Consumers Prefer PIN Debit - Gartner Research

Consumers believe it's more secure than signature credit and debit transactions and Online Retailers would love to eliminate chargebacks, let alone, reduce their Interchange Fees by 100 basis points.

So it appears that bringing PIN Debit and PIN Credit transactions to the web is just going to be the natural order of things.

HomeATM is positioned to help consumers and online retailers do just that with their patented browser space PIN debit application, which includes being able to assign PIN's to previous Non-PIN'd existing credit and signature debit cards.

Here's the report from Gartner:

U.S banks have put significant efforts into marketing contactless and signature-based debit card payments, but they have failed to win over consumers, according to market research firm Gartner.

According to a survey of 4,500 online U.S. adults in August 2007, consumers prefer PIN debit over other payment methods such as credit cards, contactless cards and signature-based debit.

PIN debit is popular with cardholders, as they believe it is more secure than signature based transactions, Gartner says.

“Despite significant marketing campaigns by banks and issuers to steer consumers towards using debit cards with a signature, consumers prefer entering their PIN to pay for groceries with their debit card over all types of signature-based card payments, whether credit or debit,” says Avivah Litan, vice president and distinguished analyst at Gartner.

Consumers’ least-favorite payment method when shopping for groceries is contactless cards, and there is similarly little interest in using cellphones for making payments, Gartner says.

According to Litan, banks promote signature-based debit payments as they earn more interchange fee revenue from card-accepting merchants. “The reason is that signature-based debit is riskier and more prone to theft, so banks need to earn higher interchange fees to compensate,” Litan says.

Fraud rates on signature-based debit card payments are at least 10 times higher than on PIN debit.

Gartner adds that contactless debit and credit card transactions earn issuers higher interchange fees than contact-based transactions. The Gartner survey found that, when shopping at grocery stories, consumers prefer PIN-debit card payments, even though only card payments with physically signed receipts typically earn them reward points. “Brick-and-mortar businesses which accept electronic consumer payments should promote use of PIN-based debit card payments through payment terminal programs and by offering store-based incentive campaigns,” Litan says.

“Businesses pay less to banks for PIN-based payments, and, since consumers prefer them anyway, this is a win-win strategy for all parties except card issuers and banks.” Related Links:

www.gartner.com
Why Aren’t More Merchants Prompting for PIN - Digital Transaction News
U.S. Consumer Secure Payment Preferences Create Opportunities for Nonbanks
Another U.S. Alternative Payment Service Debuts
U.S. E-Shoppers Turning to Alternative Payments
Surge Seen In U.S. Alternative Payments

HomeATM Card Present Solution

Card Present Solution for Online e-commerce Retailers

Traditional e-commerce is based on Card Not Present (CNP) transactions; i.e. the cardholder enters credit / debit card data using an online form. There is no way to prove that the user entering the card information is in fact the actual cardholder. To truly identify the cardholder the card needs to be processed via some form of hardware device that interrogates the card in order to match the data entered by the user with data phyiscally stored on the card.

Enter Home ATM. The HomeATM solution is based on an Internet consumer connecting the HomeATM device to their PC via a USB port. Once installed and configured the HomeATM Scanpad may used to process card present credit card and PIN debit card transactions via the Internet, resulting in less risk for all parties.

Payment for goods using PIN based Debit Cards as the settlement instrument of choice is the fastest growing card sector in the world at present. PIN based Debit Card settlement offers merchants a number of benefits such as Zero Chargeback and NO Risk.

Traditionally the ability to accept PIN based debit cards has been reliant on the card issuer. Home ATM removes this reliance - any debit card, issued by any issuer can be processed by merchants. Technically it's exactly the same transaction type as a user using a POS device or an ATM device.

Would HomeATM's "PIN My Card" Technology Remove 75%-90% of Fraud?

In the wake of Hannaford's recent "PCI Compliant" breach of over 4 million cardholders data, there has been much written on the subject. Below is a rather interesting comment from Gartner, Inc.

Avivah Litan, a security analyst at Gartner Inc. argues that the biggest lesson is that the banking industry needs to make it harder for thieves to put stolen credit card data to use.

Requiring PINs on credit card transactions, she said, "would remove 75 to 90 percent of the fraud in the system."

HomeATM's PIN My Card technology assigns PIN's to existing cardholders Credit Cards.

Hmmm...sounds like HomeATM is on to something. Look for more on HomeATM's PIN my Card technology later....

New Credit Card Breach Will Test PCI

In a follow up to yesterday's post regarding whether or not current PCI Standards are flawed, I include this related article from Information Week.

Does Hannaford Hack Suggest PCI Standards are Flawed?

A security breach of one of our nation's grocery chains computer system may have exposed 4.2 million debit and credit card numbers to theft, making it one of the largest such cases in the nation. Hannaford Bros. says it has secured its credit and debit card transaction system to block future unauthorized access and the Secret Service is investigating. So far, 1,800 cases of fraud are linked to the breach.

