Star Systems Inc. is conducting a five-month pilot test in which people use digital signatures to authenticate Internet payments with debit cards over its electronic transfer network.
Normally, when people use a PIN-based automated teller machine or debit card, they must punch in their personal identification number at the point of sale, which effectively precludes the use of these cards on the Internet. In the Star Systems pilot the digital signature substitutes for the PIN.
In the test, which began in November and will continue through March, more than 100 consumers with PIN-based debit cards have been given digital certificates and are using the digital signatures attached to them to validate transactions they make through the Web. Half the cards also have microprocessor chips, which can store the digital certificates and signatures.
The experiment makes Star Systems, the Maitland, Fla.-based debit and automated teller machine network, the second electronic funds transfer company to try to adapt debit cards to gain a toehold in Web commerce. NYCE Corp. of Woodcliff Lake, N.J., has been developing a technology called SafeDebit that is also aimed at letting people buy goods on the Internet using PIN-based debit cards, which they cannot do today.
Most online commerce is conducted with credit cards or with the signature-based debit cards that bear the Visa and MasterCard brands and run over the associations networks. But NYCE, Star, and the other electronic funds transfer networks do not handle those types of cards, so they have been seeking ways to gain relevance in Internet commerce. If a method of doing PIN-based debit card transactions on the Internet took hold with consumers, it would be a boon to these networks.
Nacha, the electronic-payments association, is coordinating the Star Systems pilot through its Internet council.
The program is running for a number of months to allow consumers to use it over a period of time, said Barbara Span, a spokeswoman for Star Systems. If you use something for a week or two weeks, that doesnt give you as good a picture of something.
Star Systems has talked in the past of incorporating the NYCE SafeDebit technology, which does not require an external card reader, but instead uses a debit card that fits into the CD-ROM drive of a personal computer. Under the SafeDebit system, which is not yet in commercial use, a person would use a special PIN number to send an encrypted number over a network for authentication.
We have talked about it once out of pilot, but its not an active program at Star, Ms. Span said of SafeDebit.
Paul A. Tomasofsky, vice president of the advanced product group for NYCE, said that even though Stars digital signature program would compete with SafeDebit, the fact that both exist is a plus for the industry, because credit cards do not allow consumers to authenticate themselves to the issuer or the merchant.
Mr. Tomasofsky said both systems face the challenge of consumer acceptance. NYCE has gotten two banks to agree to issue SafeDebit (North Fork Bank in New York and Michigan National Bank), but the system has the additional hurdle in that merchants would need to adjust their Web sites to accept SafeDebit.
Ms. Span said online merchants also need to make some coding changes to accommodate Star Systems technology. She said the extra costs and effort are justified because the security associated with digital signatures will get more technology-shy consumers to shop on the Internet.
