ATM Direct’s New Bosses Say They Will ‘Own’ PIN Debit Online

PIN debit on the Internet may become a commercial reality in 2008 if the small Atlanta company that bought ATM Direct from the bankrupt Pay By Touch Inc. fulfills ambitious plans it has laid out for the processor. Over the course of the next 90 to 120 days, ATM Direct is set to contract with a major, publicly held acquirer to sign merchants, receive certifications from a couple of major electronic-funds transfer networks, and sign a number of large merchants, according to officials with ATM Direct and its new parent company, Accullink LLC. “Our intention is to own Internet PIN debit transactions,” says Rajiv Grover, an investor in ATM Direct and dean of the Fogelman College of Business and Economics at the University of Memphis. Both Grover and Nandan Sheth, the new president of ATM Direct, refuse to name the organizations the company plans to contract with and are vague about some of their plans, including what Accullink may do in payments outside of ATM Direct. And they say they're not sure that Accullink will keep the ATM Direct name. But both men stress the processor under its new management is prepared to move fast to start enabling transactions made by consumers using PIN debit cards on merchant Web sites. “We're well-funded to execute [our plans],” says Sheth, an entrepreneur who eight years ago cofounded Harbor Payments Inc., an electronic-billing company that was sold to American Express Co. in 2006 for an undisclosed price. Interest in bringing PIN debit to e-commerce is mounting as the payment method grows more and more popular with consumers in physical-world stores and as merchants seek out ways to cut their acceptance costs for electronic payments. While more expensive than alternatives like automated clearing house debits, PIN debit generally carries interchange that is lower than that for credit or signature-debit cards. Accullink bought ATM Direct and its portfolio of some 25 patents, patents pending, and lapsed patents on Feb. 22 for $600,000 in an auction supervised by the bankruptcy court that is managing the disposition of assets held by San Francisco-based Pay By Touch, a company that operated enterprises ranging from biometric authentication of payments to merchant processing (Digital Transactions News, March 7). Hoping to exploit ATM Direct's technology, Pay By Touch had paid $30.5 million for the company in 2005. The bargain-basement price, coupled with the opportunity to enable PIN transactions on the Web, made the deal compelling for Accullink, which has a head count of 11 people. “It was a high-quality, undervalued asset,” says Sheth. At the time of the asset sale, ATM Direct had recruited one EFT network, Fiserv Inc.'s Accel/Exchange, and two merchants, including 2checkout.com, a major online seller of both physical and digital merchandise. ATM Direct's technology uses software downloaded to consumers' PCs to set up a link allowing consumers to use their debit cards with their PINs when they're ready to check out at a merchant site. The software presents a so-called floating PIN pad on the user's screen, allowing the user to enter his PIN with mouse clicks; the computer keyboard is disabled during the process. ATM Direct then transmits the PIN block and other card details to the EFT network for authorization as in a point-of-sale transaction. And, as in such transactions, merchants receive guaranteed funds. While ATM Direct under Pay By Touch had tried to sell its service directly to merchants, Sheth and Grover say the company will focus on selling through merchant acquirers, starting with the big, unnamed company they expect to sign with in the next 30 days. These acquirers will then be expected to market ATM Direct alongside other payment methods. “The large merchants don't want to be acquired by different acquirers for different payment types,” says Sheth. ATM Direct will link to the acquirers, relying on their direct connections with EFT networks, say Grover and Sheth, though these networks will require that the processor certify with them. Sheth expects to be on board with two major networks, which he won't name, within the 90-to-120-day window he and Grove have set to begin commercializing their service. There is growing interest among large merchants in processing PIN debit on their sites. Costco Wholesale Corp., for example, held a summit in November with its acquirer Chase Paymentech Solutions LLC to evaluate a range of alternative technologies for accepting PIN debit transactions online, including that of ATM Direct (Digital Transactions News, Nov. 21). But ATM Direct and its new managers will face heavy competition. Montreal-based HomeATM, another participant in the Costco summit, also offers a system that enables PIN debit for e-commerce and recently won a contract with Universal Air Travel Plan, the switch for major airline transactions. And chipmaker Intel Corp. is said to be developing technology of its own for this market, though details of its product remain unclear.