Article
Mobile banking, online debit expected to revolutionize payments
As the economic recession pushes U.S. consumers away from credit, more are expected to rely on cash, debit and emerging payment options such as m-payments.
May 13, 2009 by Tracy Kitten — Editor, AMC
See aslide showfrom the PULSE conference.
In the wake of the economic crisis, the future of debit looks bright, but it's definitely not immune to the wave of regulation coming down on the financial industry. At least that's the way PULSE president Dave Schneider sees it.
VIDEO:Ron Schuldt of Columbus Data Servicesshares his thoughts about the future of debit and stored-value |
"I see the time we are in now as being similar to what the debit industry went through in the 1990s, when we underwent profound change and debit became a product," Schneider said during his opening address at the PULSE "Debit ReDefined" conference May 7. "A lot of change is driven by bad times. … And though debit is less affected by things like a recession, more government regulation is on the way, and that's going to impact our industry greatly."
Governmental scrutiny over interchange will be top of mind, Schneider says, as will new ways of doing business, as financial institutions search for methods to make their products and services more viable.
Mobile banking will be, Schneider says, "the next big thing."
Mobile banking
Lee Wetherington, senior vice president of integrated technology and payments provider for Goldleaf Financial Solutions, says the future of banking and payments lies in mobility. And that mobility is getting legs from some unexpected places, like Facebook.
"To see how the payments space will evolve, you need to understand Facebook," Wetherington said.
OboPay, a mobile-payments provider, is already working with Facebook, Wetherington says. And it's only a matter of time before the two revolutionize payments.
Wetherington predicts that by the end of 2010, fewer than half of all online retail purchases will be conducted by credit card. By 2012, only 44 percent of all online retail purchases will be made with credit. That dip in credit transactions is increasingly evident.
"The mobile revolution gives an online alternative to payment providers," he said.
Today, one in four online payments are not signature debit, and Amazon, PayPal and Google each have their own, though similar, online pricing structures — keeping them outside the stifling structures of Visa and MasterCard, for instance, Wetherington says.
While much of this movement is occurring in the online space, the sale of smart phones is skyrocketing, Wetherington says. And those smart phones are increasingly being used for Web browsing. IPhone 3G users are said to spend 80 percent of their device time browsing the Web, using their devices only 20 percent of the time for phone calls.
The advent of new applications, such as those for ATM locators and m-banking, are increasing. MFoundry now has three modes for m-banking, including WAP and SMS. And in the iPhone space, Bank of America's ATM-locator application is iPhone's second-most downloaded mobile app.
As the number of online purchases grows, so too will mobile banking.
Online PIN-debit
A shift in how online payments are made, beyond the move from credit to debit, also is occurring, PULSE's Schneider says. PULSE, which recently signed with Acculynk to offer online PIN-debit transactions to its financial institution partners, also is working to redefine the way it views debit.
Acculynk, which just more than a year ago bought ATM Direct, has patented a unique online debit platform that allows retailers to offer online payments without requiring enrollment or a software download. The PaySecure platform allows users to enter PINs online, not with the keyboard, but with a virtual PIN pad that is used by clicking the mouse.
Acculynk president Nandan Sheth says Acculynk is the only company on the market today that has a patent for the online PIN pad.
"The PIN pad is offered as the transaction is run, so it's just like a traditional merchant transaction at a regular POS," Sheth said. "We are not looking for a new transaction. We are working with the existing infrastructure, with the networks (like PULSE) and the acquirers."
And because Acculynk does not capture the PIN during the transaction, and because the keyboard is taken out of the equation, thus eliminating the ability for malware to intercept the PIN, the transaction is secure, Sheth says.
"We did some research with Javelin to see how consumers would react to the PIN when it appeared on the screen during an online transaction. Would they feel secure?" Sheh asked."What we found was that consumers understand two-factor authentication. They are savvy, and they felt comfortable conducting an online transaction using this technology."
The benefits to issuers are similar, he added, since fraud and charge-backs are reduced. With traditional online purchases, between 10 percent and 15 percent of transactions are adversely affected by fraud and/or are charge-backs.
ATM & Mobile BankingIndustry OrganizationsTrends / StatisticsTransaction ProcessingDebit / CreditNorth America
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