Kevin Mandia, president of Alexandria, Va.-based computer security firm Mandiant Corp., said retailers are most vulnerable during the processing of the credit or debit transaction. Hackers can create a type of software called a "sniffer" that acts like a wiretap and can intercept credit and debit card data as it travels between the retailer's point of sale and the credit card processing company. It can be very difficult to detect sniffers.

While the banks appear all but ready to blame Hannaford for failing to follow payment card industry standards on security, there are signs that this may be the first of many cases to surface this year wherein the affected retailer was hacked even though it appeared to be following all of the security rules laid out by the credit card associations.

Editor's Note: What does this have to do with HomeATM you ask? The highlighted sections below underline deficiencies (in the brick and mortar world) where deficiencies should NOT exist and where HomeATM has already taken precautions designed to alleviate these new concerns.


The Boston Globe's Ross Kerber today writes that Hannaford is still investigating the specifics of how the data was taken, but that the company's chief executive said the data "was illegally accessed from our computer systems during transmission of card authorization." Translation: The hackers snatched the credit/debit card data sometime between when the customer swiped their card in the reader at the register and when that transaction was approved.

Editor's Note: If the passage in the second highlighted area is correct, then the revised PCI-DSS standard is flawed.

The Globe story continues: "What could make the Hannaford case unusual is that since last spring its stores have met industry standards regarding how customer data is stored and maintained, Eleazer said. Many other retailers victimized by breaches, including TJX, had been faulted for lax security. It's too soon to know whether Hannaford's case will warrant the consideration of further security reforms, said Ted Julian, vice president of strategy at Application Security Inc., a New York database services company."

Brian Sartin, vice president of investigative response for Cybertrust, a division of Verizon said a great many retailers have taken extra precautions to ensure that any credit or debit card data they store is properly encrypted and secured.

Sartin said his team is currently responding to a number of data breaches in which hackers have targeted financial data as it is being transferred from the retailer to the credit card processor and back.

While the payment card industry standards require retailers to encrypt payment data when it traverses public networks, that requirement does not necessarily apply to a company's own internal, non-public networks, Sartin said.

"I would say a trend we're seeing hitting a lot of retailers right now is that these organizations can be [compliant with the credit card industry security standards] and still have customer data stolen," Sartin said. "The data in transit is allowed to traverse private links and internal infrastructure without being encrypted, and the attackers are taking advantage of that."

Editor's Note: According to George Gendron, President of HomeATM, "Contrary to current practices – and a function that HomeATM has presented a patent application on – HomeATM decreases the chance of hacking during transmission by not only encrypting the PIN, but also the PAN prior to transmitting."

Sartin declined to say whether this dynamic was at work in the Hannaford case (his company had been retained by a party involved in the breach). But he noted that Cybertrust has found with a number of very recent compromises that attackers have seized control over the very terminals that control cash registers or point-of-sale systems within a retail store, or the server through which all registers connect to pass transaction data out across the Internet to the store's payment processor. Once these systems have been compromised, Sartin said, the attackers typically eavesdrop on the network using "sniffer" programs that can extract credit and debit card data as it moves across the wire, before it even leaves the store's network.

Indeed, attackers appear to be exploiting the letter - if not the spirit - of the payment card industry standards, said Tom Kellerman, vice president of security awareness at Core Security.

Kellerman said many retailers not only fail to encrypt financial data while it is being moved around inside the stores, but they also fail to understand that encrypting data is meaningless if the merchant doesn't also harden the security of the computers that power the point of sale systems.

Already, there are signs that 2008 may turn out to be a record-breaking year for retailer and card processor data breach disclosures. Kevin Mandia, president of Mandiant Corp., an Alexandria, Va.-based company that specializes in investigating data breaches, said his firm responded to more credit card losses in the past year than in any prior 12-month period. "It's early in the year, but the tempo [of data breaches] has been very heightened since the summer of 2007 and maintained the same barrage," Mandia said. "We're seeing at least two new companies a week discovering that they've lost credit card numbers, and at the rate we're going [the criminals] are going to exhaust U.S. retailers as targets.

HomeATM's New Flash Website is Up

HomeATM's new Flash Website is up and running. Although there's still a lot of work to be done before it's complete, it is currently available for viewing. I expect that it will be up and down over the course of the next few weeks/month as ongoing work is being done to complete it. But take a look. FYI: To turn off the music, look for an icon on the bottom middle right and click it.

On the right is a screen capture of the Introduction and Benefits to Merchants...

Click the picture to enlarge or vist HomeATM's website at:

www.homeatm.net

Fraud Still a Problem in 2007

From Digital Transaction News on March 13th, 2008

Companies that accept checks and electronic payments were victimized by fraud at virtually the same rate in 2007 as in 2006, but those that experienced fraud saw more incidents of it, according to a survey by the Association for Financial Professionals released this week. The Bethesda, Md.-based AFP is a trade group made up of treasury professionals from retailing, manufacturing, and other sectors.

