First Virtual Holdings

» see fv.com as it lived, on the wayback machine

~ the goodbye ~

first virtual holdings opened in san diego in 1994 and called itself the first cyberbank. the smithsonian later agreed with that label. the product was the first virtual internet payment system, launched in october 1994, and the trick was that no credit card number ever crossed the network. you got assigned a virtualpin instead, a short alphanumeric token that stood in for your card. when you bought something, the merchant sent the virtualpin plus the amount to first virtual. first virtual then emailed you and waited for a one-word reply. yes meant charge me. no or fraud meant cancel the charge, and in the second case lock the account for review.

the founding crew was four people in four different cities. lee stein in san diego ran it as chairman and ceo. einar stefferud was the chief visionary officer, working out of orange county. nathaniel borenstein, the mime co-inventor, sat in northern new jersey. marshall rose was the protocol man in silicon valley. they got patent 5,757,917 for the payment system, took the company public in 1996, and by 1998 had signed up around two thousand merchants. softbank held sixty four percent of the stock.

then ssl arrived. netscape pushed https into the browser with the lock icon in the corner, and suddenly merchants did not need a middleman to keep card numbers off the wire. in july 1998 first virtual signed a deal with cybercash, handed over the entire merchant base, and walked out of the payments business. the company kept the corporate shell and bought email publishing inc to pivot into interactive messaging. that pivot became messagemedia. the cyberbank had been alive for less than four years.

this is not a product i can claim to have used. i was ten when virtualpin launched and fourteen when it shut down, on a 33.6k modem at home in turkey, and the merchant base was anglophone us catalog mail order. virtualpin worked over email, which i had, but it required a us bank account and a credit card that almost nobody around me owned. first virtual is one of those companies whose obituary i can read but whose checkout flow i never personally went through.

~ the chronicle ~

~ how virtualpin worked ~

you signed up by sending first virtual a credit card number over the phone or by physical mail. they returned a virtualpin by email. from then on you only ever typed the pin into web forms. when a merchant submitted a transaction, first virtual would email you a confirmation request. you replied yes, no, or fraud. fraud was a real option in the spec. it canceled the charge and flagged the account for review. nobody else has built a payment system since where the user gets to say fraud as a one-word email reply.

the model assumed email was a trusted channel and the web was not. in 1994 that was a defensible position. by 1998 the web had ssl and the assumption inverted.

~ what they actually pivoted into ~

after the cybercash handoff, first virtual became messagemedia and did permission-based email marketing. it was not a glamorous second act. the company was acquired by doubleclick in 2002 for its lists, and the brand disappeared inside the larger ad business. nathaniel borenstein went on to mimecast and lee stein later moved into the music business. einar stefferud died in 2009.

the virtualpin patent stayed with the corporate shell and got cited in later payment system patents for years. the idea of using email as an out-of-band confirmation channel for high-risk transactions is still alive in 3-d secure and in every bank push notification you get when you try to buy something in a new country. first virtual did it first and quit before anyone noticed.

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