Having Snagged 2Checkout, ATM Direct Aims at More Merchants

A processor that allows consumers to pay online with their PIN debit cards signed its second merchant this week and expects 18 more by the end of the year, including two more this quarter. “I feel good about the conversations we're having now with top online merchants,” says Robert Ziegler, general manager at Irving, Texas-based ATM Direct. “We're right on track.” These “top” merchants, Ziegler says, are in the upper levels of Web retailers in terms of sales. ATM Direct also expects soon to sign an agreement with a second, unnamed electronic funds transfer network to enable its technology. The ACCEL/Exchange network, based in Bellevue, Wash., has been testing the service for about a year, but Ziegler says ATM Direct is now a commercial processor on the network, which is owned by Milwaukee-based Fiserv Inc. And, the company plans to introduce a mobile version of its technology “late this year,” Ziegler says. This week, 2Checkout.com Inc. agreed to accept PIN debit via ATM Direct. Columbus, Ohio-based 2Checkout.com is an online distributor of physical and digital goods ranging from apparel and books to collectibles and DVDs. The merchant, which also accepts Visa, MasterCard, and I4 Commerce Inc.'s Bill Me Later, joins The J. Paul Co., a Dallas promotional goods merchant, as an ATM Direct merchant. ATM Direct, a unit of San Francisco-based Pay By Touch Inc., bills itself as a secure and inexpensive alternative to credit and signature-debit acceptance online. Without discussing pricing, Ziegler says ATM Direct's fees are less than half what merchants pay for bank card transactions. PIN debit at the physical point of sale is generally priced by EFT networks at rates below signature debit. That could result in significant savings for large online retailers. Anywhere from 7% to 15% of the signature-debit transactions accepted by merchants ATM Direct has targeted could be converted to PIN debit, Ziegler estimates. As with PIN debit at the point of sale, transactions are authenticated by consumer-entered PINs and funds are guaranteed to merchants. “We're the only provider of online PIN debit,” Ziegler says. “And as part of our software, we give the consumer the security of an authentication framework to protect them when they're online.” ATM Direct's plans could be furthered by getting more EFT networks to enable its technology. ACCEL/Exchange, whose 80 million cards account for about one-third of those in circulation, will bring the last of its 3,500 member banks live on the service by the end of the quarter, Ziegler says. ATM Direct may have an edge with other networks. Ziegler points out that the company is already a certified processor for physical POS PIN transactions not only on the ACCEL/Exchange network but also on the three major national systems, Star, NYCE, and Pulse. He adds the company is also processing so-called PIN-less debit transactions, which are bill payments consumers make online with PIN-debit account numbers but without PINs, for these networks. “When they're ready, it makes it easy for them to move [into PIN-based online payment],” Ziegler says. ATM Direct's system works by downloading digitally unique code to the consumer's desktop, setting up a process of multifactor authentication in which the company can authenticate the consumer by recognizing the code and by means of technology such as geo-location. The company also sweeps the consumer's PC for keyloggers and other trojans. When the consumer is ready to buy and ATM Direct is satisfied the PC is secure, the system presents on the screen a keypad for PIN entry. The pad is called a floating PIN pad because a different numerical configuration is presented each time. This process disables the computer keyboard, allowing entry only by mouse click. Once PIN entry is complete, ATM Direct returns a signed token to the merchant, asking if the merchant wants to go forward with authorization. If so, it creates a transaction message, including a PIN block with PINs encrypted at two-key triple DES, to go to the relevant EFT network for authorization and settlement at the issuing bank. In this sense, it operates as if it were another processor hooked into the EFT network's switch.