While the AFP reports 71% of respondent organizations reported actual or attempted fraud last year, virtually unchanged from 72% in 2006, some 30% of those companies said the number of incidents increased; 18% reported fewer incidents, while 52% said the number was unchanged.

Much of this fraud resulted from paper check payments, with fully 94% of victimized organizations reporting this type of fraud. Of those companies that receive electronic payments from consumers in the form of cards or through the automated clearing house, just 10% said they were hit last year by actual or attempted fraud. And incidents of consumer-based fraud appear to be moderating. Among these companies, 61% said they had experienced the same number of incidents as in 2006. Thirty-seven percent reported more incidents, and 2% said there had been fewer.

Altogether, 43% of the respondents reported accepting consumer-based ACH and card payments.

Among companies reporting consumer-based fraud, credit cards were responsible for most of the incidents, with 89% of organizations reporting this type of fraud, followed by ACH (38%), and signature debit cards (24%).

Interestingly, 11% reported attempted or actual fraud on PIN debit cards, often seen as safer than either signature debit cards or credit cards because of their PIN authentication.

But consumer fraud often results in actual losses for these businesses, largely because of online commerce. The AFP report says two-thirds of organizations reporting consumer ACH or card fraud sustained losses, compared to 37% for all companies reporting fraudulent incidents of all types. Again, credit cards were responsible for most of the consumer-fraud losses, with 92% of those reporting such losses citing this as the source. ACH fraud caused losses for 36% of these companies, followed by signature debit cards (28%) and PIN debit cards (20%).

Some 71% of those suffering losses said the loss came from Web sales, followed by card-present sales (63%) and phone-based transactions (46%).

Taking into account all payment instruments, including checks, and business-to-business payments as well as consumer transactions, some 63% of organizations reporting actual or attempted fraud suffered no losses at all. Among those that did, the median loss came to $13,900, a number the AFP report characterizes as “relatively small.” Though check fraud seems pandemic, with nearly all companies reporting fraud citing checks as a source, only 17% of these organizations sustained losses.

The AFP survey is the fourth annual poll the organization has conducted and was underwritten by the Electronic Payments Network, a unit of The Clearing House Payments Co. LLC, New York. It was fielded in January and went to 3,950 members, with 488 responses. Surveys sent to non-member companies yielded another 64 responses. Manufacturers and retailers made up nearly one-third of respondents.

Online Retailers Need Online PIN Debit

Question: What do the Top 500 Internet Retailers All Have in Common?

Answer: They are all being charged Interchange Fees that are 100 basis points higher than they would pay with a web based PIN debit payment platform. HomeATM can bring PIN Debit to your website today. Call John B. Frank at 612-432-6980 to find out how....



Smaller niche retailers pace the 2007 Top 500

America’s 500 largest web retailers accounted for 61% of all e-commerce sales in 2006, but the fastest-growing merchants are smaller niche retailers who specialize and know what makes their customers tick, according to Internet Retailer’s forthcoming 2007 Top 500 Guide.

While the Top 500 was the engine that powered online sales growth for several years, in 2006 sales at the Top 500 companies grew 21.3% compared to 25.9% for the entire market. Top 500 sales totaled $83.6 billion, up from $68.9 billion a year earlier. The rest of the market, including an estimated $34 billion in eBay Inc.-originated sales that could be considered retail sales, accounted for $52.6 billion in sales, up 29.9% from $40.5 billion a year earlier.

Within the Top 500, the split between slower growing large sites and faster growing smaller sites was apparent. In 2006, combined revenue of the Top 500’s 100 smallest merchants—with annual sales of about $5.5 million to $10.9 million—rose by 23% to $836.3 million from $682.6 million in 2005. Sales at the Top 100 grew 19% to $71.6 billion in 2006 from $60.2 billion in 2005.

In 2006, the Top 500 accounted for 61.3% of all online retail sales of $136.2 billion, down from 62.9% a year earlier. Among the Top 500, the Top 100 account for 86% of all sales, down slightly from 87% a year earlier.

But smaller and more nimble merchants continue to grow faster than their established competitors. For instance, the Top 25 retailers grew their combined sales in 2006 to $52.9 billion from $44.8 billion, an increase of 18%. But the total sales for all start-up retailers in the Top 500 Guide—companies only in business since 2004—grew by 55% to $494 million last year from $319 million in 2005.

The Top 500 Guide ranks America’s 500 largest web retailing organizations based on annual sales. Each retailer’s listing also includes: site traffic, conversion rate, average ticket, senior management, key vendors and where each retailer ranks in the market they serve. New this year are a list of web features and functions for each retailer, the percent of traffic from search engines for 2005 and 2006 for each merchant, and a browser satisfaction score and the ForeSee Results/Internet Retailer Purchase Intent Index for each top 100 e-retailer.

