Tuesday, January 8, 2008

More About HomeATM...

Having been on a PIN Authorized Internet Debit tangent lately, I thought I'd expand on that and provide more background on HomeATM, a company who sees the value of, and, (seemingly, unlike PBT) is AGGRESSIVELY pursuing the Internet PIN Debit market.

With that said, here's an overview of HomeATM Payments, as published in The GreenSheet:

HomeATM Payments creates innovative solutions for processing secure debit and credit card transactions on the Web. You may wonder why this is newsworthy. After all, many companies process transactions online.

HomeATM has a twist: It processes all transactions as card present. Yes, you read that correctly.

(Editors Note: The "Yes you read that correctly" statement perfectly exemplifies the vast potential of this market. The reason for the statement is obvious, A card-present rate for interent transactions? It sounds too good to be true thought the author of this story. And ISO's, banks, and web merchants will surely think that as well, so I should prepare for their double-take with the "yes you read that correctly" addendum) Moving forward....

With HomeATM, consumers make e-commerce purchases using their ATM or credit cards, and payments are processed as PIN debit transactions. HomeATM Chief Executive Officer Mitchell Cobrin said the company's mission is to "expand current payment options on the Web by enabling consumers to use their debit/bank ATM cards, a growing payment option of choice.

The company was founded in 2002 by a group of payment industry experts and Internet entrepreneurs. It recently switched headquarters from Chicago to Montreal, and its 25 employees are spread among offices in Chicago, Montreal and Hong Kong.

While HomeATM is just four years old, its founders have more than 40 years of combined experience introducing e-commerce solutions. Among them, they have more than 30 patents.

After three years of research and development and spending more than $3 million, HomeATM owns one patent and has six more pending. They all pertain to innovations in payment processing and encryption.

"HomeATM owns the worldwide patent for PIN debit or credit transacted through a Web browser," Cobrin said. "We are capable of enabling e-consumers to use their PIN debit/bank ATM card from the comforts of their home with participating merchants. We will defend our patent and pursue infringers."

The nitty gritty

The HomeATM process requires only a computer, a HomeATM ScanPad and an ATM/debit card. No registration or enrollment is needed. To deploy, a consumer simply connects a ScanPad to a computer, swipes an ATM card and enters a PIN. That's it.

"Our bank-level secure technology operates via a USB peripheral and offers the consumer dual authentication," Cobrin said. The plug-and-play devices are supplied to merchants at cost. Merchants then give the devices to their customers, free of charge.

Merchants determine which clients receive devices. For example, a merchant may decide any consumer who spends a certain amount of money within a given time deserves the device.

Cobrin realizes some consumers may resist changing their online purchasing habits. For them, merchants can offer incentives. For instance, an airline may offer three miles for every dollar spent with the device, rather than the standard one mile for every dollar spent using other payment methods.

HomeATM does not seek to profit from equipment sales. Rather, it wants to get the ScanPad into the hands of end users. The situation is analogous to cell phone service or satellite television subscriptions. In these models, the hardware is typically provided at no cost to the consumer. The provider earns profits on the use of the service.

The company is also beta testing PIN-entry software that has the same capabilities as the ScanPad. But Cobrin noted its release is not imminent. HomeATM continues to collaborate on development with processors and banks.

HomeATM's target merchants have large, recurring client bases. Cobrin said it is advantageous for these merchants to convert consumers from card not present credit transactions to PIN debit transactions because there is less risk.

"We guarantee 100% payment in real time with no chargebacks or reserves," he said. The company is able to make this guarantee because PIN debit transactions take place in real time. "When the transaction occurs, the funds are set aside at the issuing bank. Those funds settle at 3:00 a.m. Eastern Time that night. No chargebacks," he added.

Cobrin also pointed out that PIN debit transactions are more cost effective: HomeATM can often save merchants 100 to 150 basis points.

