ORC Looks to Three PIN-less Debit Pilots This Year, Eyes Stored Value

Electronic bill-payment processor Online Resources Corp. plans to have three PIN-less debit pilots live by year's end, says Matthew P. Lawlor, chief executive of the Chantilly, Va.-based company. He sees high potential for the product in the stored-value and debt-collections markets, and hints the pilots will be aimed at these applications. “Stored value is a perfect application,” he says. “We have a pretty bright future [with PIN-less debit], we think.” PIN-less debit represents less than 0.2% of all U.S. consumer bill payments, but that number is projected to double this year and next, according to Celent Communications, which estimates the application will account for 36 million payments this year. Online Resources got its toes in the water of PIN-less debit?so-called because it allows consumers to make payments on the Internet using their PIN-debit account numbers but without entering their PINs?earlier this year when it agreed to make its links to the nation's electronic funds transfer networks available to a PIN-less service rolled out by Govolution Inc., Arlington, Va., which processes payments for public-sector entities. The company over its 16-year history has built connections to some 55 PIN-debit transaction processors to support its core bill-payment product. Now it sees potential to leverage those links in markets like PIN-less debit. “Pulse, NYCE, and Star cover 60% of the market,” says Lawlor. “We have ways to get to that other 40%. We've been doing it with bill payment.” So far, the EFT networks have restricted PIN-less debit to certain industries where the risk of fraud is seen as low, such as utilities, secured lending (such as mortgage payments), and government payments (including tuition and meal plans at state universities). As with PIN debit at the point of sale, merchants get guaranteed funds, but since transactions are authorized without a PIN, they must bear the risk of fraud. PIN network interchange, though rising, is still significantly lower than that for credit cards, another factor that's beginning to attract billers in the approved industries. Lawlor figures ORC will forge partnerships to reach these billers, as it has done with Govolution. “We'd rather partner with acquirers,” he says. “We're not trying to do duplicate what acquirers do.” Could full-fledged online debit with authentication be next? Lawlor thinks so, though he adds it will take five or six years to work out political and operational difficulties. For now, he says, there's plenty of potential in PIN-less debit. “PIN is the best way to go, but in the meantime there's this dirty, messy product called PIN-less debit,” he says.