The Top 500 Guide includes 145 e-retail businesses that are owned or operated by store-based retail chains, 89 by catalog and direct-marketing firms, 42 by consumer branded manufacturers and 224 by the so-called pure plays or web-only retailers.

As e-retailing becomes more established, the Top 500 Guide finds that more online merchants are freely revealing their online sales numbers. This year, 256 companies reported their online sales data, compared with 240 last year and 150 the year before. The Top 500 Guide sells for $59 for a single copy plus $9.95 for shipping and handling. To order, click here.

There's No Place Like Home...ATM

Costco Wholesale Corp. is investigating two technologies that would allow the retailing giant to accept PIN debit cards for payment on its Web site, according to sources familiar with the matter.

At a meeting arranged by Chase Paymentech Solutions LLC, a senior Costco official met with representatives of ATM Direct (which has since gone bankrupt), HomeATM and Intel Corp. to discuss methods for processing PIN debit transactions online, these sources say.

Irving, Texas-based ATM Direct and HomeATM, a Montreal company, market products that give consumers the ability to enter PINs on PCs.

HomeATM uses, depending on the application, either an external PIN pad combined with a mouse clicks on a floating screen based PIN Pad. They also have the ability to transact without the external PIN Pad.

ATM Direct relied only on a PIN entry via mouse clicks although now that it's bankrupt, dismantled, and it's website gone (www.atmdirect.com) , it seems irrelevant what they did or could have done. ATM Direct WAS a unit of San Francisco-based Pay By Touch, a provider of biometrically authenticated payment processing. They have since filed for bankruptcy and must liquidate their core and non-core assets.

ATM Direct was sold at auction and is therefore no longer considered a player.

To give you an idea of the lack of viability regarding ATM Direct's platform; according to Digital Transaction News, Pay By Touch paid $30.5 million dollars for ATM Direct, yet it fetched only $600,000 at auction. Therefore, one would have to logically assume that it's intellectual property was not very strong in the face of HomeATM's and thus it was purchased for the purpose of it's inventory, which consisted of 25+ IBM Blade Servers.

Therefore, it is my guess that it will never be heard from again, which although it probably wouldn't have mattered anyway, still bodes well for HomeATM.

HomeATM relies at least in part on technology acquired from InstaPay Systems Inc., whose Kryptosima unit developed external PIN pads that can be hooked up to PCs via USB connections. (Digital Transactions News, Sept. 7, 2004). However, in the last three years, they have vastly improved on this technology and hold the global patent for PIN based transactions in a web-browser space. This is the patent that probably resulted in ATM Direct becoming a Blade Server Discount Store.

Also in attendance at the meeting, held at Costco’s headquarters in Issaquah, Wash., were representatives of three of the five biggest electronic-funds transfer networks, according to one of the sources, who declined to identify them.

A spokesperson for Chase Paymentech declined to comment. Calls from Digital Transactions News to the other known participants in the meeting were not returned by late Wednesday.

While the ultimate outcome of the meeting will likely remain unclear for some time, its purpose was to provide a basis on which Costco and its processor, Chase Paymentech, can decide on which technology to use, say the sources familiar with the matter. Moreover, Chase Paymentech, a merchant-processing behemoth owned jointly by JPMorgan Chase & Co. and First Data Corp., is trying to decide how to place its bets when it comes to PIN debit for e-commerce in the face of mounting demand from merchant clients, these sources say. This is just the beginning of what could be a whirlwind decade for HomeATM.

“There’s likely to be more meetings [with other merchants] in the near future” like the one with Costco, says one source, who adds much of the demand for Web-based PIN debit is coming from multichannel retailers looking to cut the cost of online transactions.

A move by Costco, a top-25 Internet merchant, to take PIN debit on its site would lend considerable credibility...make that debibility...to the idea of taking PIN debit online.

This is a notion many EFT officials have historically shied away from, citing concerns about security and about a possible threat to the interchange income EFT network members earn from signature debit. However, according to HomeATM, their transactions would be 99.9 Sigma Secure, so it seems they have overcome those concerns and are poised to challenge some of the biggest online payment players for market share.

Because of these concerns, the EFT networks have limited PIN debit online to payments in certain biller categories regarded as safe because the billers have established relationships with consumers. These categories include utilities and insurers, though lately the networks have added more categories, such as rent payments.

PIN debit interchange rates are significantly lower than those for signature debit. Of course, signature debit doesn't really even exist on the Internet, as it's not physically possible to provide a signature, thus the rates web retailers pay are typically even higher than signature debit.

Costco’s site is the 21st largest among Web retailers with $1.22 billion in annual sales, according to Internet Retailer magazine.

