Major regional automated teller machine networks are in talks on an agreement that could make widespread use of debit cards for Internet payments a reality, according to NYCE Corp., the network that developed a technology for on-line use of the cards.
The major ATM networks do not allow debit purchases over the Internet because personal computers are not equipped with the secure, hardware-encrypted PIN-pads now a familiar sight at many checkouts. Unlike credit cards or the off-line debit cards offered through MasterCard and Visa, PIN-based debit also requires the consumer to present his card for the purchase.
SafeDebit, a PIN-activated CD-ROM developed by NYCE Corp. that would act like an ATM card, may soon be offered by other prominent networks, a NYCE executive told American Banker on Monday. NYCE announced the product in December and is the first debit network to commit to full rollout of a product that makes conventional ATM/debit cards work on the Internet.
The Woodcliff, N.J.-based network is talking with executives at "other major North American ATM networks and a high interest has been expressed by those networks in a SafeDebit business arrangement," said Paul A. Tomasofsky, vice president of remote banking at NYCE. Mr. Tomasofsky, who declined to name the networks, was a speaker at Faulkner & Gray's eighth annual Debit Card Forum in Orlando.
NYCE has pitched SafeDebit transactions as being just as secure as conventional point of sale transactions. Activated with an alphanumeric e-PIN, the product requires no change to the existing debit-network infrastructure. Michigan National Bank, Farmington Hills, is the first to sign on, along with the CVS and Walgreen's Internet sites.
Proponents say PIN-based debit the estimated 25% of consumers who do not have a credit card.
Other networks' collaborative initiatives aimed at the Internet, which are only in the planning or pilot stages, propose using digital signatures, smart chips, or magnetic-stripe card readers.
Observers said industry adoption of a recognizable standard would go a long way to building debit cards as a payment method of choice for Internet commerce.
"If you can get say, five or six major networks all to buy into this, you've got the universe," said Michael Strada, a former network executive and president of Electronic Commerce Strategies, an Atlanta-based consulting firm. SafeDebit would then "dwarf the other proposals out there."
David Stewart, vice president of Global Concepts, a payment-systems consulting business in Norcross, Ga., said that what the Internet debit movement essentially needs is a strong brand.
According to research conducted by Boston-based Dove Consulting, the presence of a keypad is the most common way consumers know PIN-based debit is accepted at a retailer. "A PIN-pad is a poor excuse for a brand," Mr. Stewart told the Orlando group.
Maitland, Fla.,-based Star Systems Inc., the country's largest debit network, is among those considering a partnership. Julie Saville, vice president of product development, said collaboration is "really significant because the merchant community wants something that's supported by all the networks."
Star is not ruling out other options, however. Star and Citibank are among participants in a National Automated Clearinghouse Association pilotdigital signatures instead of PINs. Ms. Saville also heads a working group of the Electronic Funds Transfer Association's Network Executives Council, which plansto create a standard set of rules that all networks would follow as they develop their Internet payment offerings.
Lee Manfred, principal at First Annapolis Consulting in Linthicum, Md., said a "broader sponsorship or ownership" would "certainly help Safe Debit move forward. As to whether it ultimately prevails as an industry standard remains to be seen."
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