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The throw-away culture comes to credit card numbers
Cyota, a provider of temporary credit card numbers, gets an infusion of cash.
Even in today’s market where dot-com funds are difficult to get, a product that fills a need-or a perceived need-can find funding. New York City-based Cyota, which provides temporary credit card numbers for issuing banks whose customers shop online, has closed an $11 million round of private financing led Giza Venture Capital, a leading Israeli VC firm. Cyota secured $3.2 in its first round of private financing.
Cyota plans to use the money to fuel its drive into Europe and Asia, even though it has no customers yet in North American, the biggest Internet market in the world. “We are marketing to the top 100 banks in North America and expect to have several other deals announced this year,” says CEO Gary Heatherington, a former executive at MasterCard International and MasterCard Canada. Cyota’s only customer so far is Isracard, an Israeli issuer of Visa, MasterCard and American Express,
Developing one-time-used card numbers to protect real credit card numbers is a security option that some observers say is needed to convince consumers that they can shop safely on the web. Most research reports show that more than 50% of consumers still have concerns over using credit cards online. Cyota says its product addresses three problems associated with online security: higher costs for credit card issuers, fear of fraud that keeps consumers from shopping online and lost revenue and tarnished reputations for online merchants that have fraud losses.
Cyota’s SecureClick technology generates random, single-use credit card numbers for issuing banks. Banks install the software on their servers. When a consumer wants to use the card, the retailer’s server or the retailer’s merchant bank’s server, contacts the issuing bank’s server, which generates a special number for an online transaction. The real card number never leaves the issuing bank’s database. Cardholding customers of issuing banks must download the SecureClick software to their computers to get the single-use numbers while shopping online.
Merchants who accept payments from SecureClick do not have to change transaction processes. “It is transparent to the merchant,” says Heatherington, who adds that if a merchant site were hacked, the SecureClick card numbers would be useless.
Heatherington says the company’s expansion into Europe and Asia will be assisted by investment partners such as Dresdner Kleinwort Wasserstein, the investment banking division of Germany’s Dresdner Bank Group, and I Value Creation Co., which is part of Toshiba Corp.
Founded in 1999, Cyota plans to expand its product offerings to include card security, card utility and card information systems, Heatherington says. Since the company introduced its flagship SecureClick product, American Express Co. developed and introduced last fall its own product similar to Cyota’s. American Express’s Private Payment online transaction program also uses random, single-use card numbers instead of actual card numbers.