Digital Transactions Authoritative, insightful and timely information for payments professionals
Pay By Touch, a San Francisco-based company offering a biometrics-based technology that allows consumers to pay at the point of sale without presenting a card, keyfob, token, or any other payment medium, announced today that it has formed an alliance with IBM Corp. that should give the fledgling biometrics company a big boost with the large retail chains it's targeting for its product. Under the agreement, which was announced today at the National Retail Federation's annual trade show in New York, IBM will help sell the Pay By Touch system to merchants using the technology giant's point-of-sale systems, as well as handling installation of fingerprint readers and POS software issues. Partly as a result of the IBM deal, Pay By Touch expects to sign up 14 retail companies by the end of the year and to have from 50 million to 100 million e-wallets in its database. It is currently in serious discussions with a dozen chains, including Target, Best Buy, Shaw's Supermarkets, and Supervalu. The Pay By Touch system, on which the company holds 23 patents with 12 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 the customer opts for. A Thriftway supermarket in Seattle, which has been using the system for a year, has been able to increase the share of transactions on debit cards tied to personal identification numbers to 60% from around 13%. Merchants generally prefer PIN debit to either credit cards or signature-based debit because it carries lower transaction costs. “We can dramatically affect payments,” says Craig Ramsey, Pay By Touch chief executive and a former Siebel Systems and Oracle Corp. executive. Indeed, the company is now rolling out electronic check conversion, based on the automated clearinghouse, as an added option that is generally even less expensive to merchants than PIN debit. Pay By Touch claims that its experience so far at the Thriftway grocery and at a handful of video-rental stores has shown that 80% of customers adopt the system within the first 120 days. This adoption rate has come about largely without promotions or incentives to consumers, Ramsey says. At the same time, transaction times have been cut dramatically–by one-third in the video stores, for example. And the company is footing the cost of the scanners and their installation. Says Ramsey: “The retailer has no impediment to moving ahead.” In part owing to these advantages, Pay By Touch is counting on the IBM deal to help it penetrate big chains. One customer the company hopes to sign soon is the unnamed video-rental chain, which has been testing the system in five of its 4,000 stores and has 45 million customers. Already, Pay By Touch is relying on IBM technology for on-demand computing services to help manage the peaks and valleys of retail cycles. And the company's database?the e-wallets set up by consumers when they enroll?resides on an IBM computer. Ramsey, who joined the company six months ago, has helped engineer the installation of a new management team and a $10-million financing round. He now has a sales force of six calling on retailers, up from virtually no sales effort when he started. And the company has a co-marketing agreement with consulting giant Accenture as well as its IBM alliance. Not surprisingly, Ramsey's conviction that his company's biometric payments technology can revolutionize the transaction market is strong. “This is the first disruptive technology to hit the financial-services market since the ATM,” he says.
