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Secure Vault Payments, the alternative payment system that lets consumers make online purchases directly from their bank accounts, may gain new prominence from a test it is running with a sizable client.
March 4 -
U.S. Bancorp has signed on as the largest bank to use an alternative payments system that lets consumers pay for online transactions through their institutions' websites.
November 3 -
An online payments system that could help banks compete against alternative service providers like PayPal Inc. is getting the green light from Nacha.
September 16
A service that lets consumers make electronic payments to online merchants without disclosing their bank account details is expanding into more financial institutions through a deal with the online banking software vendor Jwaala.
The Austin, Texas company now provides Secure Vault Payments as an alternative to paying with a credit or debit card on a merchant's site. Secure Vault Payments was developed by the Denver company eWise Group Inc. and is offered by Nacha, the electronic payments association that oversees automated clearing house rules.
Jwaala's credit union clients were demanding secure payment options for their members, says Andrew Taylor, Jwaala's chief technology officer.
Secure Vault Payments addresses the "uneasiness" that some consumers feel about "entering credit card information into a website," Taylor says.
News of recent payment card data breaches as well as new regulations for debit cards have generated interest in alternative payment methods, says Tony Rasmussen, the senior vice president of e-services at Mountain America Credit Union, a Jwaala client that is planning to make Secure Vault Payments available to its 350,000 members this year.
"I think that probably the … climate is such that people would be willing to try an alternative payment method — one that does not involve their credit card and one in which they do not have to give a lot of their personal information to the merchant to complete a transaction," Taylor says.
While card use online continues to grow, many consumers still express fears over the security of such transactions, says Beth Robertson, the director of payments research at Javelin Strategy and Research in Pleasanton, Calif.
Javelin in September surveyed 4,998 U.S. adults about their use of online payments services. Seven percent of respondents said they have never made an online purchase and another 7% said they hadn't made an online purchase in the last 12 months, Of those, 21% cited concerns that their credit or debit card data would be used fraudulently for not making online purchases.
Additionally, 46% of respondents said they had used an online alternative payment service in the past year. Of those people, 36% cited greater protection from fraud or other misuse of their information as a reason for using alternative payments.
"There's a certain percentage of people that still feel that giving their information to a merchant [online] is" not safe, Robertson says. "They're not comfortable with that and that's one of the reasons they don't shop online."
To use Secure Vault Payments, a consumer would select it as a payment option on a merchant's site. They would then be directed to their online banking site to verify their information and select the deposit account from which they want to make a payment. The funds typically are sent to the merchant by the following day.
Nacha, which established special rules for financial institutions offering the service to merchants and consumers, announced the commercial availability of Secure Vault Payments in September after testing it for two years.
Forty-eight U.S. financial institutions, including several that are owned by Synovus Financial Corp., offer the service to their customers, says Richard Brierley-Jones, the executive vice president of eWise. EWise also has partnerships with Fidelity National Information Services Inc. and Harland Financial Solutions, a subsidiary of M&F Worldwide Corp.
For the consumer's bank, the service is another way to generate payments revenue. A merchant accepting Secure Vault Payments would pay financial institutions 1.35% of the value of a typical e-commerce transaction. Payments made to utilities cost is 50 cents per transaction and those made to a government organization cost 40 cents, Taylor says.
With caps on the fees that financial institutions can earn on debit card transactions taking effect in October, Rasmussen says Mountain America is interested in products and services "that could offer either additional revenue, make up that revenue [or] replace that revenue."
Mountain America, with $2.8 billion in assets, is exempt from the caps because of an exemption to regulation for financial institutions under $10 billion in assets contained in the Dodd-Frank Act, though many expect the rules to affect smaller institutions.
