Pulse Becomes Third EFT Network to Agree to Test Online PIN Debit

The Pulse electronic funds transfer network on Monday announced it will test transactions in which consumers use PIN debit cards to pay online merchants. The Houston-based network is the third EFT system to agree to run such a pilot using technology from Acculynk Inc., an Atlanta-based software company. The Accel/Exchange network, a Morris Plains, N.J.-based unit of Milwaukee-based bank processor Fiserv Inc., began processing transactions earlier this month (Digital Transactions News, March 5). And the NYCE network, a Secaucus, N.J.-based unit of Fiserv rival Metavante Corp., has agreed to use Acculynk's PaySecure technology but has not yet announced a start date. A Pulse spokesperson says in an e-mail message to Digital Transactions News that the network will start its pilot “in a few months,” or some time in the second quarter, and will run it for three to six months “after which we will make a decision about the next steps.” The test will include “selected” banks that issue Pulse cards and merchants that accept Pulse, the network said in its announcement. “The pilot will involve a small number of merchants and issuers,” says the spokesperson. “We are not providing any numbers or participant names at this time.” A unit of Riverwoods, Ill.-based Discover Financial Services, Pulse links some 4,500 banks and processes transactions from in-store point-of-sale terminals as well as from 289,000 ATMs. Pulse hopes the test will establish whether consumers are willing to use debit cards with PINs when they're ready to check out on merchant Web pages. “Internet-based PIN debit has tremendous potential value for consumers, who enjoy the convenience of debit cards,” said Judith McGuire, senior vice president for product management at Pulse, in a statement. “We also believe this new payment option could provide significant value to both card issuers and merchants, driven in part by reductions in fraud and cardholder disputes.” PaySecure works by presenting consumers on their PC screens with a so-called floating PIN pad that features a random arrangement of numerals. Cardholders use mouse clicks to enter their PINs on this virtual PIN pad, which rescrambles its numerical arrangement with each click. Acculynk formulates an encrypted PIN block for transmission to acquiring processors and ultimately to card issuers for authorization and settlement. As with in-store PIN debit, transactions are guaranteed to merchants, and, though neither the Accel/Exchange nor Pulse pilot has established final pricing, the service is expected to be less costly to online merchants than credit card and signature-based debit card acceptance. “One of the goals of the pilot is to verify that the tested interchange rate provides value for both the merchant and the issuer,” the Pulse spokesperson says, though the network refuses to reveal the test rate. The concept of allowing consumers to pay online merchants with PIN debit cards has picked up momentum lately with a number of developments, including Acculynk's efforts to arrange pilots with EFT networks and the dawning recognition that PIN debit is popular with consumers for in-store purchases. A study by Hitachi Consulting and the Bank Administration Institute last year found the payment method accounted for one-fifth of consumer transactions at the point of sale, or a greater share than the 17% claimed by signature debit. As a result, major acquirers, including Chase Paymentech Solutions LLC, are looking to sign up merchants for the online PIN debit pilots (Digital Transactions News, March 11). Lending further impetus to the trend is the development of a hardware-based product by Acculynk rival HomeATM ePayment Solutions, a Montreal-based engineering company. HomeATM's PIN pad, which consumers hook up to their PCs via a USB link, on Friday became the first such device to achieve certification under Payment Card Industry PIN Entry Device (PCI PED) 2.0 rules. Pulse remains open to both hardware- and software-based solutions for PIN debit on the Internet, the spokesperson says. “We are interested in understanding more about any solution that would be viable in the market,” she says. “Such a solution would need to be consumer-friendly and provide value for both merchants and issuers.”