The startups are particularly going after young, mobile-first customers, pitching their products as a fit for consumers who rely on subscription services like music, movies, food and clothing. And they have simple apps that work in a few taps.
With Final and Pay With Privacy, customers can create two types of virtual cards. For subscription services and online merchants where customers buy frequently, there are merchant-locked cards. These cards, once used by a particular merchant, can be used only by that merchant.
Because each merchant has its own card, users can effectively cancel a subscription by shutting down a single virtual card. Final's Dietrich said that in many cases, it's easier than trying to go through the merchant itself.
"You don't have to think about it and go to their website and go through all the layers of customer service to cancel," he said.
Final and Pay With Privacy also offer one-time-use cards, or "burners," which expire after a single transaction, a feature that might be attractive when purchasing from an unfamiliar website for the first time.
Token offers only a single type of virtual card, but Zohar Steinberg, the company's chief executive, said any of its cards can be quickly deactivated, making them practical for recurring or single use.
"You go into the app and go to a payment token, swipe right, and it's frozen in 10 seconds," he said.
Brian Riley, a director at payments consulting firm Mercator Advisory Group, said this new virtual cards seem designed to play into consumers' concerns about fraud, even though consumer protection laws effectively shield consumers from the consequences of card number theft.
"It's leveraging the fear people have," Riley said. "But the important thing to remember is, at the end of the day, consumers already have zero liability behind them."
Federal rules and credit card network policies protect consumers from responsibility for fraudulent transactions, limiting their liability to no more than $50 if they report their physical card as lost or stolen, and there is no liability if card numbers are stolen online.
But new virtual-card companies say consumer protection is only half the point. Their pitch is that consumers should not only have no financial liability for fraud, but also that they also shouldn't have to deal with the hassle of reporting fraud, getting a new credit card or changing payment information with numerous merchants.
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