Is Now the Time for Online PIN Debit?This session was presented by MikeStrada from Chase Paymentech. Mike is a fan of online PIN debit,especially the notion of giving merchants more choices. His discussionfocused on the different options the 12 North American debit networksare exploring.
Several of the debit networks are exploring PIN debit, some aren’t.ACCEL, NYCE, PULSE and STAR are doing PINless debit for utility andother low risk payments. Mike explained that these are the 4 networksthat are exploring PIN debit on the Internet. Three of these four (allexcept STAR) have recently announced PIN debit pilots.
Mike maintains that PIN debit forecommerce transactions could provide some incremental sales lift formerchants, especially since 14% of debit cards are “ATM only” – i.e.,they don’t have a MasterCard or Visa logo on them and thus can’t beused for general ecommerce transactions.
Mike explored the pros and cons of the four alternatives:
- Acculynk (formerly ATM Direct, previously owned bynow-defunct Pay By Touch). ACCEL, NYCE and PULSE have all signed LOIsto do pilots with Acculynk. Mike thinks two more debit networks willannounce pilots within the next 90 days.
- Safe-Debit (the same name of the program NYCE wentto market years ago using a CD ROM token). This iteration is usingVerient’s platform to redirect the user to the customer’s home bankingsite for authentication. In this case, the cardholder is sent a onetime PAN for use at the merchant site. Hoping to do a pilot in firsthalf of 2009. This, of course, requires a redirect which scares a lotof merchants due to the increased risk of abandoned shopping carts.
- Claerity – technology allows consumer to registercell phone number with their DDA FI. The bank, via the network, sendsone time password back to cell phone which the shopper enters onmerchant checkout page. Network compares the onetime password sent tocell phone with the one issued to the consumer. Not clear who will bearthe cost of the SMS message. Hoping for a 2009 pilot, but unclear if ontrack.
- Home ATM – Canadian firm distributes USB PIN padthat has a mag-stripe card reader and encrypts data. Has a distributionagreement with Microsoft, but no announced pilots.
Mike acknowledged one of the big issues that Glenbrook encounterswith our merchant clients – critical mass and the challenge of gettingonline merchants adopting two or three (forget four or more) differentprocesses. Our clients tell us they’ll consider it when the networksadopting a particular approach/technology bring critical mass ofcardholders in aggregate. My sense is that STAR has critical mass untoitself. The next 3 largest networks (assuming Interlink and Maestrowon’t play) would need to converge on a solution to bring critical massto market. Just my opinion, but Mike doesn’t think standardization willhappen in the foreseeable future, and Paymentech has decided to moveforward anyway.
Mike/Chase Paymentech is predicting that be the end of 2010, most ofthe major networks will implement online debit products (excluding, ofcourse, Interlink and Maestro), with transaction pricing somewhere inbetween physical POS interchange and online Visa/MasterCardinterchange.
Mike also predicted that by 2012, online PIN debit could be the mostwidely used payment mechanism on the Internet. The operating rules forhandling online PIN debit transactions haven’t been worked out, butthey’re working on it. He acknowledges that the rules really should be,and probably will be standardized across networks.
ChasePaymentech has agreed to do a pilot with Acculynk (and is looking for merchants to participate).
Of course there’s the fraud risk associated with these new products(Mike acknowledged it, but didn’t spend much time on this area).Mike feels the consumer proposition is one of safety, security, and identity theft protection.
One question I have is whether 3D Secure technology could do just aswell as the above four products/technologies mentioned above. Mikethought that it probably could, but he wasn’t aware that any of thedebit networks had considered that path (could mitigate merchantadoption problem).
The merchants in the audience were somewhat skeptical on a number offronts. For example, how to deal with split shipments that span theauthorization time frames. They worried about consumer valueproposition and recalled all the issues they encountered with 3DSecure, particularly how the banks/issuers didn’t do as good a job asthey needed to educating their cardholders.
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Merchant Risk Councils Platinum Day - Afternoon Sessions 
Is Now the Time for Online PIN Debit?
John B. Frank 03.11.09 at 5:50 am
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