The Shazam electronic funds network has made a “strategic investment” in Adaptive Payments, a payment-authentication company that has developed technology that uses any mobile or landline phone to help verify Internet PIN-debit transactions conducted at participating merchant websites.
In September, Shazam was the first network to announce its support for Adaptive’s E-commerce Checkout product (
Dan Kramer, Shazam senior vice president of marketing and merchant services, tells PaymentsSource the network believes Adaptive has “a strong product offering, one that would be easily accepted by consumers.”
Adaptive uses what it calls a five-factor authentication process that combines cardholder information and transaction data with the PIN consumers are accustomed to using at the point of sale or at ATMs. The technology also validates a consumer’s Internet protocol address and phone number used in the transaction.
Merchants integrate the E-commerce Checkout system into their checkout software. To complete a transaction, consumers enter their phone number in a dedicated field on the retailer’s checkout page. An automated system then calls them to verify the transaction details, and they enter their card PIN using the phone to complete the transaction. A hardware-security module on Adaptive’s back-end system encrypts the PIN before Adaptive sends the transaction information to a payment gateway to begin the processing cycle.
Ft. Lauderdale, Fla.-based Adaptive is using its technology to develop a person-to-person smartphone application Shazam would offer its partner financial institutions. Adaptive also is working with funds-transfer companies on a similar service, according to Ralph Bianco, Adaptive chief operating officer. He did not indicate when the app would become available.
Adaptive is in the process of securing more EFT networks to support its service. The company could announce four more network partnerships in the next month, and Adaptive will announce merchant partnerships as more networks agree to support the service, Bianco says.
“For a national retailer, they might say they need some greater coverage before they agree to a rollout,” he says. “That’s why the announcement of these other networks will be critical. It gives us enough card penetration to keep the merchant satisfied.”
Adaptive instantly gains merchants through its Shazam partnership. The network also acts as an acquirer and processor for some 9,000 merchants, Kramer says.
“About 5% [of those merchants] are e-commerce merchants,” he says. “We’ll make the product available to them and price it in a way that there’s an incentive to use it. ... We will have a special interchange fee for these transactions, much lower than current signature-based rates.”
Whether consumers ultimately use it remains the question.
Adaptive’s internal market research indicates consumers would use their debit cards more online if they could use their PINs, Bianco says.
Paul Tomasofsky, president and executive director of the Secure Remote Payment Council, believes Internet PIN-debit products will thrive if consumers and merchants believe them to be safe, they are easy to use and merchants find them simple to implement.
“Consumers are clearly looking for more safe and secure ways to do Internet commerce using their checking accounts to pay,” Tomasofsky, who also is president of Two Sparrows Consulting, told PaymentSource last year.
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