Heartland Payment Systems Inc. said that although it generally favors hardware-based payment security systems, it is supporting Acculynk Inc.'s PaySecure software because of the endorsements the technology has received from multiple debit networks.
PaySecure enables consumers with an eligible debit card to enter their PIN on a virtual, scrambling PIN pad on a computer screen to complete a transaction during the online checkout process.
Heartland said Tuesday that the payment option will be available to its merchants by early July.
Steve Elefant, Heartland's chief information officer, said he rates Acculynk's technology as state of the art. But the endorsements of various electronic funds transfer networks also played a role in Heartland's agreeing to support PaySecure.
"The debit networks are the ultimate arbiter, and obviously a number of them have signed on to accept Acculynk," Elefant said.
Nine EFT networks support PaySecure: Accel/Exchange, Alaska Option, Credit Union 24, Jeanie, MasterCard Inc.'s Maestro, NetWorks Inc., NYCE, Pulse and Shazam. The two largest networks that support PIN-debit purchases, First Data Corp.'s Star and Visa Inc.'s Interlink, have yet to sign on with Acculynk.
Acculynk has said it is working on a deal with a 10th, undisclosed network.
Heartland sees PaySecure as a method for "e-commerce merchants to connect online payments with lower costs through the debit networks that [support Acculynk] and greater charge-back protection because of the PIN entry," Elefant said.
Heartland works with some 50,000 online merchants and 250,000 overall.
Acculynk emphasizes the lower interchange rates PaySecure offers to merchants.
Card-not-present signature-debit rates set by Visa Inc. and MasterCard Inc. typically range from 1.64% to 2.2% of the sale, depending on the type of transaction, according to Acculynk. The final price to the merchant for PaySecure generally is 20% to 40% lower than what they would pay for card-not-present signature debit, Acculynk has said.
The EFT networks set the PIN-debit interchange rates, which determine how much the issuer receives from the merchant's bank for the transaction. The acquiring bank then passes the expense along to the retailer as part of the discount rate, which also covers costs for processing and other services, including those provided by the supplier of the PIN-debit payment service.
Different categories of Heartland merchants have expressed interest in PaySecure, Elefant said.
"There is a general interest among merchants on how to secure payments and how to do that in the PIN-debit world," he said.
Heartland can be picky about its partners, given the processor's need to keep its operations and transactions secure. The company reported in January 2009 that hackers a few months earlier had breached its processing network, capturing credit and debit card numbers and expiration dates.
The Secure Remote Payment Council, which Elefant participates in, has vetted Acculynk's product. That helped Heartland in its decision to support PaySecure, he said. The organization, which formed in 2009, promotes a set of best practices for payments companies involved in Internet PIN-debit and mobile-payment transactions.
Acculynk's deal with Heartland comes just two weeks after it announced its most significant partnership with First Data, which provides processing services to more than 300,000 e-commerce merchants. First Data is a unit of the private-equity firm Kohlberg Kravis Roberts & Co.
The Heartland deal is similar to Acculynk's partnership with the Dallas merchant services provider JetPay LLC, said Ashish Bahl, Acculynk's chief executive. JetPay is also a processor.
Processor agreements "certainly are an important part of this puzzle for anyone that's going to be in the business," said Paul Turgeon, president of Payments & Processing Consultants Inc. "They are certainly gaining momentum in that regard."
Turgeon said Acculynk stands to gain more support from issuers pending the outcome of the Federal Reserve Board's proposed 12-cent cap on debit card interchange because PaySecure is based on PIN-debit transactions, which generally are more secure than signature-debit purchases. Issuers likely would become more concerned about fraud as a lower interchange rate cuts into margins, he said.
