Consumer adoption likely will determine whether First Data Corp.’s decision to support Acculynk Inc.’s PaySecure Internet PIN-debit product benefits the processor’s merchant partners that decide to offer the online checkout payment option, observers say.
First Data announced Feb. 14 that, effective immediately, it will give its merchant-processing customers the option to activate PaySecure, which enables consumers to use PIN-debit cards to make purchases online when merchants integrate the software into their checkout process. First Data has some 85,000 e-commerce customers. Acculynk also offers an option for merchants to integrate PaySecure into their mobile application’s checkout process (see story).
PaySecure has a perceived advantage over the systems offered by its competitors, and that could help to drive consumer interest in using the service, observers say.
The checkout process somewhat replicates what consumers experience at the point of sale in a brick-and-mortar environment. Cardholders use their computer’s mouse to enter their four-digit PINs into an Acculynk virtual PIN pad that appears on the computer monitor. No extra hardware is needed
“From a consumer perspective, entering a PIN is beneficial to make people feel more comfortable about [using PaySecure],” says Beth Robertson, director of payments research at Javelin Strategy and Research.
First Data recognizes consumer adoption ultimately will determine whether merchants will embrace PaySecure. “At the end of the day, it depends on what the consumer is comfortable using,” Souheil Badran, First Data senior vice president and division manager of ecommerce solutions, tells PaymentsSource.
Badran, however, views PaySecure as an easy, understandable payment method for consumers shopping online. “We effectively have the same mechanism [PIN entry] popping up online,” he says. “It shouldn’t be strange to use, especially if you’re dealing with a repeat customer.”
Merchants have been clamoring for what PaySecure offers from a business perspective because of its ability to increase payment security and cut transaction costs, Badran says.
Indeed, First Data’s objective to help its merchant partners mitigate risk and fraud, offer cost-effective payment services and expand the options consumers have available to them to transact online helped cement its agreement with Acculynk. “The voice of our customers was one of the big forces behind us selecting Acculynk,” Badran says.
PaySecure’s initial selling point when it was introduced two years ago was the it offered merchants a less expensive interchange rate compared with those the card networks apply for typical credit and signature-debit card-not-present fees.
Card-not-present signature-debit rates set by Visa Inc. and MasterCard Worldwide typically range from 1.64% and 2.2% of the sale, depending on the type of transaction, according to Acculynk. The final price to merchants for PaySecure typically is 20% to 40% lower that what they would pay for card-not-present signature debit, Acculynk has stated in the past.
The electronic funds transfer networks set the PIN-debit interchange rates, which determine how much the issuer receives from the merchant’s bank for the transaction. The acquiring bank then passes the expense along to the retailer as part of the discount rate, which also covers costs for processing and other services.
Though EFT networks have declined to disclose the rates applied to online transactions such as PaySecure’s, they price it high enough to make it attractive to issuers, Acculynk says.
But this was before the Dodd-Frank Act was signed into law last year. As part of that law, the Federal Reserve Board in December proposed limiting the interchange rate for all forms of debit to 12 cents per transaction. Acculynk believes such a drastic cut will not affect how card issuers and merchants view PaySecure.
At least one observer believes the new rules might make the payment option more attractive. Under the Fed’s proposed rate rules, PaySecure is “a very low-cost form of payment [for merchants], and it’s very low risk because the PIN is involved,” says Patricia Hewitt, director of debit advisory services at Mercator Advisory Group.
For issuers, “there is an attraction because issuers need to prove the value and continued value of their debit cards, and I think this shows that,” she adds.
Acculynk CEO Ashish Bahl expects many First Data merchants to offer PaySecure based on his own past experiences. Over the past two years, Acculynk has met interested retailers only to later find they were associated with First Data, and PaySecure implementation was not possible because First Data did not support the payment option.
Bahl also recently met with First Data executives and received a list of 20 merchants that are interested in adding PaySecure.
Acculynk, however, might need more than merchant adoption to convince consumers PaySecure is a legit and safe payment form, Hewitt says.
“The more important piece for consumers is if financial institutions are going to sanction it,” she says. “I think that’s more important in some ways then the merchants.”
Indeed, Acculynk is seeking bank partners to support PaySecure, Bahl says.
Some 60 million debit cards are eligible for PaySecure transactions, and Acculynk wants to boost that figure to up to 100 million by the end of the year by adding more EFT network participation and issuers.
Nine EFT networks support PaySecure, including Accel/Exchange, Alaska Option, Credit Union 24, Jeanie, MasterCard Worldwide’s Maestro, NetWorks Inc., NYCE, Pulse and Shazam. Acculynk is working on a deal with a 10th, undisclosed network, Bahl says.
Ironically, First Data’s own Star network is not included in the Acculynk deal, and Acculynk is not involved in any active discussions with Star, Bahl says. Also noticeably absent is support from Visa Inc.’s Interlink PIN-debit network.
Visa has said its issuers prefer that their customers use signature-debit or credit cards online because they generate more interchange income. That position could change if the Fed finalizes its proposed 12-cent cap because PIN-debit transactions are more secure.
Acculynk’s First Data agreement also gives it exposure to additional merchant acquirers. First Data has partnerships with Bank of America Merchant Services LLC, Wells Fargo Merchant Services LLC and PNC Merchant Services Co. Chase Paymentech Solutions, Elavon Inc., LLC Merchant e-Solutions Inc., JetPay LLC and Universal Air Travel Plan Inc. also are partnered with Acculynk for PaySecure.
What do you think about this? Send us your feedback. Click Here.