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Innovate Now: Enabling Secure PIN Debit for eCommerce via Credit Push (MAG Quarterly- Volume Six, Issue One)

Low cost payments for online & mobile transactions enabled by a credit push method improves merchants’ bottom lines through lowering the cost of payment acceptance and eliminating card-not-present fraud.

Moeller_Scott headshot  Snell_Jacqueline_newsletter
ByScott Moeller, CEO and Jacqueline Snell, VP of Strategic Initiatives, mSHIFT Inc.

March 8, 2018

According to Federal Reserve statistics, in 2015 more than twenty billion PIN debit transactions worth $800 Billion were performed in the United States1.  However, these relatively inexpensive PIN debit transactions have been nonexistent for Online and In-App purchases due to the inherent security risks of using debit cards online.  

Multi-Factor eCommerce Debit Transactions are now viable. Emerging mobile and digital payment technology combined with direct bank core integration makes it possible for merchants to accept low cost, real-time PIN debit payments through a guaranteed good funds model.  This system eliminates the vast majority of fraud, data breaches and chargebacks.  

Cost Effective Alternative for eCommerce Payment Acceptance
As Americans continue their shift to eCommerce, the ability to process these payments as Multifactor (PIN) Debit transactions can save merchants millions of dollars annually in interchange expenses. Dramatic increases in online credit card fraud since the rollout of EMV in the USA, has made eCommerce transactions even more costly for merchants. Merchants have been stuck in the unenviable position that they must accept credit cards online in order to conduct eCommerce.  

Credit push transactions are efficient, low-cost and secure.  Originating from the consumers’ checking or savings Demand Deposit Accounts (DDA), at banks or credit unions, these credit push payments provide merchants with the payment, and only the payment. Critical data which compromises merchant systems such as static credit card numbers or other key identifying financial data is eliminated from these transactions.  As a result, the merchant is removed from risk of fraud, chargebacks or data breaches, as there is no data to breach!  Credit push payments are enabled by securing funds from the customers checking or savings account (DDA accounts) in real time at the time of sale. Funds are transferred from the customers’ checking account, into a holding account at the Bank in real time to secure these funds for the benefit of the merchant.  All purchase transactions are aggregated into a single ACH for end of day settlement for each merchant.  Below is a diagram to illustrate the flow, which is in commercial service today with Financial Institutions and merchants on the AnyWhereMobile payment network:
 
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Key Benefits for Merchants

Significantly Lower Cost of Payment Acceptance.
By using a combination of standard account to account transfers combined with aggregated ACH for daily settlement, the cost of payment acceptance for this version of multi-factor eCommerce debit is much lower than with signature debit or credit on the plastic card payment networks.  Merchants can expect to pay no higher than Durbin PIN debit rates for enabling this version of Debit eCommerce.
Fraud Reduction
Because there is no data delivered to the merchant such as static card numbers that can be compromised, all of the fraud associated with securing and storing customers’ financial information disappears.
No Risk of Data Breach
Since merchants are not required to collect or store any customer personal account or payment info, there is no risk of data breach for merchants.
No Chargebacks!

Merchants Leverage Credit Push to Solve eCommerce Payment Issues
Merchants can challenge their legacy payments systems transaction path with a better alternative for eCommerce transactions.  Mobile technology combined with credit push is a viable option for merchants. Merchants and Banks have a strong vested interest to work together to build a new payment ecosystem that is mutually beneficial.   Credit push is especially valuable when compared to EMV’s inability to solve open issues with eCommerce. This method also provides great advantages for in-store, P2P and cross border payments. With the ubiquity of mobile technology providing new opportunities, there is too much at stake for merchants and banks to continue down the same legacy path of payments.

Sources

  1. 2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions:
    https://www.federalreserve.gov/paymentsystems/files/debitfees_costs_2015.pdf