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Acculynk Inc. believes its partnership with Credit Union 24 to pilot the company's PaySecure Internet PIN-debit product will help test Acculynk's theory that credit-union members are debit-centric and will make debit purchases online.
However, 69% of credit-union members said they used a debit card to make a purchase compared with 72% of nonmembers as of the end of 2006, the latest data available, according to the Credit Union National Association, a Washington, D.C.-based national trade association.
That may not paint an accurate picture of debit card use today, though, the association contends. "Given the explosive growth of debit card usage in recent years, those figures may well have changed," says association spokesperson Mark Wolff.
Credit unions have been protective of their debit card portfolios, which they view as tethers to their members. For example, when decoupled debit was introduced, credit unions made a joint effort to offer consumers better reward programs to counter the rewards offered in decoupled debit programs networks (ADN, 10/25/07).
Through decoupled debit, any issuer could market debit cards that can access checking accounts at any financial institution using the automated clearinghouse system. Credit unions contend decoupled debit would separate credit unions from their members. Checking and savings accounts are key services credit unions offer, and debit cards are the primary means to access them.
The bigger question for Acculynk, however, may be how many of those credit union debit cardholders would be comfortable conducting PIN-debit transactions online, notes Bruce Cundiff, director of payments research and consulting at Pleasanton, Calif.-based Javelin Strategy & Research.
"There is certainly some validity in what [Acculynk] is saying, but it's just a matter of translating that to PIN-debit use," he says.
Tallahassee, Fla.-based Credit Union 24, the nation's largest credit union-owned ATM and point-of-sale debit network based on 43,000 surcharge-free ATMs, is the fourth electronic funds transfer network to agree to test Acculynk's PaySecure Internet PIN-debit product. Both parties announced their agreement June 2.
"This is a segment of the banking sector we need to evaluate," Nandan Sheth, Acculynk president, tells ATM&Debit News.
CU 24 closely monitored Acculynk's progress with PaySecure and decided the payment option would be attractive to consumers and merchants, says Jim Gowan, CU 24 executive vice president and chief operating officer.
"From our perspective, it's really important for our credit-union members that they are able to participate in this new payment technology because many of them depend on the interchange from debit transactions," he tells ATM&Debit News.
CU 24 is still working out the details of the pilot, which it plans to start it by the end of the year, according to Gowan.
Acculynk also is conducting PaySecure tests with Metavante Technologies Inc.'s NYCE, Fiserv Inc.'s Accel/Exchange and Discover Financial Services' Pulse networks.
"We've had unprecedented interest from the EFT network community," Sheth says. The addition of a fourth EFT network "really represents strong validation from the issuer community that PaySecure is a complimentary payment type to their current mix of payments," he says.
PaySecure also may help issuers recapture transaction volume lost to alternative payment methods such as PayPal Inc. and Amazon Payments, Sheth contends.
Though payment cards dominate the $170 billion e-commerce market, buyers use alternative-payment methods for approximately 15% of that volume, according to a Celent LLC report released last year. Celent estimates the major card brands and issuers of their cards stand to forgo $345 million in volume in 2010 and about $1.7 billion in 2015 to users of alternative-payment methods.
"There is a tremendous threat from nonbank-sponsored alternative payments, and as that threat increases, assisted by merchants who are rallying consumers away from bankcards, our product is a very solid and very strong complement for any bank portfolio," Sheth says.
Banks are seeking "alternatives to retain that payment relationship [with consumers] and, in turn, the transaction volume," Cundiff says. "Looking at it that way, if you turn a would-be PayPal transaction into a [PaySecure] transaction, that's most definitely a victory for the bank," he says.
The EFT networks will determine the issuers receive interchange for a PaySecure transaction, Acculynk says.
The networks contacted by ATM&Debit News declined to reveal the interchange rates they will apply to PaySecure purchases.
Acculynk enables PIN-debit purchases online by integrating its PaySecure software into a merchant's online-checkout system. Cardholders use their computer's mouse to enter their PINs into an Acculynk virtual PIN pad that appears on the monitor.
Consumers apparently are comfortable with the process. In April, a Javelin consumer survey found that 80% of 500 respondents would use PaySecure if a trusted merchant presents it as a checkout option (ADN, 4/16). Ninety-three percent of respondents said PaySecure was easy to use, and 86% liked that the product does not require additional passwords, log-ins or one-time-use numbers to complete transactions.
To date, Acculynk has announced only two PaySecure merchant pilots. One involves 2Checkout.com, an authorized reseller for online retailers, and the other involves ShoppersChoice.com, a luxury-cooking retailer. Sheth expects to announce PaySecure partnerships with four other merchants by September.
"What we've done is select merchants from very specific [niches] within the e-commerce space," Sheth says. Atlanta-based Acculynk plans to have a total of about eight merchants signed for the next pilot.
"We've told some of the merchants that are significant in size and in similar categories that we will add them to the next phase of the pilot," he says.
Sheth is unsure when commercial rollout of PaySecure might happen. Acculynk wants to give all four EFT networks the chance to go through the full paces of a pilot. The first pilot phase most likely will last the rest of the year "and possibly into the first quarter of next year," Sheth says.
The post-pilot period "really signifies to us opening up the flood gates allowing more merchants to implement this payment type," Sheth says. ATM
