Over the past two years, Acculynk Inc. has worked to become the industry standard for PIN-debit transactions on the Internet with its PaySecure product.
Its work is paying off.
PaySecure has moved from being a niche concept in the alternative-payments space to becoming a major player in e-commerce as more electronic funds transfer networks and merchants throw their support behind the product.
The latest network to do so is Discover Financial Service’s Pulse, which on July 14 announced plans to roll out PaySecure after a pilot that lasted just more a year. Last year, Fiserv Inc.’s Accel/Exchange became the first EFT network to commercially roll out PaySecure support (see story).
Networks still testing PaySecure include Alaska Option, Credit Union 24, NYCE, Jeanie and Shazam. Jeanie plans to roll out it's Acculynk service later this year (see story)
Acculynk enables consumers to use PIN-debit cards to make purchases online by integrating its PaySecure software into a merchant’s online-checkout system. After a consumer enters his card number into a designated field, the system will determine if the card is eligible to be used with a PIN. The consumer has the option to complete the purchase as a signature-debit transaction or as a PIN-debit one.
A virtual PIN pad that appears on the screen scrambles the numbers as a safety precaution each time the consumer enters a digit. The bank’s brand also appears at checkout, providing additional peace of mind for the consumer.
Its pilot helped Pulse validate a couple of assumptions it had about PaySecure, says Judith McGuire, Pulse senior vice president of product management. Consumers showed they would use the payment option when given the chance, and they feel comfortable with the process, she says.
“We also wanted to understand what the value was [to financial institutions] in terms of fraud and charge-back expense,” she adds.
Pulse anticipates fraud-cost reductions for banks whose customers use PaySecure as a payment option. No fraudulent transactions were reported during the pilot, and issuers reported during the pilot that the rate of charge-backs decreased by 77% compared with signature-debit purchases initiated online.
Any of Pulse’s 4,400 financial-institution participants have the option to opt out of PaySecure, but McGuire does not anticipate many will do so when the network goes live officially with the service in October.
From the beginning, Acculynk has positioned PaySecure as a payment option that will drive more e-commerce because of the PIN-debit option.
Indeed, the PIN-debit option should be more attractive as consumers seek ways to be more directly involved in protecting sensitive information, notes James Van Dyke, president and founder of Javelin Strategy and Research in Pleasanton, Calif.
“When we look at consumer capability, clearly the top driver to more online-payments volume is more security that involves the consumer,” he says.
The bigger networks for too long have relied on backend and embedded security features that omit the consumer from the process, Van Dyke adds. “The consumer gets the last laugh because they gravitate toward systems that involve them,” he adds.
Javelin and Acculynk have the numbers to support that argument.
In a survey last year involving 500 signature-debit card users, 65% of participants said they would feel safer buying on the Internet using PaySecure, while 48% said they would buy on the Internet if they paid using the product.
The survey results came on the heels of two major security breaches involving Heartland Payment Systems Inc. and RBS Worldpay.
Van Dyke expects PaySecure and other payment options that involve the consumer more in the security process will continue to gain traction.
Acculynk also has positioned PaySecure as an incentive to merchants as the product carries a lower interchange rate.
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 the merchant for PaySecure is typically 20% to 40% lower that what they would pay for card-not-present signature debit, Acculynk has stated in the past.
The EFT networks set the interchange rate, which determines 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.
While the EFT networks decline to disclose their interchange rates, they price it high enough to make PaySecure attractive to issuers, Acculynk says.
Acculynk will have between 60 million and 90 million cards active for PaySecure by the end of the year, according to company CEO Ashish Bahl. The company is exploring partnerships with networks overseas and anticipates expansion there some time next year, he says.
And Acculynk is doing its part to keep PaySecure top-of-mind with financial institutions and merchants.
Earlier this year, it formed an advisory council to help the payments industry better understand its Internet PIN-debit product. The council initially included Acculynk’s partner EFT networks, and its goal is to establish the processes, procedures, rules and best practices around PaySecure, according to a company statement.
Some 1,000 merchants, including such airlines as AirTran Airways and Spirit Airlines, accept PaySecure.
The Atlanta-based company is in the process of adding merchants and is trying to move the other EFT networks from pilots to full rollouts, according to Bahl, who expects more merchants to accept PaySecure once more EFT networks launch full rollouts that will expand the number of card eligible for PIN-debit transactions.
“We’ve been able to stand out among the fringe participants in this space,” Bahl adds.
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