Pan-African mobile operator MTN is looking to make shopping easier for its South African customers by implementing payD, an e-commerce payment mechanism that allows consumers to buy products and services online with their debit cards

According to Rich Mkhondo, MTN's head of corporate affairs, consumers will use their existing MasterCard or Visa debit cards for transactions and subsequently use their mobile phone to enter the pin to approve their purchases.

"This means that e-commerce is now available to millions of South Africans that until now have not been able to make payments as they did not have a credit card," said Mkhondo.

PayD's authenticated mobile transaction technology was developed by MTN MobileMoney. It uses SIM cards and pin technology to turn mobile phones into secure encrypted point-of-sale terminals.

Mkhondo said payD is unlike existing online payment mechanisms, as customers do not have to top up their account beforehand. Instead, they purchase items online with funds in their accounts, just as if they were using a credit card.

Budget airline 1time was the first company to implement the system and has been using it for a month for online ticket sales. However, Mkhondo said MTN has been testing the mechanism extensively with 1time for over six months.

He said that currently over 80 e-commerce merchants are live on the system – they include leisure operator Holiday Tours and electronics supplier The Gadget Shop.

Currently, Standard Bank and Nedbank are the only two financial institutions operational on the system but Mkhondo expects the rest of the local banking industry to follow suit.

He added that MTN will look to take payD beyond South Africa's borders soon.

Safer than credit cards
Purchasing online with a credit card has always been seen as risky. But with the debit card, merchants and consumers are ensured that transactions will be safer.

Head of MTN MobileMoney's new business development, Dave Parrat, said payD is as secure as purchasing products from a shopping centre.

He added that payD is secured by high levels of hardware-based encryption. It uses the security of a SIM card to replicate that of a point-of-sale device.

But the more crucial feature to its security process is that the service only works for the registered user through their personal mobile phone. For the service to work there would have to be three elements present at the same time. These are the debit card, the registered phone and the ATM pin.

Transactions are completed in seven steps, or less for returning customers.

When checking out online, the user selects the payD method then enters their mobile number. The user types in their debit card number before being asked to select their current or savings account and provide the card's expiry date - first-time users have to do this step once, and thereafter just the pin is required.

After entering the expiry date, payD requests confirmation via the mobile phone. Once the user has entered the debit card ATM pin on the phone the order will be confirmed on the website.

Customers receive a message of confirmation which, Parrat said, does not remain on the phone when a transaction is complete. If the customer's phone is lost, no one will be able to use it for transactions as they would need the customer's debit card pin.

Consumers, merchants save on extra costs
Mkhondo explained that before payD, South Africans used credit cards as the most common method of buying items online. However, only 3% of the population qualified for them.

Now that payD has been implemented, online shopping is accessible to most bank card carriers.

Consumers will avoid high interest rates as debit card purchases are priced at 1%, the same as a traditional point-of-sale terminal.

With debit cards, online merchants now have a wider customer base to sell to. They will also save on the extra costs usually incurred with credit cards.

Parrat said that previously, credit card transaction costs cut into merchant's profit margins and reduced the range of products they were able to sell. However, with payD merchants are able to offer a wider product range.

Source: MediaClubSouthAfrica.com