"Debit is a cheaper transaction on the whole," he said. "The rates across the board in
the debit world are less. With debit we have a point of sale rate that allows us to pass the savings on to the merchant."

Merchants also benefit from the system's flexibility. They can use any processor because the HomeATM software works with all existing debit and credit networks.

Another attractive feature of HomeATM transactions is their security. Transaction information is not entered into merchant databases. It doesn't even go to merchants; it goes directly to consumers' banks. Therefore, the risk of consumer data remaining on merchant servers is eliminated.

Additionally, all customer data is encrypted in the ScanPad's PIN pad before it even reaches the computer. The card data is never visible, eliminating the risk of theft due to phishing, key logging and other criminal tactics.

Consumers can even use this technology to send funds person to person by simply swiping their bankcards. The intended recipients can retrieve the money from any ATM worldwide, or use it for POS transactions at any merchant who accepts debit cards.

When asked if PayPal is a competitor, Cobrin said, "It can be a friend or foe. HomeATM can be an instrument to load a PayPal wallet, or it can be a direct competitor at the checkout. We can do everything PayPal can and a whole lot more. And our rates are much more advantageous."

Good news all around

HomeATM is good news for consumers who want to use their ATM cards online. It is good news for merchants who want access to that market. And it is good news for ISOs and merchant level salespeople (MLSs) because HomeATM is interested in forming relationships with the ISO and MLS community.

We are a dexterous and nimble company eager to add ISOs, MLSs and merchants, and we are open-minded to strategic relationships and partnerships," Cobrin said. The company uses hybrid buy rates and offers agents commissions and residuals

HomeATM already has several established relationships with agents around the world. "We are a company that offers a lot of support and collaboration to our ISO/MLS agents throughout the sales, integration and customer care processes," he said. "We view these organizations as partners; our success relies on their success."

The company is interested in working with ISOs that are sector-based and have expertise and contacts in industries such as e-commerce, travel and hospitality.

"We want to align ourselves with companies who have established relationships with appropriate e-merchants who fit our markets," Cobrin said. "Costco.com, WalMart.com, Dell.com and so on - those are the people we envision doing business with." ISOs and MLSs choosing to add HomeATM to their merchant offerings will be able to help their customers access consumers who have previously been out of reach.

E-commerce security is an ongoing and growing concern. And, debit is the largest growing transaction method. Both of these factors contribute to an environment ripe for an effective PIN debit e-commerce solution.

There is a huge market of people who don't use credit, and there is a huge part of the market who are petrified to put their data into a Web browser," Cobrin said.

Not only can HomeATM help ISOs and merchants reach the debit community, it can help them reach the credit community and other profit areas.

"Debit can be a conduit to grow sales," Cobrin said. "It is generating sales growth potential. Even micro payments are an opportunity. Because of our cost system, we can make it affordable."

HomeATM can also process credit cards: The HomeATM device is chip-and-PIN-ready. And when a credit card is swiped using HomeATM's device, track 2 data is captured.

"We can still do credit better than anyone can do remotely," Cobrin said. "From a chargeback, repudiation and fraud consideration, capturing track 2 data is nonexistent from home" with other providers.

HomeATM's focus is to make payments easy for all parties. It can work with any industry in any region. The company's process is compatible with all banks and acquirers.

"Since we are technology-centric and bank-agnostic, we are flexible to integrate and work with an unlimited amount of processors and banks," Cobrin said. "We are happy to work with our clients' processors and acquirers."

Of particular interest to merchants, HomeATM custom designs programs to accommodate each industry's challenges. This honors HomeATM's commitment to flexibility and ease of use and is another selling point for ISOs and MLSs.

"Our solution can be applied to every industry including person-to-person money transfers, travel, MLM, taxation, parking meters, airlines, car rentals, hotels, tour operators and so forth," Cobrin said. "When it comes to PIN debit over the Internet, there is only one place to go, and that's with our worldwide patented technology."