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Accel/Exchange, an electronic funds transfer network, and three other EFT networks plan to pilot consumer use of PIN-debit cards for Web-based shopping. PIN-debit use on the Internet has been tested before and discussed for years, but the vendor supporting the test believes its technology could succeed in bringing the concept to market.
Acculynk Inc., an Atlanta-based company that enables PIN-debit on the Internet by integrating its service into a merchant's online-checkout system, and Accel/Exchange announced a partnership in late October to conduct the pilot. The companies have yet to set a launch date.
"If the stars align for us, we hope to launch the pilot before the end of the year," Nandan Sheth, Acculynk president, tells ATM&Debit News. Sheth declined to name the other participating EFT networks.
The pilot will involve at least four merchants with annual sales ranging from $15 million to $250 million, Sheth says. "The date for completion is a moving target, but we plan to have it completed by the end of the second quarter," he says.
If the initial pilot is successful, four other large Tier 1 retailers will join, Sheth says, declining to name the merchants.
Sheth sees a pot of gold at the end of each PIN-debit transaction consumers initiate online. "Consumers spend $200 billion annually over the Internet. Imagine if PIN-debit gets 5% of those transactions," he says.
Indeed, online merchants would prefer PIN-debit acceptance because it would help control costs,contends Adil Moussa, an analyst with Boston-based Aite Group.
Acquirers of brick-and-mortar merchants pay issuers 20 cents to 60 cents in interchange per typical PIN-debit transaction compared with 1.6% of the sale plus 10 cents for a signature-debit transaction. On a $40 transaction, the merchant may pay 45 cents in interchange for a PIN transaction versus 74 cents for a signature transaction.
Moussa says he does not know if there is an interchange rate for online PIN transactions.
EFT networks charge brick-and-mortar merchants that accept PIN-debit transactions 35% to 40% less in interchange for PIN-debit transactions compared with credit cards, Moussa says. Networks charge much higher interchange fees for credit and signature-debit card transactions initiated online because of the relatively high degree of fraud, says Tim Sloane, director of the debit service at Mercator Advisory Group in Maynard, Mass.
Besides lowering merchants' costs to accept payment cards, PIN-debit is a powerful transaction tool that can prevent fraud because of its two-factor authentication method, says Michael Kelly, Accel/Exchange general manager.
Fisev Inc. of Brookfield, Wis., owns Accel/Exchange, which is based in Morris Plains, N.J.
When a customer is ready to pay, Acculynk's system checks the debit card number the buyer enters at checkout to determine if it can be used with a PIN. If it can, a virtual PIN pad appears on the computer monitor, Sheth says.
The consumer enters his four-digit PIN using his computer's mouse into Acculynk's patented, scrambling PIN pad, which encrypts the PIN and the card information.
The cardholder does not enter PIN information with the keyboard because if malware, which is virus software fraudsters use. It lurks inside the personal computer and capture sthe user's PIN.
Acculynk then notifies the cardholder the PIN has been accepted. Once the transaction is complete, the PIN pad disappears, and a payment-confirmation page appears on the screen.
Attempts to enable PIN-debit use online have been talked about and tried previously. In 2003, for example,, the Armed Forces Financial Network worked with Inscape Systems Inc.'s Kryptosima subsidiary to enable consumers carrying AFFN-branded cards to initiate PIN-debit transactions on the Internet using Kryptosima's payEnkrypt gateway service (ADN, 7/24/03). In June 2006, Pay By Touch's ATM Direct division announced plans to launch an online PIN-debit payment system that would use Accel/Exchange for authorizations (ADN, 6/8/06).
"That was the last I heard of it," Sloane says.
This past August, ATM Direct, a provider of PIN-debit technology for online payments, changed its name to Acculynk after Acculynk bought the company's patents from Pay By Touch Inc., which filed for bankruptcy.
Acculynk purchased ATM Direct in March for $600,000, Sheth says.
Meantime, Acculynk and Accel/Exchange continued to develop plans to enable consumers to use the service.
Earlier models to enable PIN-debit acceptance online failed because of cost and the lack of consumer acceptance, Sheth says.
"Consumers had to swipe their cards in a PIN pad connected to their home computers and type in their PINs. Can you image the cost of distributing millions of PIN pads to consumers?" he asks rhetorically. PIN pads also presented another problem, says Aite's Moussa.
"PIN pads need to conform to encryption standards as set by the PCI Security Council. Making individual PINs for personal computers is a nightmare logistically because if there is a new change in encryption, it would take forever to inject the PIN pads with the new codes," he says.
"PIN pads pleased card issuers, but there wasn't any incentive for cardholders to carry around PIN pads," Moussa adds.
Acculynk says its encryption technology protects the PIN because no one sees it, and it never passes through to the merchant.
Acculynk's owns ATM Direct's patents, and PCI Security Standards Council is testing the patents to see if they meet the council's compliance data.
"We will be ready to go before we launch the pilot," Sheth says. For the Accel/Exchange-Acculynk pilot to work, participating EFT networks must agree on standards involving policies and procedures, Sloane says.
The EFT networks have agreed on merchant rules, which include merchant-category, merchant volume and risk criteria, Sheth says.
The EFT networks also agreed on chargeback rules, which are same rules regarding purchases at the point of sale, he says. ATM
