Throwaway credit card may be the next big thing

Following American Express Co. (AXP) ‘s launch of a similar product in September, MBNA Corp. (KRB) , the world’s largest independent credit card issuer, recently announced plans to give consumers a more secure way of shopping online, with a disposable credit card number.

MBNA will use technology created by New York-based Orbiscom to allow its 45 million Visa and MasterCard customers to buy goods on the Net without ever disclosing their personal credit card number. MBNA cardholders will be able to download Orbiscom’s O-power application from the bank’s Web site to use a unique card number for each transaction and set a dollar limit on that transaction.

MBNA, based in Wilmington, Del., will be the first U.S. bank to offer such a service, expected to debut next month, just in time for the busy holiday shopping season. American Express began offering its cardholders disposable credit card numbers on-line, using in-house technology, at the end of the month. But the AmEx service does not give cardholders the ability to set a price limit on purchases.

MBNA will initially offer the service to only its U.S. customers, later expanding it to Canada and the U.K. Orbiscom’s technology already has been adopted earlier this year by HFC Bank in the U.K. and AIB Bank in Ireland, which beta-tested the technology. A competitor, New York-based Cyota, has announced an agreement to offer disposable credit card numbers in Israel by January to the more than 1 million customers of Isracard, a credit card issuer owned by the country’s largest bank.

Such disposable credit card systems protect customers when numbers are stolen online, as they have been recently in high profile cases involving such companies as Western Union. “If it was one of these numbers it’d be absolutely useless because they’ve already been transacted,” says Orbiscom COO Ray Sheridan. “It would be kind of like getting a check that’s already been cashed.”

MBNA research has found that security is a big concern and often an obstacle when cardholders shop on the Internet, says company spokesman Steve Boyden. From January through July, 5.5 million of MBNA’s 45 million cardholders purchased US$2.4 billion of goods on-line.