HomeATM ePayment Solutions is changing its business model, shifting away from relying on merchants to distribute its keypads to consumers who want to use debit cards to shop online in favor of licensing its technology to processors and merchant acquirers.
"We're going to license our hardware to Tier 1 processors to try and get our product in the market instead of HomeATM being the lead sales generator for the device," Kenneth Mages, the Montreal payments technology company's chairman and chief executive, said in an interview.
Mages said that trying to deliver the company's Safe-T-PIN device to the vast consumer market was an "uphill battle that quite frankly, we can't win."
HomeATM, which for 18 months served as a downstream processor for transactions initiated through its devices, is no longer handling payments directly, he said.
Consumers can attach the Safe-T-PIN to their computers to enter their debit cards' PINs when making purchases online.
But several observers have said that one of the company's biggest hurdles was getting its payments technology into the hands of consumers.
Javelin Strategy and Research released a report last month evaluating nine alternative payment systems. HomeATM's device received one star in its five-star rating system, the lowest mark of the group, according to Bruce Cundiff, Javelin's director of payments research and consulting and the author of the report.
"Success for the HomeATM solution will be minimal in the context of online retail," Cundiff wrote, though "there is potentially a market for B2B transactions, for larger-value remittances, or other high-value transactions."
Mages said Safe-T-PIN is not an alternative-payment scheme, a term that he said "implies that it's something that's way out of the box," he said.
"I would argue that what we do is a very traditional point of sale transaction using" a certified Payment Card Industry PIN-entry device, Mages said.
The Payment Card Industry Data Security Council certified Safe-T-PIN in March.
HomeATM's device plugs into computers' USB ports, and requires no installation or software. Participating online merchants' checkout systems can prompt consumers to swipe their cards and enter their PINs to complete a purchase.
Safe-T-PIN uses secure socket layer encryption between consumers' computers, HomeATM's data center, and a virtual private network between the company's data center and processor.
Cundiff said he defines alternative payments as anything other than credit or signature-debit cards for online transactions, and though he conceded that it may not be completely accurate to label Safe-T-PIN as an alternative payment system, "saying that the product HomeATM is putting out there is creating an alternative process for consumers to initiate e-commerce transactions is accurate."
Mages said his company has had trouble convincing debit network operators that a HomeATM PIN transaction is comparable to a face-to-face PIN transaction at a store; the main issue is disputes.
Mages said that in the 18 months HomeATM has been processing transactions, there have been "zero transactions disputed." Moreover, "we had no breaches, and we had no fraud."
HomeATM processed more than 70,000 transactions worth about $8 million between January 2008 and mid-June of this year.
Generation Technologies Inc. has found success selling HomeATM's product to Internet retailers under the MiniTeller brand, said Hish Derby, the Burlington, Mass., independent sales organization's director of technologies.
The merchants interested in the device typically have recurring monthly business from customers, such as online pharmaceutical companies, he said.
Steve Rathgaber, the president and chief operating officer of Metavante Technologies Inc.'s NYCE Payments Network LLC debit unit, said Safe-T-PIN has a "viable model."
"There is a market and interest for almost any kind of [payment] product," Rathgaber said. "It's just a question of, in the payments space, is there a large enough interest to make it all worthwhile." He would not comment on how NYCE treats HomeATM transactions.
Licensing the hardware to processors such as First Data Corp. and Total System Services Inc. could make debit networks more receptive to the technology, Mages said. "If they sell it" to merchants, "the networks don't have any questions," he said.
First Data and TSYS declined to discuss HomeATM.
In the meantime, a rival system that also offers consumers that ability to use PIN debit is showing some promise.
Acculynk Inc. of Atlanta announced last month a partnership with Credit Union 24 to pilot its PaySecure software, which displays a virtual PIN-pad on users computer screens; shoppers enter their PINs by clicking the appropriate numbers.
Acculynk also is conducting tests with NYCE, as well as the debit networks operated by Fiserv Inc.'s Accel/Exchange and Discover Financial Services' Pulse unit.
2Checkout.com, an authorized reseller for online retailers, and ShoppersChoice.com, a luxury-cooking retailer, are also evaluating the Acculynk software.
Cundiff's report was more bullish on Acculynk. "Merchants will push for this, financial institutions are already involved, and it is a process with which consumers are familiar," he wrote.
One factor working against Acculynk is that the company will need to overcome the "financial institution pushback that signature debit generates more revenue and that these will primarily be cannibalized signature-debit transactions."
