A table talk with Acculynk CEO Ashish Bahl: "Online payments is the one bright spot in the current economy"

Acculynk was founded in early 2008 and draws from a management team with extensive experience in the payments industry. The company`s CEO, Ashish Bahl, founded Harbor Payments, Inc. in 2000 and served as the CEO until the company was purchased by American Express in December 2006, when he became the Senior Vice President of the EReceivables Business unit.

The Paypers: What made you decide to get into the online payments industry? What kind of approach does Acculynk offer to e-payment solutions?

Ashish Bahl: Online payments is an industry that is ripe for innovation. On one hand, you have the default standard payments of credit cards and signature debit cards. Merchants are fed up with the fees and fraud around card payments and, as a result, are steering consumers to alternative payment methods. This steering is causing an erosion in bank issuers’ online market share and revenues.

At the same time, the available alternatives don’t ideally meet the needs of consumers and merchants. They require consumer enrolment and redirection from the merchant checkout, and consumers must pro-actively choose to use these payment methods – which means merchants must educate consumers on these alternatives and provide incentives for usage. And as merchants are discovering, their bottom line savings with alternatives is minimal, if it even exists, since many alternatives carry fees similar to credit cards, and they’re just not seeing the lift in sales that these alternatives have promised. And none of these alternatives address the astronomical growth in debit that has occurred because of the credit crunch and more responsible consumer spending.

We saw an opportunity to introduce a simple, secure payment method that would address the growth in debit while providing a superior consumer payment experience and meeting the needs of merchants and bank issuers. Acculynk is the first company that has been endorsed by 6 EFT networks to provide a service that allows consumers to use their debit card with their bank-issued PIN for online purchases. And we are the only company with a PIN debit solution that has been adopted by multiple merchants and acquirers, and thousands of issuers. Our goal is to become the standard for Internet PIN debit payments, both in the U.S. and worldwide.

The Paypers: In March 2009, your company introduced a software-only service for internet PIN debit, dubbed PaySecure, as part of a pilot project that has grown to include significant EFT networks and merchants. How does PaySecure work and what target audience did you have in mind when you developed this particular offering?

Ashish Bahl: PaySecure utilizes a graphical, scrambling PIN-pad for the secure entry of a consumer`s PIN. Consumers enter their debit card information as they normally would on a merchant website. Once the consumer submits the information, PaySecure performs a BIN check on the card number. If the card can be used with a PIN and is in Acculynk`s network of participating issuers, PaySecure`s graphical PIN-pad is presented and the consumer is given the opportunity to enter their PIN. The consumer enters their PIN on the PIN-pad, using their mouse, clicks Submit PIN and the transaction is processed as PIN debit.

The Paypers: What are the advantages of an online PIN debit service from the consumer and merchant perspective?

Ashish Bahl: Consumers want greater security for their online transactions. PaySecure adds an extra layer of authentication to a consumer’s debit card transaction with a convenient payment process that leverages the debit card they already have and the PIN only they know. It is familiar to the PIN debit payment process at the retail point of sale, and they don’t need to enroll or be redirected to a third party website for payment.
PaySecure’s benefits to merchants include lower interchange fees than signature debit/credit cards, reduced fraud, a shift in charge-back liability to the bank issuer and guaranteed funding. Consumer usage is demonstrating that 1 out of every 2 consumers presented with the option to enter their PIN with PaySecure are doing so, which means merchants start generating PaySecure transactions as soon as the payment method goes live, allowing them to immediately begin seeing a return on investment.
For issuers, PaySecure is an “out of the box” solution that requires no change to current processes, since we ride the EFT network rails, and this is a competitive weapon for issuers to fight the onslaught of alternatives – keeping more business in the bank. With a higher interchange than POS PIN debit, PaySecure provides attractive margins by cutting network assessments, fraud losses, and administrative costs by 75-80%. Finally, PaySecure brings new transactions from security conscious consumers, those that prefer to pay with PIN debit and consumers that have “PIN-only” debit cards.

The Paypers: What other payment systems or products do you consider to be the main competition for PaySecure? Why?

Ashish Bahl: Our main competition is signature debit. While we are an alternative debit type online, PIN debit has been in use for over 20 years at the point of sale. By bringing a PIN debit payment option to consumers, we are simply extending the choice in how a consumer uses their debit card, just like the choice they have at the POS. In terms of other companies providing an Internet PIN debit solution in a software-only service, we do not see any competition.

The Paypers: In todays online payments space, fraud affects the consumer confidence in non-cash means of payment. Some experts have voiced concern over potential problems with software-based online PIN debit solutions that might limit adoption among customers. How do you comment on the following statement: “I would highly recommend not entering a PIN anywhere on the Internet unless (a solution is) hardware-based,” asserts Avivah Litan, vice president and analyst at research firm Gartner. “I’m not convinced that the code is not breakable”?

Ashish Bahl: Our position is that when PIN debit first came out at the retail point of sale, there were some of the same concerns, and the same will be true for any new payment method that enables PIN debit usage on the Internet. But we believe that through the inherent benefits of our product, the simplicity of use, the security, and the growth in standards, these will only be a temporary set of comments.

The Paypers: In the context of a change in terms of consumer preferences related to the payment methods they select when paying for online purchases, usage of alternative payments is on the way up. In your opinion, what are the main factors which shifted online consumers attention from credit cards towards these alternatives?

Ashish Bahl: There are two main factors. First, the credit crunch has consumers looking at new ways to pay because credit cards are no longer an option. But the second, bigger factor, in our opinion, is promotion and incentives. These alternatives have been able to get people to enroll and use their service because there is a cash or discount incentive to do so, particularly with the larger alternatives. Our question is once that incentive has run out, do these consumers continue to use alternatives on a regular basis?

The Paypers: What advantages does a debit card-based online payment service bring to buyers and /or merchants, as compared to an alternative method?

Ashish Bahl: In terms of the advantages we provide over alternatives for consumers (buyers) specifically:
- Greater security for their online transaction
- No sign-up, no new account, usage of existing debit card and PIN
- No redirection from the merchant checkout for payment
- A familiar payment process that requires no education and no marketing incentives

For merchants, specifically:
- Lower transaction fees than online credit card/signature debit card fees, and lower fees than most alternative payments
- A shift in charge-back liability for denial of purchase charge-backs from the merchant to the bank issuer
- Simple implementation that takes a few weeks, not a few months, like alternatives. Implementing PaySecure on a merchant website involves adding code to the checkout.
- Addresses the largest segment of pre-enrolled consumers of any emerging payment method: the 250M+ U.S., signature-enabled debit cards and the approximately 80M U.S. debit cards that can only be used with a PIN.

The Paypers: What are your company`s plans for 2010?

Ashish Bahl: Domestically, we plan to scale our merchant and issuer base significantly. We were very conservative with how we rolled this product out last year. We focused on adding small to mid-size merchants to prove the system, eventually adding one major airline. This year, we are going to announce many major names from the Internet Retailer Top 500, as well as the top U.S. airlines. Next month, we will be announcing a top 150 Internet retailer with a network of E-Commerce websites.
As we scale domestically, we will also be introducing PaySecure into a select few international markets. As you can imagine, there is enormous demand for an Internet PIN debit solution globally, as the majority of debit cards in the world are not MasterCard / Visa branded and can only be used with a PIN. We expect that we’ll enter our first international market some time in Q2.
Finally, PaySecure has application in mobile and kiosks, both of which we are exploring now, with use of our PIN-pad on kiosks likely being the first market. We are also considering additional applications, including online banking authentication and credit card verification.

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