Even as Amazon comes closer and closer to becoming The Everything Store, people still buy a lot of stuff online from other merchants. And every site that has your credit card info represents another potential gold mine for hackers to try and crack into.
Inspired by ecommerce, and the recent explosion of bitcoin, Bo Jiang founded Privacy, a startup that creates virtual credit cards with disposable numbers for online shopping. The concept works like a throwaway prepaid cell phone—you can link your bank account to the generated card, use it once, and then it’s gone, so that the merchant never actually sees your actual financial information and hackers can’t get it by attacking them.
The following interview with Jiang was edited for clarity and brevity.
Benzinga: Why did you start Privacy? What made you think that people wanted a virtual credit card?
Jiang: The main thing driving Privacy is that we came from the cryptocurrency world and took inspiration from Bitcoin. It made us rethink how payments should work. If you think about mainstream payments, you largely have a single credit card number that you use everywhere. It makes sense for the offline world, but not in the online world. The closest analog is a password manager—you shouldn’t use the same password everywhere, so why would you use the same payment information?
Privacy founder Bo JiangWe cooked up this idea of generating a brand new card number for every transaction you make online. We found out that it’s not a new idea, but a lot [of what we’ve done] has boiled down to good timing. Ecommerce and subscription products are exploding, so there are a ton of new use cases that have popped up.
We built this browser extension that lets you generate a card number much like how a password manager works. When you head to a checkout page, we automatically detect the checkout field and put a little button right next to it. You click the button and it auto-generates a brand new card number that you can put in the card field.
Benzinga: So you created a burner credit card. How have people been responding to that?
Jiang: We’ve been growing quickly and consistently by word of mouth. It’s one of those things where the product has a timing aspect to it—data breaches are happening everywhere, and we provide a tool to help users take back control and protect themselves.
There are a couple of things promoting this word of mouth, because it’s so topical with merchants and credit bureaus getting breached. People start talking about using VPNs, and people mention using Privacy.com for online spending.
And when you think about where we are in the transaction flow, it’s usually a very positive point. Either you’re purchasing something, which is associated with positivity, or we saved you money, in case the merchant was breached, because the hacker couldn’t get your credit card info.
A lot of our users are debit card users, so if they got hacked, they’d be out that money until they could get it paid back, which can often be a substantial portion of their net worth.
Benzinga: Privacy feels like it could be the new way to pay for things online—like something a credit card company offers as a product. Do you see the company being acquired by a firm like that, or becoming a large player in its own right?
Jiang: We’re not dogmatic in the way we think about how we get to where we want to be. We don’t think there’s one way to do this. We do think what we’re doing is significantly better than the status quo right now, and it’s hard to argue the other way.
Banks and big financial institutions are really good at doing certain things, and fintech companies are good at doing other things. I think there’s room to partner and a collaborative way to grow. I think banks will continue to own very important parts of the ecosystem while newer fintechs like us will work in parallel with them.
Benzinga: What’s the design philosophy behind some of the security features like limiting the number of cards you can make?
Jiang: We decided early on that we weren’t going to do cards that you could use at multiple merchants. Instead we were going to make it as easy as possible for you to make a brand new card every time, and abstract away this concept of a single number. Our cards are either locked to one merchant or they close after the first purchase—there’s no card you can use at 20 different merchants.
If we hadn’t been as opinionated about that, we think the default experience would have been making a bunch of different cards, which just affects your exposure.
Benzinga: How does Privacy make money?
Jiang: We make money off of interchange, which is a sustainable business model for us. We’re purely virtual, so we don’t have to deal with the costs of plastic issuance, lost cards, ATM withdrawals and whatnot, which are very expensive for an upstart bank.
The way interchange works is the merchant will pay Visa a fee for the transaction, Visa shares that fee with our issuing bank and the bank shares it with us.
Benzinga: Do you have any plans to raise money?
Jiang: We’re thinking about raising money. We wanted to first build a sustainable business and then raise money to accelerate growth, and I think we’ve done a pretty good job to date proving that out. The next step is the capital raise to blow things out.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
