Digital Transactions Authoritative, insightful and timely information for payments professionals
In a development that could lend considerable momentum to efforts to bring PIN debit to the Internet, Costco Wholesale Corp. is investigating at least three technologies that would allow the retailing giant to accept PIN debit cards for payment on its Web site, according to sources familiar with the matter. At a meeting held last week and arranged by Chase Paymentech Solutions LLC, a senior Costco official met with representatives of ATM Direct, HomeATM PLC, and Intel Corp. to discuss methods for processing PIN debit transactions online, these sources say. Irving, Texas-based ATM Direct and HomeATM, a Montreal company, market products that give consumers the ability to enter PINs on PCs. HomeATM uses an external PIN pad while ATM Direct relies on PIN entry via mouse clicks on a screen-based PIN pad. Santa Clara, Calif.-based Intel's offering in connection with electronic payments was not immediately clear. ATM Direct is a unit of San Francisco-based Pay By Touch, a provider of biometrically authenticated payment processing that has become embroiled in a courtroom battle between its chief executive and a major investor for control of the company. Last week, a custodian was appointed to run the company pending the outcome of the litigation (Digital Transactions News, Nov. 19). HomeATM relies at least in part on technology acquired from InstaPay Systems Inc., whose Kryptosima unit developed external PIN pads that can be hooked up to PCs via USB connections (Digital Transactions News, Sept. 7, 2004). Also in attendance at the meeting, held Nov. 15 at Costco's headquarters in Issaquah, Wash., were representatives of three of the five biggest electronic-funds transfer networks, according to one of the sources, who declined to identify them. A spokesperson for Chase Paymentech declined to comment. Calls from Digital Transactions News to the other known participants in the meeting were not returned by late Wednesday. While the ultimate outcome of the meeting will likely remain unclear for some time, its purpose was to provide a basis on which Costco and its processor, Chase Paymentech, can decide on which technology to use, say the sources familiar with the matter. Moreover, Chase Paymentech, a merchant-processing behemoth owned jointly by JPMorgan Chase & Co. and First Data Corp., is trying to decide how to place its bets when it comes to PIN debit for e-commerce in the face of mounting demand from merchant clients, these sources say. “There's likely to be more meetings [with other merchants] in the near future” like the one with Costco, says one source, who adds much of the demand for Web-based PIN debit is coming from multichannel retailers looking to cut the cost of online transactions. A move by Costco, a top-25 Internet merchant, to take PIN debit on its site would lend considerable credibility to the idea of taking PIN debit online. This is a notion many EFT officials have historically shied away from, citing concerns about security and about a possible threat to the interchange income EFT network members earn from signature debit. PIN debit interchange rates are typically lower than those for signature debit. Because of these concerns, the EFT networks have limited PIN debit online to payments in certain biller categories regarded as safe because the billers have established relationships with consumers. These categories include utilities and insurers, though lately the networks have added more categories, such as rent payments. Costco's site is the 21st largest among Web retailers with $1.22 billion in annual sales, according to Internet Retailer magazine.
