NYCE Looks to 2010 for SafeDebit Rollout, Pilot Later This Year

NYCE Payments Network LLC expects to start testing Internet-based debit transactions by the end of the year and to start a commercial service some time next year, says Steven A. Rathgaber, president and chief operating officer of the Secaucus, N.J.-based electronic funds transfer network. The service will rely on single-use debit card technology from Verient Inc., a San Jose, Calif.-based technology company. A unit of Metavante Corp., NYCE signed an agreement with Verient last fall and had originally expected to get a pilot for the online service, which it calls SafeDebit, under way early this year (Digital Transactions News, Nov. 18, 2008). Rathgaber says technology implementation has gone smoothly, but the network has had to contend with the inevitable complexities regarding pricing and other business arrangements that arise when a number of banks, merchants, and networks must work together. “There's a lot of parties at the dance,” he notes. Rathgaber is sanguine about the prospects for SafeDebit, which will come as the latest in a string of services that have been introduced in recent months by networks and technology vendors to allow consumers to tap their checking accounts while shopping online. “We feel good about the level of interest,” he says. “Dozens and dozens of partners have expressed interest from the [financial-institution] side. And we haven't found a merchant who doesn't see value in it. We look forward to the rollout in 2010, which is where the real excitement is.” SafeDebit isn't NYCE's only gambit in Internet-based debit. It also agreed last year to test a PIN-debit service from Acculynk Inc., an Atlanta-based software company (Digital Transactions News, Dec. 3, 2008). But while Acculynk has launched pilots for its service, called PaySecure, with the Pulse and Accel/Exchange networks, NYCE has so far concentrated on moving SafeDebit toward its pilot. Rathgaber says NYCE will support PaySecure for any NYCE member interested in trying it. SafeDebit, however, “is the model we're endorsing,” he says. To use SafeDebit, a NYCE cardholder selects the option on the merchant's checkout page. This triggers a popup window that links to the consumer's online-banking site. There, the shopper authenticates herself with her log-in credentials. The Verient platform generates a so-called pseudo card, or a virtual card with a primary account number and card-verification value good for one-time use. The platform populates the merchant's checkout page with the consumer's information, including the pseudo-card data. Verient translates the pseudo card into the cardholder's actual card data and transmits it over the NYCE rails to the issuer for authorization. At no time does the cardholder enter a PIN or an actual card-account number, nor does she leave the merchant's site. Many consumers who would otherwise buy online are seeking more secure transactions, NYCE contends. To help make the case for SafeDebit, the network on Wednesday released survey results showing that 43.5% of consumers who have never shopped online cite security as the factor holding them back. By contrast, 18% said they would try online shopping if they could use a secure payment option from their financial institution. Marketing-research firm Analytica Inc. performed the survey late last year, canvassing 2,608 consumers. The results echo similar sentiments found in other consumer research regarding e-commerce. But that doesn't make it any less valid, says Bruce Cundiff, a senior analyst at Javelin Strategy & Research, a Pleasanton, Calif.-based firm that conducts frequent consumer research. “It's still valid for online merchants looking for incremental transactions,” he notes via e-mail. “There certainly is still a decent percentage of the consumer population that does not shop online because of security concerns. The question is whether or not any particular solution (SafeDebit or other) addresses these concerns adequately enough to bring these incremental transactions.” Cundiff also questions whether NYCE members will have adequate motivation to promote SafeDebit to their cardholders in light of the fact that they are likely to earn more income on signature-debit transactions. While not revealing pricing, Rathgaber says SafeDebit transactions will carry interchange rates lower than those for signature-based debit but higher than those for PIN debit. “Is the draw of additional consumers enough to overcome the potential decreased revenue [on] NYCE compared to signature debit?” Cundiff asks. For his part, Rathgaber has no such doubts. SafeDebit's interchange, he says, “is designed to incent banks to participate. We think there's a price point that's effective below signature but still profitable for the [financial institution].”