Th Advent of Virtual Credit Cards & How They Are Solving Real World ‘Privacy’ Problems
The entire world was in shambles in 2008, after a few financial institutions became rapacious. While millions of Americans lost their jobs, and homes, a person or a group — dubbed Satoshi Nakamoto — were already thinking of a new financial system for the recovering world. A system where anonymity was a right, transparency was ubiquitous, and middle-men were obsolete.
Birth of Privacy
In 2014, when cryptocurrency was still a largely esoteric concept reserved for the erudite, Bo, David, and Jason — buddies since high school — began scoping the landscape. Despite the undulating value of cryptocurrencies, there is no denying its merits: you get to transfer a million dollars to someone across the world for a mere $0.45 in a network that is more secure than the most secure bank account in a matter of milliseconds. Did I mention it’s all anonymous? On the flip side, two areas where contemporary payments fare better are universality and transaction disputes. Once you send money over a blockchain, it’s forever gone. And because of its arcane stature, it is still not layman’s currency.
The three co-founders were fascinated by the blockchain technology, but they didn’t want to tread the conventional route. Rather than quitting their day jobs to mine bitcoins, they decided to pick out the elements that made it enticing and blended that with the way payments were made across the world. And thus Privacy.com was born.
Best of Both Worlds
“Even though we have supercomputers in our pockets connected through high speed internet, the act of buying something online is still worse than paying for it offline.” says Bo. “You’re stuck typing in the same 16 digit number everywhere, which is horribly unsecure and cumbersome. So we thought, what if you were to build a credit card or payment method from the ground up right now?”
Head over to Privacy and you will be greeted by a user interface that is minimal in design and content. The attention is quickly grabbed by the contrastingly dodger blue button asking you to try the free product. Like credit cards, we make money from the interchange paid by merchants. Unlike credit cards, we don’t sell your data or charge interest and annual fees reads a disclaimer below. Once you sign up and connect a funding source, you are good to go. Immersed in the seamless experience, it’s easy to forget that this is in fact a security service, a testament to the inconvenience caused by most security softwares.
Once you set up a new card, — and by setup I mean click on New Card and set a spending limit — you are immediately guaranteed anonymity and authority. The “pull” mechanism becomes a “push” mechanism, giving you control of how much, and if, a merchant can debit your account. Let’s say you want to enroll in a Fitness Studio that offers a discounted first month fee. In such cases, you can toggle the Single Use option offered.
Back in 2015 when the co-founders were gearing to launch the product soon, they needed a strong domain name. A domain name can make the product deeply personal or universally lackadaisical. When we think of McDonald’s, we visualize the golden arch with the ecstatic clown sitting on a bench. We wouldn’t expect the website’s URL to be www.trythisfood.com. We expect it to be the name of the company, and what it represents. “Domains are somewhat undervalued by entrepreneurs. A good domain goes a long way in establishing credibility. We deal with people’s most personal data, and we wanted them to know we took that seriously,” says Bo. So they got in touch with the owner of Privacy.com and bought it in exchange for an undisclosed equity percentage in return.
The efforts bore fruit. As soon as the co-founders launched it on ProductHunt and Hackernews, it shot to the top of the list and became the #3 product of the month. Since then, the growth has been based on word-of-mouth and network effect that accompanies every product people enjoy using (they also have a referral program). “We had a different philosophy than a typical startup; we didn’t want to move fast and break things,” admits Bo. “We had a pretty polished product, strong product market fit, and lots of beta customers. So it grew based on word-of-mouth since the beginning and took a life of its own. We’ve been lucky in many ways.”
Future of Payments
While we are more similar to our primate partners in the forest than we think, there’s one element of separation that quite frankly was the catalyst of our incredible evolution: our ability and willingness to believe in fiction. Nothing is more powerful than the concept of money to substantiate that claim. The Mesopotamians began bartering around 6000 B.C., soon followed by the Phoenicians. The simplicity of the system outweighed the time spent in each transaction. For a while. By 1100 B.C., China began instrumenting miniature versions of weapons and tools they wanted to exchange in bronze. Over time, these jagged hand-pricks became a circular coin that is still used as a standard today.
Applying a first principles’ line of thought, money in itself has little value: it’s made up of 75% linen and 25% cotton paper, colored with an array of green, black, and metallic ink and contains a unique identifying number. The value of each note is corroborated solely by the trust that the one who holds and receives it has in the system. This trust has only increased over time, as we moved away from cash to credit cards to mobile payments, and potentially to cryptocurrency. We don’t need to see our money anymore to believe in its existence.
There’s a flip side though. The more we shied away from holding onto our possessions, the more easy it has become for ill-intentioned attackers to get hold of it. In 1000 B.C., one would have had to go through a dozen hefty guards and an angry hound to get to the king’s wealth. Today, a combination of credential stuffing and knowledge of javascript can give you access to millions of users’ credit card details within minutes without ever leaving your room. Just in 2017, over 14 million credit card details were exposed and consumers reported $905 million in fraud losses. While cryptocurrencies dissuade these worries, we need an immediate saving grace until that happens. A virtual card is one way to go.
References : Google, HBR archives and The Economic Times.