Thus, according to the chart on the left, HomeATM could save Costco 100 basis points on it's Interchange Fees. That would equivocate to an annual savings of $12.2 million dollars, or $122.2 million dollars over the next whirlwind decade that HomeATM could enjoy.

Imagine that only half of the top 30 Internet Retailers, who each process $1 billion dollars per year were smart enough to save 100 basis points, reduce back office risk management costs by half (estimated to average around 4%) The sales proposition is as simple as it gets. Save More, Risk Less.

HomeATM Article from Digital Transaction News

Smart Card Marketing, HomeATM Enable PIN Debit Online and at Stores

In a move that could further the penetration of "Internet-based PIN debit", (Editors Note: I prefer PIN Authenticated Internet Debit which gives us the acronym P.A.I.D which could also stand for PIN Authenticated ID) a San Antonio-based processor of prepaid card transactions has adopted a device that will allow users of its electronic-wallet service to load their accounts online with credit cards and PIN debit cards.

Smart Card Marketing Systems Inc., which introduced its VelocityMoney.com e-wallet product just six months ago and so far has 1,000 users, will use a device from Montreal-based HomeATM that connects to PCs via a USB cable to allow users to load accounts online with card swipes. The device includes a numeric pad for entry of PINs linked to debit cards.

Also, as part of the agreement with Smart Card Marketing Systems, HomeATM will begin reaching the physical point of sale for the first time.

Working with an unnamed merchant acquirer, Smart Card Marketing Systems is signing up merchants to accept credit and debit cards through the HomeATM device.

The acquirer will process credit card transactions, while HomeATM will handle debit card payments. Smart Card Marketing has booked orders from merchants for 9,000 of the devices so far, says Bruce Baillio, president of the company. Targeting niche merchants that in many cases don’t have existing merchant accounts, Smart Card Marketing is offering the HomeATM device as a substitute for conventional point-of-sale terminals and pricing it at around $50.

Although the devices will accept credit or debit cards, Baillio says many merchants have a strong interest in PIN debit. “Our merchants are interested in the debit-loading aspects of this,” he notes. A travel agency, for example, finds the service useful to allow customers to load prepaid cards for use on trips, he says. Another client is a processor for small online merchants that wants to enable PIN debit payment, Baillio says.

The agreement with Smart Card Marketing represents the second major deal HomeATM, a small engineering company with a handful of Web merchants as clients, has struck in the past two months. In December, the company agreed to use its technology to enable online PIN debit and credit card transactions for airlines linked to the Universal Air Travel Plan transaction switch.

At the same time, it applied for a patent on a PIN-authentication system called PinMyCard, which, when paired with its device, could allow merchants to process credit card transactions online at card-present interchange rates. Company officials say this is possible by virtually eliminating the risk of fraud (Digital Transactions News, Dec. 18, 2007).

For users of Smart Card Marketing’s VelocityMoney.com service, the HomeATM device will enable cardholders to replenish the company’s prepaid MasterCard online with the swipe of a credit or PIN debit card. VelocityMoney.com, an e-wallet platform, also allows loading through the automated clearing house, wire transfers, and checks and money orders. The advantage of PIN debit card swipes, Baillio says, is that the company will get good funds the same day. “Unless you’re getting physical cash from someone, the time frame of moving money is extended, it could turn into multiple days or a week,” he says.

The agreement with Smart Card Marketing does not yet involve HomeATM’s PinMyCard system, so online credit card transactions on the devices are being assessed card-not-present interchange, according to Mitchell Cobrin, chief operating officer at HomeATM. But he says talks are under way with Smart Card Marketing to integrate the system and allow card-present rates, which do not carry the premium the card networks levy on card-not-present payments.

Universal Air Travel Plan Selects HomeATM's PIN Solution

Targets Airlines with PIN Based Alternative Form of Payment

Washington, DC – Universal Air Travel Plan, Inc. (UATP), today announced a partnership with HomeATM ePayment Solutions, a global online payment solution and web security engineering firm.

The partnership will initially offer an alternative payment option to the global commercial airline community.

“UATP continues to expand its partnerships into alternative forms of payment with HomeATM, utilizing UATP’s existing connections with the airlines to offer a new form of payment option for consumer use,” said Ralph Kaiser president and CEO, UATP.

“UATP’s goal is to maximize the usage of the network infrastructure and offer to the buying-public the options of payment that they are looking for.”

Addressing the consumer need for online debit card processing abilities, HomeATM developed a secure PIN debit and PIN credit card (as card present) transaction method via the internet; the growing preferred method of payment for consumers and merchants alike.

HomeATM’s unique system utilizes state of the art technology and the HomeATM swipe pad to allow users to conduct secure, PIN-based transactions ensuring virtually zero fraud and with significantly lower merchant processing fee costs.

“Through this partnership, airlines will be able to address the growing demand for alternative forms of payment, significantly reduce their cost and offer the buyer side 99-Sigma security”, said Mitchell Cobrin, chief operating officer, HomeATM.

