is that people just want more convenience."
— Linda Foley

Virtual numbers mostly unknown and unpopular
If virtual numbers don’t seem very popular, it is because few credit cards offer the service and even fewer cardholders know that it exists. In 2004, American Express dropped its Private Payments disposable number program due to a lack of interest from cardholders. Both Bank of America and Citi continue to offer the service, and Steve Furman, director of e-business for Discover Financial Services, says demand for Discover’s Secure Online Account Numbers program has actually increased. He attributes the growth of the Discover program to more promotion and marketing through the cardholder’s handbook, but still admits that not all cardholders will take to using virtual numbers.

“No matter what kinds of words you use, it is very difficult for people to grasp the concept because it is somewhat different to what they’re used to. Once they understand it though, many people won’t shop online without it,” says Furman.

Whatever card company they’re offered through, virtual numbers have limitations in that they can only be used in the virtual world. Because there is no tangible card associated with the numbers, they cannot be used in person or to preorder goods or services that later require the cardholder to produce a credit card.

“The only limitation is if a merchant requires you to show the actual plastic to have your goods or services fulfilled, the numbers won’t match. We don’t recommend it for things like airline purchases,” said Furman.

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