NYCE Revives ‘Safe Debit’ Name for PINless Debit Test Set for ’09

Electronic commerce hasn't been the slam-dunk for the electronic funds transfer networks that it has been for Visa and MasterCard. One of the biggest issues has been if and how to facilitate Internet transactions from PIN-based debit cards issued by the EFT networks' member banks and credit unions. Now Metavante Corp.'s NYCE EFT network is about to test PINless debit transactions using technology from San Jose, Calif.-based Verient Inc. “NYCE is always looking for ways to leverage access to the DDA [demand-deposit account], which is what we do for a living,” NYCE president and chief operating officer Steve Rathgaber tells Digital Transactions News. He notes that Secaucus, N.J.-based NYCE already has services for mobile banking and online bill pay. NYCE calls the pilot it will start in early 2009 SafeDebit, which represents a revival of a name NYCE used early this decade for an e-commerce effort that went nowhere. But the new SafeDebit represents a “different technology, different solution,” says Rathgaber, who calls the earlier initiative “way ahead of its time.” What Rathgaber says is a “modest pilot” will start with several financial institutions on the card-issuing side and a “brand-name entity” on the merchant side. More merchants likely will be added, he says. NYCE has established a separate interchange rate for online transactions that Rathgaber says balances the interests of merchants and issuers, though he will not reveal the rate. The online merchants' sites will feature NYCE's SafeDebit logo, which will take shoppers through a payment process on Verient's platform. The system links to the online-banking site of the financial institution that holds the customer's DDA and prompts her through the authentication process that typically involves entering a user name and password. Then the system generates a one-time or limited-use electronic card with a pseudo primary account number, or PAN, and pseudo card ID. The consumer never enters her real card number or a PIN, and an animated bank “agent” guides her through the process. While a separate window is open for the creation of the card, the merchant's page remains open during the transaction process. The pseudo card is populated with the temporary PAN and related data for the merchant. Consumers can be given the option to set various controls on the pseudo card, including spending limits. The transaction is vetted by the Verient platform and then converted into a new transaction with the cardholder's real PAN. The new transaction then goes over the NYCE rails to the issuer for authorization. Upon approval or denial, the issuer's response is converted back to the pseudo PAN and sent back to the merchant. Rathgaber says the system represents a “happy marriage of capabilities” that leverages NYCE's network, uses existing credentialing systems, puts no card data at risk for the consumer, and doesn't force shoppers to leave a merchant's Web site. “We believe the technology is in excellent shape,” he says. Verient is a privately held firm whose investors include DoCoMo Capital Inc., a wholly owned U.S. subsidiary of Japanese wireless network operator NTT DoCoMo Inc., and venture-capital firm Global Catalyst Partners LP. Nick Holland, a technology analyst with Boston-based Aite Group LLC, says Verient has credible backers, and its system using pseudo numbers will prevent certain types of fraud such as that resulting from Trojan software programs that enable fraudsters to copy keystrokes as cardholders type account numbers and PINs. But a play based only on security may not work now that e-commerce has a strong foothold, he says. “I tend to think that most people are either blissfully ignorant about [potential fraud] or have the card network or the issuer take the brunt of the loss for a dubious transaction,” he says. Another risk is payment-choice overload for online shoppers given the recent proliferation of alternatives to the major credit card networks. “How many options do people want at the end of the day?” he says. “You're getting toward a situation … where people default to what they know best.” But Rathgaber says SafeDebit will appeal not just to the security-conscious, but to a wide circle of consumers who want to use debit cards for online purchases. And PIN-debit cards are the only major payment form that has yet to gain much traction on the Web. “We think e-commerce sales are hampered by a lack of a complete set of services, if you will,” he says. “This is ideal for the secure-minded person and ideal for the expert at navigating the Web.”