“Our motivation for aligning with UATP was to extend this most timely payment process to as wide a swath of the travel sector in as short a lead time as possible. Now that it is done, HomeATM will gain speed to market by offering a quasi Plug and Play solution to commercial airlines globally. We could not be more pleased.”

Functionally, HomeATM mirrors brick and mortar POS transaction processes and is the first player in the e-payment space to bring PIN – or dually authenticated – debit to the web environment. In addition - through its PinMyCard technology and with an eye to increasing the security of sensitive buyer data and lowering merchant processing, fraud and reserve costs - HomeATM will be offering airline clients the capability of generating a PIN for use with their credit cards.

For more information, visit http://uatp.com or www.homeatm.net

About UATP

UATP accounts are accepted as a form of payment for corporate business travel by airlines and travel agencies worldwide. UATP accounts are issued by: Aer Lingus, Air New Zealand, American Airlines (NYSE: AMR), Austrian Airlines, Continental Airlines (NYSE: CAL), Delta Air Lines (NYSE:DAL), Japan Airlines (Pink sheets: JALSY.PK), Northwest Airlines (NYSE: NWA), Qantas Airways, Ltd., United Airlines (Nasdaq: UAUA), and US Airways (NYSE:LCC). AirPlus International issues the UATP-based Company Account for: British Airways (Pink sheets:Bairy.pk), Continental Airlines (NYSE: CAL), and Lufthansa German Airlines.


About HomeATM:

HomeATM is the owner of a global patent covering PIN-debit card and PIN-credit card authentication in a browser environment and of patent pending solutions for both a 2nd generation iteration aiming to turn any Internet-enabled device into a fully secured, bank “standard” transaction device as well as a PIN-based dual-authentication conversion process for traditional credit and charge cards, aspiring to be a significant player in online financial services,payment solutions and remittance.

HomeATM Featured in The GreenSheet

Homing in on e-commerce

HomeATM Payments creates innovative solutions for processing secure debit and credit card transactions on the Web. You may wonder why this is newsworthy. After all, many companies process transactions online. HomeATM has a twist: It processes all transactions as card present.

Yes, you read that correctly.

With HomeATM, consumers make e-commerce purchases using their ATM or credit cards, and payments are processed as PIN debit transactions. HomeATM Chief Operating Officer Mitchell Cobrin said the company's mission is to "expand current payment options on the Web by enabling consumers to use their debit/bank ATM cards, a growing payment option of choice."

The company was founded in 2002 by a group of payment industry experts and Internet entrepreneurs. It recently switched headquarters from Chicago to Montreal, and its 25 employees are spread among offices in Chicago, Montreal and Hong Kong.

While HomeATM is just four years old, its founders have more than 40 years of combined experience introducing e-commerce solutions. Among them, they have more than 30 patents.

After three years of research and development and spending more than $3 million, HomeATM owns one patent and has six more pending. They all pertain to innovations in payment processing and encryption.

"HomeATM owns the worldwide patent for PIN debit or credit transacted through a Web browser," Cobrin said. "We are capable of enabling e-consumers to use their PIN debit/bank ATM card from the comforts of their home with participating merchants. We will defend our patent and pursue infringers.

The HomeATM process requires only a computer, a HomeATM ScanPad and an ATM/debit card. No registration or enrollment is needed. To deploy, a consumer simply connects a ScanPad to a computer, swipes an ATM card and enters a PIN. That's it.

"Our bank-level secure technology operates via a USB peripheral and offers the consumer dual authentication," Cobrin said. The plug-and-play devices are supplied to merchants at cost. Merchants then give the devices to their customers, free of charge.

Merchants determine which clients receive devices. For example, a merchant may decide any consumer who spends a certain amount of money within a given time deserves the device.

Cobrin realizes some consumers may resist changing their online purchasing habits. For them, merchants can offer incentives. For instance, an airline may offer three miles for every dollar spent with the device, rather than the standard one mile for every dollar spent using other payment methods.

HomeATM does not seek to profit from equipment sales. Rather, it wants to get the ScanPad into the hands of end users. The situation is analogous to cell phone service or satellite television subscriptions. In these models, the hardware is typically provided at no cost to the consumer. The provider earns profits on the use of the service.

The company is also beta testing PIN-entry software that has the same capabilities as the ScanPad. But Cobrin noted its release is not imminent. HomeATM continues to collaborate on development with processors and banks.

Speedy, safe and profitable

HomeATM's target merchants have large, recurring client bases. Cobrin said it is advantageous for these merchants to convert consumers from card not present credit transactions to PIN debit transactions because there is less risk.

"We guarantee 100% payment in real time with no chargebacks or reserves," he said. The company is able to make this guarantee because PIN debit transactions take place in real time. "When the transaction occurs, the funds are set aside at the issuing bank. Those funds settle at 3:00 a.m. Eastern Time that night. No chargebacks," he added.

