Acculynk Sees Itself Closer to Web-Based PIN Debit ‘Mainstream’ with First Data Deal

First Data Corp., one of the largest merchant processors in the country, said on Monday it will offer an Internet PIN debit option to its merchant clients starting some time in the second quarter. The option will be available to the company’s 300,000 merchants that derive at least some of their sales from the Web.

First Data services many of these merchants through alliances and joint ventures with acquiring banks such as Bank of America Corp. and Wells Fargo & Co. These alliances are included in the new offering, which comes from Acculynk Inc., a company that, like First Data, is based in Atlanta. Neither company will name names, but they say at least 10 merchants have committed so far to adopt the service. At least two will go live with the service as soon as First Data turns it on. “We are looking at a couple of beta merchants to help us out,” says Souheil Badran, senior vice president and division manager for e-commerce solutions at First Data.

First Data represents the biggest processor yet to offer online PIN debit. Acculynk had previously signed up Elavon, Merchant e-Solutions Inc., and JetPay LLC. In 2009, it also signed Chase Paymentech Solutions LLC, another massive processor, but that connection has not been implemented.

First Data’s move comes at a time of ferment in the debit card business. The product has soared in popularity over the years, leading many merchants to believe an online version would help them control e-commerce fraud and cut transaction costs. PIN debit requires a personal identification number for authentication and typically carries interchange pricing below that levied by payments networks for signature-based debit. First Data’s merchants process anywhere from 12% to 20% of their card volume on PIN debit, Badran says, leading many of them to seek the product for their e-commerce stores. “We did the business case, and it became pretty obvious [we needed] to have a solution that would help them out,” he says.

At the same time, the new Dodd-Frank Wall Street reform law imposes new interchange and routing restrictions on the debit card business. The Federal Reserve, which is working out rules to implement these restrictions, has already proposed pricing caps of 7 to 12 cents per transaction, along with rules that would require cards to carry a selection of unaffiliated networks merchants could choose from. The Fed’s restrictions, which are expected to take effect in July, would make debit cards even more attractive to merchants.

For its part, Acculynk sees its deal with First Data, which has been in the works for six months, as a further step toward eventual mass acceptance of PIN debit on the Internet. “First Data brings a lot of scale,” says Ashish Bahl, the company’s chief executive. “It’s getting us more into the mainstream.”  He adds the company is nearing the end of negotiations with another large acquiring processor and expects to announce the deal at the end of the month.

Acculynk has connections to nine electronic funds transfer networks, including Pulse and NYCE, two of the country’s largest. Absent from that list, however, are two huge card bases, those of Visa Inc.’s Interlink network and Star, which is owned by First Data but is not part of the latest agreement. With Acculynk’s PaySecure system, a consumer enters his PIN by means of mouse clicks on a so-called scrambling PIN pad presented on his PC screen. Acculynk in January announced it will launch a version of PaySecure for smart phones, starting with the iPhone, next month.

Badran will not comment on how First Data will price the new service except to say pricing will be dependent on merchant category, with the rate for airlines, for example, differing from that for general retailers.