In an article recently published in Bank Technology News, Javelin Strategy and Research analyst Bruce Cundiff, seemed "pretty postive" that the time has arrived for PIN Debit on the Internet. There's two approaches. Hardware and Software Only. Software only is certainly sexier, as I've stated in the past, but is a software only approach secure? There's many who don't believe it is. Can it be PCI DSS certified? What happens when EMV is factored into the equation? I agree with Mr. Cundiff that the stars looked to be aligned for PIN based transactions to emerge on the web. Two current trends: (1. Debit transactions outpacing Credit transactions and 2. eCommerce outpacing Bricks and Mortar.) point in favor of it happening. Combine those trends with the fact that PIN is more secure and it looks like the payments industry will see it's time has arrived.
Here's a post from Javelin's site:
Javelin Strategy and Research » A Very Tenacious Idea: Online PIN Debit
A Very Tenacious Idea: Online PIN Debit
Bank Technology News- “I’m pretty positive about it,” says Javelin Strategy & Research analyst Bruce Cundiff, who just authored the firm’s 2008 outlook on the online payments industry. “With the state we find ourselves, in terms of the credit space, I think a lot more people will be using debit cards [online].”
What Cundiff points to are results of Javelin’s 2008 Online Payments Forecast survey, which last month unearthed what the economic crisis has wrought in terms of declining credit-card transactions online. Not only are people cutting back on discretionary spending, but their credit limits are freezing as well (Thirty-seven percent of users said they’re using credit cards less often). Meanwhile, electronic spending directly from bank accounts is climbing, which means that the $148 billion online transaction market is increasingly comprised of alternative payments such as PayPal, prepaid cards and signature debit.
Sheth says it’s a perfect environment for PIN debit solutions, which could attract banks’ merchant clients looking to shave off interchange fees from credit and signature debit options; there are also some 80 million PIN-only debit cards that carry no card association ties. “The cost to adopt this payment type is negligible or zero,” says Sheth. “They’re riding the same rails they have established today, and there’s nothing for banks to change on the back end.”
The only major changes afoot appear to be the vendor’s own business model. In its original product, ATM Direct made consumers download an ActiveX control program to initiate the encrypted PIN-pad screen – not a way to pass many users’ smell test for malware. When it was a Pay By Touch company, former management attempted to build a revenue model that skewed fees and interchange for the company, but didn’t work for issuers, according to Sheth. Its biggest mistake may have been trying to collar merchants into signing separate processing agreements for the PIN debit transactions. “That’s an absurd proposition,” says Sheth, who points out those deals would have violated those clients’ existing and contractually exclusive card-processing deals with the likes of Chase Paymentech or First Data.
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