Credit cards have become the dominant tool for online purchases, but a growing number of payments companies are showing interest in a system that lets people use their PIN debit cards.
Discover Financial Services Inc.'s Pulse Network debit unit said Monday that it plans to pilot test Acculynk Inc.'s PaySecure Internet PIN debit technology.
Judith McGuire, the Houston network's senior vice president of product management, said the test will probably run three to six months and her company hopes to determine how PIN debit meets the varying needs of online merchants, consumers and card issuers.
"We've been talking to issuers and merchants alike," McGuire said in an interview. "We want to validate in this pilot the underlying business assumptions."
The merchants' interest is the easiest to guess; PIN transactions carry lower interchange fees and incur lower fraud risk than card-not-present transactions. But consumers and issuers may be trickier to assess, McGuire said.
"We're trying to understand the consumer response. Do they understand it? Are they comfortable with it?" she said.
For issuers the question is whether improved security and perhaps higher transaction volume can offset the potentially reduced interchange revenue, McGuire said. "If we can reduce fraud, that has a very positive financial impact on issuers," she said. "We believe this can deliver value to all the constituencies."
The Acculynk technology determines when a user's card number can be used with its system and offers the online customer the option of entering a PIN, using the computer mouse to click on a virtual keypad displayed on the computer screen.
Acculynk is one of several companies trying to bring the lower cost of PIN debit to online shopping. For example, HomeATM ePayment Solutions, of Montreal, announced in February that it was beginning to test a portable card reader that shoppers would attach to their computers to make PIN debit purchases online.
Ashish Bahl, Acculynk's chief executive, said his company's advantage is that it requires no hardware or software to be installed on the shopper's PC.
"We've now had three networks vet the security of the system and say this is rock solid," Bahl said.
In addition to Pulse, Acculynk is involved in tests with Metavante Technologies Inc.'s NYCE Payments Network LLC debit network and with Fiserv Inc.'s Accel/Exchange Network, Bahl said.
His company also is working with three acquirers: U.S. Bancorp's Elavon merchant-acquiring unit, the Chase Paymentech Solutions unit of JPMorgan Chase & Co., and Merchant e-Solutions Inc. of Redwood City, Calif.
Mike Strada, the manager of debit card products at Chase Paymentech, said his company plans to participate in both the Pulse and the Accel/Exchange pilots.
"We've been trying to figure this out for a couple of years," he said. "What was important to us was to be sure that the debit networks were comfortable with it."
Acculynk also has announced its first merchant trial, with ShoppersChoice.com, a luxury cooking and outdoor living retailer.
Adil Moussa, an analyst at the research and advisory firm Aite Group LLC, said the challenge for Acculynk is finding an approach that satisfies the competing interests of all participants.
"The key is going to be consumer adoption," he said. "I would be paranoid about entering my PIN online."
The other big question is getting issuers aboard, Moussa said. "If that transaction goes over the network as signature debit, then you're making much higher interchange as an issuer than you would if it's PIN debit."
