The merger of Star Systems and Concord EFS, completed last month, creates an electronic payments superstore combining payment and network servicesunder one roof.
The merger, the largest in EFT industry history, caps a trend toward consolidation. Concord owns the Cash Station and MAC networks-the latter acquired through the purchase of Electronic Payment Services. Star acquired the Honor network in 1998, extending eastward from its origins in the West. Other big mergers have included NYCE and Magic Line, and Money Station and PULSE.
Concord is the nation's largest ATM processor and online debit acquirer, and the largest POS provider to supermarkets, convenience stores and gas stations. Star Systems operates the largest online debit switch. Together, Concord and Star processed 8 billion transactions last year-almost half the online debit transactions in the United States.
The new company will operate as Concord EFS, with Star managing network services. The MAC and Cash Station brands will transition to the Star brand over the next three years, creating a network of 180,000 ATM locations.
Star Systems has sought to broaden itself beyond network services into the world of e-commerce. "We saw synergies with Concord that would make us a payment company, not just a back-end debit switch," said Ronald Congemi, president of Maitland, Fla.-based Star Systems.
Star is testing four approaches for using ATM cards to make Internet purchases. The first employs a traditional ATM card and a card reader/PIN pad-similar to a retail POS device-which is connected to a PC.
The second approach is SafeDebit, a NYCE-developed system in which a bank customer's ATM card number and PIN are encoded onto a CD-ROM, which functions exactly like an ATM card in the physical world. When making a purchase on the Internet, the customer selects the SafeDebit option on the merchant's Web site, inserts the SafeDebit "card" into the CD drive, and enters an "e-PIN" to perform a transaction. This second PIN is necessary to thwart unauthorized use of the SafeDebit and/or ATM cards.
The third approach, championed by NACHA, uses PKI encryption instead of a PIN for authentication. "That's the avenue we're strongly pursuing," Congemi said. When a customer wishes to make a Web purchase, a digital signature-generated by bank-provided chip cards or software-is transmitted along with the customer's ATM card number to the merchant processor. The digital signature is validated using the customer's public key, which is kept on file by Star. The signature validation system was developed by eFunds, which also provides switch and ATM processing services to Star.
The fourth approach is a pilot of a method for consumers to pay their utility bills on the Internet in real-time using their ATM card numbers. From a participating utility's Web site, customers select the Star debit function to make a payment. The PIN-less transaction is then routed by BillMatrix-a billing services provider-to Star, which settles the transaction overnight.
Star is also testing a method for consumers to pay their utility bills by phone with their ATM cards. Using a special toll-free number, the customer enters the account number, confirms the amount to be paid, and enters an ATM card number. Star processed nearly 400,000 such transactions last year.
Star conducted the first live pilot of SafeCheck, a NYCE-developed service that converts a paper check presented at the POS into a real-time debit transaction. In the SafeCheck transaction, a retailer cancels the check and returns it to the consumer, along with a receipt/disclosure statement. The purchaser's checking account is immediately debited for the amount of the check, just like a PIN-secured debit transaction. The transaction is settled overnight, giving the retailer access to the funds the next morning.
The SafeCheck pilot was conducted with BB&T. "We switched the transaction all the way through to BB&T, and they captured the MICR," said Congemi.
A check verification system, Star Chek, processed nearly 400,000 transactions between its November launch and January. The service enables retailers to route check verifications through the Star network to a national database, maintained by Equifax, containing a list of "positive" checking accounts. Transaction volume is expected to exceed 25 million in 2001.
Yet another system, Star Station, provides Star's customers with real-time access to an electronic library of operating rules and manuals; a searchable Star member directory; and an ATM and POS locator.
Built for Star's western U.S. customers and extended to the East after Star acquired Honor, Star Station is now being rolled out to Concord's MAC and Cash Station customers.