Cobrin also pointed out that PIN debit transactions are more cost effective: HomeATM can often save merchants 100 to 150 basis points.

"Debit is a cheaper transaction on the whole," he said. "The rates across the board in the debit world are less. With debit we have a point of sale rate that allows us to pass the savings on to the merchant."

Merchants also benefit from the system's flexibility. They can use any processor because the HomeATM software works with all existing debit and credit networks.

Another attractive feature of HomeATM transactions is their security. Transaction information is not entered into merchant databases. It doesn't even go to merchants; it goes directly to consumers' banks. Therefore, the risk of consumer data remaining on merchant servers is eliminated.

Additionally, all customer data is encrypted in the ScanPad's PIN pad before it even reaches the computer. The card data is never visible, eliminating the risk of theft due to phishing, key logging and other criminal tactics.

Consumers can even use this technology to send funds person to person by simply swiping their bankcards. The intended recipients can retrieve the money from any ATM worldwide, or use it for POS transactions at any merchant who accepts debit cards.

When asked if PayPal is a competitor, Cobrin said, "It can be a friend or foe. HomeATM can be an instrument to load a PayPal wallet, or it can be a direct competitor at the checkout. We can do everything PayPal can and a whole lot more. And our rates are much more advantageous."

Good news all around

HomeATM is good news for consumers who want to use their ATM cards online. It is good news for merchants who want access to that market. And it is good news for ISOs and merchant level salespeople (MLSs) because HomeATM is interested in forming relationships with the ISO and MLS community.

"We are a dexterous and nimble company eager to add ISOs, MLSs and merchants, and we are open-minded to strategic relationships and partnerships," Cobrin said. The company uses hybrid buy rates and offers agents commissions and residuals.

HomeATM already has several established relationships with agents around the world. "We are a company that offers a lot of support and collaboration to our ISO/MLS agents throughout the sales, integration and customer care processes," he said. "We view these organizations as partners; our success relies on their success."

The company is interested in working with ISOs that are sector-based and have expertise and contacts in industries such as e-commerce, travel and hospitality.

"We want to align ourselves with companies who have established relationships with appropriate e-merchants who fit our markets," Cobrin said. "Costco.com, walmart.com, dell.com and so on - those are the people we envision doing business with."

Tapping new markets

ISOs and MLSs choosing to add HomeATM to their merchant offerings will be able to help their customers access consumers who have previously been out of reach.

E-commerce security is an ongoing and growing concern. And, debit is the largest growing transaction method. Both of these factors contribute to an environment ripe for an effective PIN debit e-commerce solution.

"There is a huge market of people who don't use credit, and there is a huge part of the market who are petrified to put their data into a Web browser," Cobrin said.

Not only can HomeATM help ISOs and merchants reach the debit community, it can help them reach the credit community and other profit areas.

"Debit can be a conduit to grow sales," Cobrin said. "It is generating sales growth potential. Even micro payments are an opportunity. Because of our cost system, we can make it affordable."

HomeATM can also process credit cards: The HomeATM device is chip-and-PIN-ready. And when a credit card is swiped using HomeATM's device, track 2 data is captured.

"We can still do credit better than anyone can do remotely," Cobrin said. "From a chargeback, repudiation and fraud consideration, capturing track 2 data is nonexistent from home" with other providers.

HomeATM's focus is to make payments easy for all parties. It can work with any industry in any region. The company's process is compatible with all banks and acquirers.

"Since we are technology-centric and bank-agnostic, we are flexible to integrate and work with an unlimited amount of processors and banks," Cobrin said. "We are happy to work with our clients' processors and acquirers."

Of particular interest to merchants, HomeATM custom designs programs to accommodate each industry's challenges. This honors HomeATM's commitment to flexibility and ease of use and is another selling point for ISOs and MLSs.

"Our solution can be applied to every industry including person-to-person money transfers, travel, MLM, taxation, parking meters, airlines, car rentals, hotels, tour operators and so forth," Cobrin said. "When it comes to PIN debit over the Internet, there is only one place to go, and that's with our worldwide patented technology."

HomeATM in BusinessWeek

SmartCard Marketing Systems Inc. Signs Significant Agreement to Expand Capability of PIN Debit Terminals to Include Standard Credit Card Merchant Processing Services

SAN ANTONIO, Feb 26 /PRNewswire-FirstCall/ -- SmartCard Marketing Systems Inc. (Pink Sheets: SMKG) announced today the signing of a significant agreement with Payment Data Systems (OTC Bulletin Board: PYDS) and HomeATM Payments to extend merchant acquiring services through the breakthrough HomeATM technology that Velocitymoney.com incorporates in its financial offering to consumers and merchants.

