When parents hand over a credit card to their kids, they can only hope it's used as intended—say, paying for gas as opposed to booze. But OnDot, a startup emerging out of stealth mode Thursday, aims to give cardholders greater control over their payments, allowing them to activate and deactivate cards as well as set rules for location, transaction types, merchant categories, and spending limits with an app called CardControl.
"What we've done is create a solution that allows consumers to essentially use their phones as a remote control to manage their payment cards," cofounder and CEO Vaduvur Bharghavan told Fast Company. "With one tap of the app, you can turn the card on and off. You can specify when, where, and how this card can be used."
OnDot has been quiet for three years, building out an app for banks and credit card processors to let consumers manage their debit and credit cards. Along with the launch of CardControl, which financial institutions can brand and integrate into their existing apps, the San Jose-based company announced it raised $18 million in funding from private investors to drive adoption and build out its marketing and sales teams. OnDot already has partnerships with four of the seven major card processors and about 10,000 banks and credit unions in the U.S.
As an early partner, McAllen, Texas-based Lone Star National Bank, which manages $2 billion in assets, has seen a 60% reduction in fraud costs—from $450,000 to $180,000—within a year of implementing CardControl. During this same period, the bank reported a 48% increase in spending and 54% rise in transaction volume. The reason, Bharghavan noted, is because shoppers feel more confident about the security of the bank's payment cards. "What cardholders are doing is they're moving their spending from another card to this [CardControl-enabled] card," he said.