Disclosing credit card information on-line is something a lot of people worry about. And to some, giving out banking information over the Web to allow vendors to access bank accounts may sound even worse. But Bernard Schaer believes this payment method – direct debiting – may be the key to making cyber sales to Europeans.
Schaer, CEO of Las Vegas-based EuroDebit Systems Inc., noticed that even though there is traffic coming from Europe to on-line merchants all over the world, that traffic hasn’t translated into sales.
“That prompted me to think of what could possibly be the reason, which led me to see that only about 20 per cent of Europeans [have] credit cards, and even less (are) using them on-line.”
The system, which is available to merchants worldwide, can currently only check the status of German consumers. There are plans of expanding this service to the U.K., Austria, Switzerland, Belgium, the Netherlands, Luxembourg, France and Italy in the near future.
EuroDebit features DirectDebit technology, which withdraws funds for a transaction directly from the customer’s European bank account and deposits the monies into the merchant’s account, making it ideal for purchases over the Internet, according to the company.
“There are really no cards involved here,” Schaer said. “The customer that comes to your Web site and would like to purchase a product needs to only enter his or her personal information and banking information and we will then, in turn, take this information and have our banks (in Germany) deduct on our behalf the money from the customer’s chequing account and we will then transfer it to the respective merchant.”
The system also includes a credit card clearing service that is designed to accept European credit cards easily and securely.
With DirectDebit, consumers enter their bank account information into the DirectDebit interface at their desired e-tailer’s Web site. EuroDebit approves the sale after validating the data and running the transaction through the screening process. The system then gives the vendor the green light to go ahead and ship the goods.
The software uses CyberSource, a fraud-control system for credit card verification, and SCHUFA, a credit bureau and reporting agency in Germany.
Michael Baray, co-founder of San Marcos, Calif.-based Depot.com, said his company was looking to go into the international market, and EuroDebit sounded quite appealing.
“The thought of the direct debit from the European end of it through the banking systems that they have in place was attractive for us,” Baray said. “It’s encrypted transactions on-line. There’s no paper work.”
But at least one analyst has some doubts about the system.
According to Avivah Litan, research director of payment systems at Gartner Group Inc., the security measures taken by EuroDebit are insufficient.
“I just did a big survey of Internet merchants in the U.S., and their fraud rates are really high, even the ones using CyberSource for fraud detection. It does not do the trick,” Litan said. “It reduces your fraud by 40, maybe 50, per cent but you still have the other 50 per cent of that risk.”
“When it comes to taking money right out of a bank, the way I see it is the way the U.S. rules are, you should have a PIN, a digital certificate and a physical device. If they don’t have added security, like a login or user ID, then I wonder how they get away with it,” Litan said. “Frankly, I wouldn’t feel secure with it.”
CyberSource and SCHUFA are effective credit card systems, Litan said.