NYCE Payments Network LLC is not quite ready to remove the "Under Construction" sign from the door of its SafeDebit Internet-debit product. Much of the infrastructure for the product is in place, and NYCE President Steve Rathgaber expects to launch a "modest, yet meaningful" pilot before the end of the year, ATM&Debit News has learned.

NYCE plans to test SafeDebit with financial-institution employees before a commercial rollout in the first quarter of 2010, Rathgaber says. The Secaucus, N.J.-based network wants to involve merchants of all sizes in the rollout, he adds.

NYCE believes SafeDebit is an answer to consumers' concerns about the safety of purchasing goods and services online. Consumers remain "very concerned" about the security of Web transactions, and for some consumers their concern prevents them from purchasing online at all, according to a recent survey NYCE commissioned.

"The whole premise of SafeDebit is to provide a more-secure [payment] mechanism through the use of pseudo numbers and one-time passwords to eliminate the need to use a PIN or anything that is subject to easy theft," says Rathgaber, who is confident SafeDebit can help quash consumers' fears about shopping online.

And that, in turn, would help increase online purchases and the associated revenue for financial institutions, merchants and the network, he says.

SafeDebit creates virtual debit card information for one-time use and automatically fills in the required payment fields on the merchant's checkout screen. No PIN is required, but the consumer still must enter a user name and password similar to online banking login credentials.

PayPal Inc.'s success is a reason why Rathgaber believes SafeDebit can find success and confidence with consumers.

Consumers who made frequent purchases online (more than three times annually) identified PayPal as their preferred method of payment, according to the NYCE survey. The survey did not indicate the percentage of those customers who use PayPal. Fifty-nine percent of consumers in that group cited security as their main reason for using PayPal.

Analytica Inc., a marketing research firm, surveyed 2,500 consumers online and by telephone between December 2008 and February 2009.

PayPal seems to have achieved a certain security-mindedness among consumers who use it "because of the way it manages the credentials and hides the data," Rathgaber says.

Like Acculynk Inc.'s Internet PIN-debit product PaySecure, SafeDebit also can help issuers recapture transaction volume and interchange lost to such other alternative payment methods as PayPal and Amazon Payments, Rathgaber says.

"There is an opportunity to reclaim that share with the right product offering," he says.

SafeDebit's value to a financial institution could be high, according to a recent report by Javelin Strategy & Research. Bruce Cundiff, the report's author and director of payments research and consulting at Javelin, gave SafeDebit four stars in the report's five-star rating system.

The challenge at the moment for NYCE is determining the correct interchange rate, Cundiff tells ATM&Debit News.

"They are trying to decide if the [rate] is going to be somewhere between a PIN-debit and signature-debit transaction," he says. "They need to find that balance."

Cundiff believes Internet PIN-debit can find success if all the right things fall into place. The products' security plays an important role, and if NYCE, Acculynk and HomeATM ePayment Solutions can "stay out of the papers" with regards to a breach, that bodes well.

Pushback from the banks also could doom Internet PIN-debit. "If banks engage in "anti-PIN steering," as they've done in the physical world, it will be an uphill battle for e-commerce PIN-debit to succeed," Cundiff says.

A valid, or cooperative reaction between merchants and banks, is to entice consumers with rewards when using  [Internet] PIN-debit, he adds. 
NYCE finds itself in an unusual situation because it also is piloting Acculynk's product.

"The history of NYCE is that they are very flexible, and they are willing to try a number of different options and see what works," Cundiff says.

NYCE's mission "is to provide value to our financial institutions and other constituents by facilitating the best connectivity [to the network] possible," Rathgaber says.

SafeDebit will be the network's preferred product, but NYCE also will support PaySecure if a financial institution chooses that direction. "We're merely facilitating a gateway to that environment," Rathgaber says.

This is NYCE's second foray into attempting to enable PIN-debit purchases on the Internet. The previous version of SafeDebit used a CD-ROM to provide PIN information for authentication, but it failed to achieve any market momentum. ATM

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