A No-Card, No-Fob System Gets Set for Prime Time

A company offering a biometric-based technology that allows consumers to pay at the point of sale without presenting a card, keyfob, token, or any other payment media has installed a new management team and is laying plans for a major expansion in 2004. San Francisco-based Pay By Touch is running tests of its so-called tokenless system in a Thriftway supermarket in Seattle and in a handful of video-rental stores, but says by mid-2004 it will have agreements with a score of large retail chains and expects to have terminals in 40,000 stores. The Pay By Touch system, on which the company holds 22 patents with 13 pending, promises to speed up customer throughput for merchants while allowing them to channel more transactions through lower-cost payment networks, at an incremental fee to Pay By Touch of anywhere from a nickel to 10 cents per transaction. The system works by having store customers touch a fingerprint-reading sensor that links to either an electronic cash register or an existing POS terminal. The system compares the print picked up by the sensor to an encrypted image taken when the customer enrolled earlier. Assuming there's a match–and that the customer punches in the right 7-digit code–the transaction proceeds on one of the cards selected by the customer at enrollment. A menu of the customer's cards appears on the POS terminal for the customer to select, but the order of scrolling is determined by the merchant, allowing the retailer to influence which type of card, credit or debit, the customer opts for. “Customers always say they want the choice (of payment type), but whatever the first item is that pops up they're more than likely to pick,” says Caroline McNally, a former Visa, MasterCard, and American Express executive who recently came to the company as chief marketing officer. With a freshly hired salesforce on the streets, as well as a marketing partnership with consulting giant Accenture, Pay By Touch expects to sign up thousands of new locations for “Pay By Touch” lanes in the coming months. The commercial rollout, says McNally, “will happen fairly quickly.” The company is counting on merchant incentives and the result so far of the tests: tender time has been cut by one-third in the video-rental shops, for instance. “We have demonstrated customers are comfortable with this,” says Eula Adams, the former First Data Corp. executive who is one of Pay By Touch's investors and board members. Also, the cost of the biometric sensors has dropped dramatically in recent years, to about $40 per unit. The company has taken on a whole roster of new managers, including a new chief executive, and completed a $10 million financing round in recent weeks in the wake of its acquisition last April of Indivos Corp., which had been developing the technology.