Are PIN debits coming soon to e-commerce transactions?

by Neil Moncrief on May 17, 2010

Every so often, I’ll have an e-commerce client ask me “Will I ever be able to accept PIN-based debits online?” Although many companies have tried to devise a solution, I never seriously believed it would happen. After all, how could a consumer enter a 4-digit PIN from a personal computer and still meet the high encryption standards required for Payment Card Industry (PCI) compliance? Nevertheless, the topic is resurfacing again, and online PIN debits may finally be just around the bend.

The primary reason e-commerce merchants want to accept PIN debits is the savings. As I explained in this article I posted several months ago, brick-and-mortar merchants with high-dollar average sales can save considerable amounts by requesting PIN numbers from customers. But the PCI rules requiring that the debit card be swiped through a magnetic card reader and that the PIN number be encrypted have kept online merchants from participating.

In her June 2009 article for Transaction Trends magazine, Julie Ritzer Ross profiles software and hardware developers that are on the leading edge of finding a workable solution. PaySecure, from Atlanta-based Acculynk, is currently being tested by some of the largest players in the debit network business: ACCEL, NYCE, and Pulse. PaySecure’s software will place a floating “keypad” on a shopper’s screen, receive the PIN, scramble and encrypt it, and then pass it along to the appropriate network. Hardware developer, HomeATM ePayment Solutions, recently introduced Safe-T-PIN, a small and inexpensive USB card reader that allows consumers to swipe their own credit cards while shopping online. It’s going to be the combination of these, or similar, software and hardware components that eventually makes online PIN debits a reality.

But before you rewrite the payment options in your e-commerce shopping cart, keep reading. Before credit card processors will begin supporting these solutions, they’ll need to feel pressure from their merchants. And for merchants, the pressure will have to originate with their customers, since it’s the consumers who’ll purchase the hardware. So, in the end, it’s going to depend on when and how widely the American consumer adapts to this new technology.

You’re probably asking, “Why would consumers want to purchase this equipment anyway?” After all, it’s the merchants who will reap the cost savings, not the consumers. According to Ross, PIN debit payments offer shoppers “perceived security.” Among the 550 shoppers who participated in the testing of PaySecure’s software, a whopping 79% of them said they felt more secure shopping online with their PIN than without it. Economic conditions may be another force that drives consumers to adopt online PIN debits. In a time when many shoppers lack the ability or the will to pile more debt onto their credit cards, debit cards are becoming their preferred payment methods. The thought of compromising their debit card (in effect, their entire checking account) may spur the acceptance of online PIN debits by consumers.

When this technology finally does make its way into the homes of America’s shoppers, it will be a day for merchants to celebrate. It’s rare that something comes along that benefits business owners more than consumers or credit card companies. And with the struggles of the past year, it’s about time merchants caught a break!

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