U.S. Bancorp has signed on as the largest bank to use an alternative payments system that lets consumers pay for online transactions through their institutions' websites.
The Minneapolis company said Wednesday that it plans to offer the Secure Vault Payments service to merchant and consumer customers next year. Online payments experts say the biggest challenge in driving usage of SVP is getting large banks and merchants to offer it.
Nacha, the Herndon, Va., electronic payments association that is pushing the automated-clearing-house-based service, in September announced that it had completed a pilot test of the fledgling product.
"It's certainly a feather in the cap for Nacha and for Secure Vault Payments to have a bank the stature of U.S. Bank involved in this," said Jacob Jegher, a senior analyst at the Boston research firm Celent.
U.S. Bancorp expects to have the service available to merchants and billers in the first quarter of next year and then to consumers in the second quarter, Mary Burchette, the senior vice president of treasury management product management at U.S. Bancorp., said in an interview Tuesday.
The service could be an attractive payment option for consumers who do not want to disclose payment card information online, she said.
"We're targeting those consumers that are more security conscious," Burchette said.
U.S. Bancorp initially plans to focus on education providers, government clients, nonprofit groups and utility companies, and add more traditional e-commerce merchants later, she said.
Merchants and billers benefit from lower transaction costs as well as from having a guarantee of payment, which banks that offer SVP must provide as part of an agreement with Nacha, Burchette said.
SVP runs on technology developed by eWise Systems USA Inc., a Denver subsidiary of the Australian payments technology company eWise.
To offer SVP as a payment option, merchants must be sponsored by a bank that has an agreement with Nacha. The merchant or biller would list it as a payment option on their checkout page.
When consumers click on SVP as an option, they would be presented with a list of consumer banks enrolled in the service. If a consumer's bank is listed, they would select it and be redirected to the bank's site and log in normally.
The bank then presents a summary of the transaction being completed and asks consumers to authorize the payment.
The service could attract consumers who are concerned about online security, but merchants must still be convinced, Jegher said. "It's an adoption issue and an awareness issue [for] all the parties involved," he said. "Those merchants are used to doing things a certain way. Banks are used to doing things a certain way and consumers are used to doing things a certain way."
About 40 banks offer the service to merchants, consumers or both, but until now the majority were subsidiaries of the Columbus, Ga., banking holding company Synovus Financial Corp. U.S. Bancorp is the first large bank not affiliated with Synovus to agree to offer the service.
U.S. Bancorp is "a really big win" for Nacha, which is in discussions with other large banks that are interested in offering the service, said George Throckmorton, the managing director of advanced payment solutions at Nacha, which establishes the operating rules and sets costs that banks pay to offer the service.