MTN MobileMoney is introducing an e-commerce payment mechanism called payD that allows SA consumers to buy products and services online using their debit cards. Budget airline 1time is the first company to offer the new online payment technology.

Dave Parratt, head of new business development at MTN MobileMoney, says only 3% of SA’s population has credit cards and “this is generally the only way to transact online” in SA.

For the seller, transaction costs for credit cards cut deep into margins. Parratt says this reduces the range of products electronic retailers are able to offer.

1time CEO Rodney James says the airline has been looking for “secure and convenient alternatives to the cumbersome electronic funds transfer or bank deposit payment options”.

Standard Bank and Nedbank Pin-based debit card users on the MTN and Vodacom networks can use payD, with more banks expected to offer the service within a year. “As a payment mechanism, payD is completely partner-neutral. Standard Bank and Nedbank are the first banks operational on the system but will soon be joined by other major institutions,” says Parratt.

PayD uses the “authenticated mobile transaction” technology developed by MTN MobileMoney and uses Sim and Pin technology to turn any mobile phone into a secure, encrypted point-of-sale terminal.

“A critical element to payD’s security, apart from the high levels of hardware-based encryption, is that the service will work only for the registered user via their personal mobile phone,” says Parratt. “So, there need to be three elements simultaneously in place for the service to work: the debit card, the registered phone and the ATM Pin. It is as secure as walking into your nearest shopping centre, but it works online.”

The greatest challenge to getting debit card holders online was recreating the security of a traditional point of sale (POS) in the mobile world. “Cellphones have many of the things POS units have. Networks have encryption, and Sims work like the chips in debit cards. We can secure the network and replicated the Pin pad at a POS,” he says.

“We can’t even see the card number, but we can see the cellphone number,” says Parratt. “Once users have linked a debit card to their cellphone number, they need only quote their cellphone number, then they’ll be sent an SMS requesting their Pin — so Pin and card details aren’t kept together.

The SMS users receive is what Parratt calls a “pervasive message”, which means it doesn’t remain on the phone once the transaction is complete. “You carry all of the necessary security on your phone, in your pocket. But if you lose your phone, no one will be able to transact with it without having your debit card Pin, too”.

He says debit card transactions are priced at almost same rate as POS ones, at “around 1%”. He says that as credit card transactions carry a higher premium, payD will also allow small retailers to boost their profits. — Craig Wilson, TechCentral