SMKG President Bruce Baillio said, "The HomeATM is an important addition to our VelocityMoney.com payment platform. VelocityMoney.com is positioning itself to be the new standard in online wallets, money transfer and payment processing platforms. We want to be faster, less costly and give more value than the other online pay sites or Money Service businesses with the unique card present services of PIN Debit and Credit Card which has never been possible prior for such a low cost.

This new agreement adds complete credit and debit card processing capabilities to qualified merchants, online or brick-and-mortar, using the HomeATM device. The revolutionary feature of this product is its tremendous power and incredibly low cost. We can give an online or retail merchant highly secure, military-grade encryption for all his/her credit or debit card transactions at very competitive rates through a USB device for less than $50 installed - an industry wow."

The original HomeATM device is a patented online payment solution for individuals and merchants. It uses the most comprehensive authenticity and verification technology available. VelocityMoney.com has seamlessly integrated this device into its payment platform, so anyone can securely and instantly move money from a debit or check card into their VelocityMoney.com online wallet for further usage.

Mitchell Cobrin, HomeATM's COO stated, "We are pleased to add standard credit card merchant services to our one-of-a-kind Debit processing technology. Although no other service provides online merchants our unique benefits of no reserves, guaranteed instant funds, no delays in funding and low price, the additional capability that this agreement brings gives our customers the complete range of card payment options, expanding our reach to brick-and-mortar merchants as well as online merchants." As Mitchell likes to say, "Imagine being able to transfer money ANY time, ANY where. That is what VelocityMoney.com and the HomeATM have accomplished."

SMKG CEO Massimo Barone stated, "We believe strongly that this will lead to immediate results in new merchant orders as well as orders from Merchant's switching over from traditional Point of Sale terminals that are more costly to maintain and operate and this does not include the direct benefit made to businesses on the go that desperately require payment solutions for their businesses on the go."

We seek safe harbor.

SOURCE SmartCard Marketing Systems Inc.

PIN Debit for the Web

Payment vendor woos e-retailers with promise of lower transaction fees

Online retailers consistently complain about the high fees they pay on credit card purchases, typically 2% for big e-retailers and considerably more for smaller ones. Start-up HomeATM ePayment Solutions says it has a way to reduce those fees significantly, although some payment experts, as always, are skeptical.

HomeATM has developed a small magnetic stripe reader with a personal identification number, or PIN, pad that can be plugged into a personal computer. That would enable a consumer to swipe his debit card and enter his PIN, just as he would at an ATM or at store checkout counter, sending the transaction through the debit networks that typically charge lower fees than credit card networks, according to Mitchell Cobrin, chief operating officer.

While PIN debit interchange varies with the network and type of merchant, it typically ranges from 40 cents to $2 per transaction, and in some cases is a flat fee, as opposed to a percentage of the purchase amount, as with credit card transactions. Merchants will be able to save 1% to 2% per transaction in many cases, Cobrin says.

His hope is that large online merchants will give the readers to loyal customers. He says the readers cost about $5, and that merchants will soon make back that investment if repeat customers pay with PIN debit cards instead of credit cards. “The financial metrics become compelling for a retailer like Amazon, Wal-Mart or Costco to give away these devices for free and incent the consumers to use it, because they’ll save money every time,” Cobrin says. He notes, however, that it often takes a long time to convince such large retailers to adopt a new payment method.

HomeATM has also come up with a way to use the PIN-entry devices with credit cards for consumers who prefer that method of payment. This system, called PinMyCard, would require a one-time registration by the consumer who would swipe his debit card and enter his PIN to verify his identity. He would then choose a credit card PIN for use with subsequent purchases. Cobrin says that could lead to merchants being charged card-present rates that are lower than the card-not-present rates e-retailers typically are charged.

There are about 5,500 of the HomeATM devices in the field and a handful of merchants accepting transactions, although Cobrin did not name them. The company has announced a deal with Universal Air Travel Plan Inc., a Washington, DC-based payment network owned by airlines from several countries, to offer the HomeATM device to member airlines.

Universal Air Travel Plan continues to expand its partnerships into alternative forms of payment with HomeATM, utilizing UATP`s existing connections with the airlines to offer a new form of payment option for consumer use," Ralph Kaiser president and CEO of UATP, said in announcing the agreement last month.

While the lower interchange of PIN-debit networks may seem appealing, merchants may not find HomeATM saves them much when all costs are considered, says Jay DeWitt of consulting firm Glenbrook Partners. Even if the device costs only $5, it will cost at least another $5 to send it out and support it, bringing the cost to $10 or more. And then merchants will have to persuade customers to use it. “Are there going to be enough customers doing enough transactions so that the interchange differential is going to be enough to pay for distributing and supporting those readers?” DeWitt asks.

As for PinMyCard turning online purchases into card-present transactions, DeWitt says it will be up to credit card networks like Visa and MasterCard to decide whether they accept that logic.