Shazam Attacks Online PIN Debit with a Trio of Solutions

If one PIN-debit system for Internet payments is good, three are even better in the eyes of the Shazam electronic funds transfer network. The network on Wednesday announced it has become the first network client of a new online PIN-debit platform from e-commerce systems provider CardinalCommerce Corp.

Shazam now has adopted a trio of technologies to offer cardholders the ability to make transactions at online merchants. The network began offering Acculynk Inc.’s floating PIN-pad technology to members a few months ago, and last week said it would add the PIN-entry system from Fort Lauderdale, Fla.-based start-up Adaptive Payments. The new Adaptive Payments technology also will enable Shazam members to offer person-to-person payments to their customers.

Shazam serves more than 1,500 financial institutions in 30 states and is one of the few remaining bank-owned EFT networks. “[Online PIN debit] is something we’re looking at as payment alternatives for our issuers,” says senior vice president of marketing and merchant operations Dan Kramer in explaining why Shazam is offering more than one Internet PIN-debit system. “We’re simply adding another transaction type.” He adds that the reason for having PIN-debit at all for e-commerce is, “one, the reduction in fraud and number two, for consumers to have confidence” that their transactions are secure. Fraud rates on PIN-debit run 80% below those for signature debit, he says.

Merchant acquirers, networks, and tech companies have struggled for years to offer PIN debit on the Web because online PIN entry presents operational and security hurdles that credit and signature-based debit cards don’t have. But PIN debit on the Web has been gaining traction since Acculynk, Verient Inc., and HomeATM came onto the scene with various offerings. Acculynk, which recently struck a deal with MasterCard Inc., uses an on-screen floating PIN-pad in which the buyer enters the PIN through mouse clicks (Digital Transactions News, July 28).

In contrast to Acculynk’s floating PIN-pad, the Adaptive Payments system prompts a consumer shopping on a participating merchant’s Web site to enter her home or cell-phone number upon checkout. Entry of the number instantly generates an automated phone call to the consumer, who then enters her debit card PIN over the phone. Kramer says the whole process takes about 20 to 30 seconds, about the same amount of time as a point-of-sale transaction. “We like to look at it as near real-time,” he says.

The Adaptive Payments platform includes a number of other security and authentication features that the company calls “5DSecure.” They include cardholder details, card data, and the user’s Internet Protocol address in addition to the PIN and telephone number. And chief operating officer Ralph A. Bianco notes that the system can also be used for mobile person-to-person payments, bill payments, prepaid card top ups, and money-transfer remittances. “We believe this is going to take off pretty quickly because we’re not a one-trick pony,” he says.

Shazam, meanwhile, has been live with Acculynk for about four months. Kramer says customer reception “has been steady, it’s been further ahead than we thought it would be,” though he wouldn’t give numbers.

And Mentor, Ohio-based CardinalCommerce, an authentication and e-commerce technology provider with connections to numerous alternative-payment systems, said Shazam has agreed to participate in Cardinal’s new Universal PIN Debit Service, or UPDS (Digital Transactions News, Sept. 21). Shazam’s issuers can offer the service through their online banking sites, and UPDS puts a PIN-debit option within reach of thousands of e-commerce merchants served by Cardinal. Kramer also says Shazam is planning a PINless debit option for utilities and other recurring payment billers within the next year to 18 months, but he would not discuss potential providers.

Adaptive Payments last week also announced a pact with IP Commerce Inc., a Denver-based open-application program interface (API) platform provider. The agreement potentially gives thousands of merchants using IP Commerce’s technology access to the Adaptive Payments system. Bianco says more deals with big industry players are in the works, but he wouldn’t identify any companies ahead of formal announcements.

The Shazam and IP Commerce deals put Adaptive Payments on the payments-industry map. The company, which was founded in March 2009 and is self-funded, includes some well-known industry executives in addition to Bianco, who was a senior vice president at U.S. Bancorp and a senior vice president at Genpass Technologies, which U.S. Bank acquired in 2005. He also was a senior executive at MasterCard, Gensar, and Wright Express Corp. The chief executive and founder is Shashi Kapur, who was chief information officer at prepaid card services provider WildCard Systems Inc., now part of Fidelity National Information Services Inc. (FIS). Gary Palmer, WildCard Systems’ co-founder, is executive chairman.