Payments Players Start to Look to EFT to Speed up P2P Transactions

Internet PIN-debit technology provider Acculynk Inc. this summer will start a pilot for a person-to-person payment system that will rely on PIN authentication and debit card network links for money movement. The Atlanta-based company has commitments for the project from between 20 and 30 financial institutions that use Acculynk for PIN-debit payments to online merchants, says Ashish Bahl, the company’s chief executive. The P2P system will work on smart phones, tablets, and personal computers.

In a development unrelated to the Acculynk pilot, the Shazam electronic funds transfer network also plans to introduce an EFT-based P2P service this summer, an official with the network tells Digital Transactions News.

The first institution to be announced as a participant in the Acculynk pilot is Alaska USA Federal Credit Union, based in Anchorage, Alaska, which this week adopted Acculynk’s PaySecure service through Alaska Option, one of 11 electronic funds transfer networks that have signed on as Acculynk clients. PaySecure lets consumers pay online retailers with their PIN-debit cards by entering their PINs on a virtual keypad. Altogether, Acculynk has established links to 7,000 financial institutions through the EFT networks.

The P2P pilot, which Bahl says will probably start in July and will run indefinitely as the company tweaks the system, represents one of the first such efforts to leverage PIN-debit networks. The two primary competing services, Popmoney from banking-technology vendor Fiserv Inc. and clearXchange, a system forged by money-center banks Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co., both rely on the automated clearing house network for clearing and settlement.

With the ACH, funds transfers can take anywhere one to two days to clear. Using EFT networks, says Bahl, will enable “near real-time money movement,” a key consideration in the payments business as consumers who adopt mobile payments  look for faster funds availability. “It’s a pretty powerful way to do P2P,” Bahl tells Digital Transactions News.

Frustration with the slower ACH has led at least one other payments-technology firm, Des Moines, Iowa-based Dwolla Corp., to develop tools to allow banks in its network to fund Dwolla accounts instantly. Responding to pressure for faster clearing, NACHA, the national rules-setting organization for the ACH, is developing rules for so-called same-day ACH settlement. “The industry is looking for real-time capability,” notes Patty Hewitt, director of the debit advisory service at Maynard, Mass.-based Mercator Advisory Group.

Banks are looking more closely at P2P because it opens a new market, Hewitt adds. “P2P is the next competitive front,” she says. “All [banks] are trying to figure out how to enable P2P because these are net new transactions. They’re also concerned about these transactions leaking out to alternative providers. It isn’t a table-stakes item yet, but it’s getting there.”

With Acculynk’s P2P service, consumers who want to send money to another person will start by launching their bank’s app and using a virtual, screen-based PIN pad to enter their PINs, much as they do with PaySecure. The P2P application will sit outside the bank’s firewall, allowing users to authenticate themselves with just their PIN rather than also having to enter online-banking credentials. “If we’re above the firewall, it’s a much more seamless transaction,” says Bahl. Recipients will need to download an app to receive notices about funds moving into their account.

Funds will move on debit-network rails, though in cases where some smaller networks can’t receive transmissions from outside networks settlement will be handled via the ACH, Bahl says. Without going into detail, Bahl says Acculynk will price the service on a wholesale basis to originating banks, which can then determine whether to reprice it to their customers.

Hewitt says that while the new service might answer a growing demand for near-real-time transfers, it will have to offer both cash-like liquidity and convenience for banks to justify consumer charges. “The ability to charge fees for this is questionable unless there’s a really high degree of convenience,” she notes, on both sending and receiving ends.

In addition, Acculynk may not have the PIN-debit market to itself for P2P payments much longer. The Johnston, Iowa-based Shazam network, one of the 11 EFT systems that link to Acculynk, plans to introduce this summer a separate P2P service called Bolts (with the “S” rendered as a dollar sign). According to Dan Kramer, senior vice president of marketing and merchant operations at the network, the service will rely on out-of-band PIN-authentication technology from Adaptive Payments, a Fort Lauderdale, Fla.-based vendor in which Shazam owns a stake.