Friday, January 18, 2008

American's Misconstrue Biometrics and Their Value

There is an interesting article from Cards&Payments Magazine. If Pay By Touch has dropped the ball on anything, it is in the failure to overcome the criminal attachment and Big Brother attitude that many uniformed (a nice word for uneducated) citizens associate with "fingerprints". Hey what about all the camera's recording your every move people?

In large part, nobody's more to blame than Pay By Touch themselves. After all, from the very beginning, Pay By Touch continued to allow the media, time after time, to portray their biometrically based platform as "fingerprint payments" and from the very beginning it never was. Yet, they did nothing. A new story would come out months later, and still, fingerprint, fingerprint, fingerprint.

Well, truth be told, it's not a fingerprint and never has been. In fact, if you want to put a finger on it, then it would be called an A-L-G-O-R-I-T-H-M, an algorithm consisting of a 300 digit code that CANNOT be reverse engineered into a f-i-n-g-e-r-p-r-i-n-t. How many numbers on a credit card? Biometrics protects us from identity theft. Identity thieves are the criminals. Not finger scans by association.

In fact, I made that point as clearly as I know how, in my very first post on this blog. (make that the second post, the one after announcing that PBT bought BioPay)

I addressed this issue, under the title "
Who's Moe Paranoid Now" There was a specific reason I blatantly included a picture of data points overlaying a fingerprint. Yes...the algorithm thing. Yet, to this day, Pay By Touch continues to allow the media to portray them as a "fingerprint payment company".

In light of what has taken place over the last 70 Daze, it's been considerably more maddening than it has in the past. They will have to, for the record, separate big brother from biometrics by putting together a simple explanation so some bible banging propagandist spouting Revelations won't 666 them to death.

Anyway, here's the story from Cards&Payments.

Biometrics Is Gaining Ground, But Payments May Be Secondary, at Least for Now

Though on shaky footing in the U.S., biometric-payment authentication may find a niche in Asia and other regions.

"Americans are a funny bunch", says one prominent industry professional. "They have this big brother Orwellian complex about biometrics, yet seem to be completely unaware that a camera captures their every movement at every street corner." he said. "Ironically, biometrics protects their privacy more than it invades it. Other countries around the world see the inherent value of biometrics much more concisely".

But we’re big in Japan” long has been the joking excuse of rock bands based in Europe and the United States that are little-known in their home countries. The quote also seems to portray the history of biometric-payment applications.

Editors Note: This is why Citibank is still "very enthusiastic" about their strategic partnership with Pay By Touch, in Singapore and the Pacific Rim.

While still a nascent application of the technology, using biometric devices to authenticate users of ATMs and payment terminals has gained traction in Japan and is starting to spread to other parts of Asia, the Middle East and Latin America.

In the United States, however, the best-known provider of point-of-sale biometric authentication services, Pay By Touch, is suffering. The San Francisco-based company recently faced the threat of disconnected phone service, eviction, and forced bankruptcy from investors and unpaid employees. However, they have recently received a cash infusion and are currently in the stages of emerging from a voluntary Chapter 11 bankruptcy.

Sources Cards&Payments spoke with recently agree that biometric-payment applications have demonstrated less than overwhelming adoption at checkout lanes in the U.S. and Europe. But many see a future for biometrics in not only payments, but securing ATM transactions, mobile-phone payments and, perhaps, eventually point-of-sale transactions, at least in some parts of the world.

Japan was among the first countries to install biometric-authentication devices on ATMs, and over the past five years the technology has grown in use there. According to Japan’s Financial Services Agency, 18,499 ATMs deployed by private banks in that country were equipped with biometric devices as of March 2007. Japan’s Postal Bank, which was privatized in October, adds another 12,300 biometric ATMs.

In a country where depositors may withdraw from ATMs the equivalent of a few thousand dollars U.S. at a time, the technology makes sense because such self-service transactions require a higher level of security, observers say.

Japan-based Hitachi Ltd. produces biometric readers for ATMs and smart cards that recognize vein patterns in fingers. About 80% of Japanese banks deploy biometric authentication, says Shigeyuki Ito, executive vice president of Hitachi’s smart card solutions operation. Authentication occurs either using biometric sensors on ATMs, usually employing infrared rays to read finger or palm-vein patterns. The system uses this live scan to the consumers’ vein patterns stored on their smart cards.

Hit by some well-publicized attacks on ATMs and facing presure from the government, the Japanese market swiftly adopted biometric authentication at cash machines. “This was accomplished since financial institutions and technology providers had carefully discussed and prepared for the deployment,” Ito says.

Ito says careful planning among banks and manufacturers of payment and biometric technology led to deployments Japanese consumers more likely would use. For example, smart cards that store biometric templates help overcome possible fears of financial institutions storing biometric data, and the infrared finger and palm-vein readers on ATMs do not require users to touch finger sensors that they might fear carry germs, Ito says. Editors Note: Germs...hogwosh..Just more BS propaganda...a door knob, elevator button, or even a bathroom towel dispenser has more germs than any biometric device" Did you hear the one about the gummy bears?

With mobile phones in Japan now performing so many functions, including initiating payments, Hitachi also plans to offer biometric-authentication devices to unlock mobile phones, Ito says. Competitor Fujitsu already offers fingerprint sensors on handsets it produces to store Japan’s contactless wallets. Fujitsu also makes palm-vein recognition systems for ATMs.

Indeed, the future of biometrics for payments will come from the use of biometric readers to authenticate users to a multitude of devices consumers own, contends Jeremy Grant, senior vice president and emerging-technologies analyst at Washington, D.C.-based Stanford Group Co.

“The most likely place you’ll see biometrics in a payment application will be if you start to see mobile payments take off on mobile phones,” Grant says. “You can develop silicon chip-based fingerprint sensors that will cost only $2 each.”

NCR Corp. sees a bright future for biometrics in poor, rural areas of the world such as coffee farms in Colombia or far-flung villages in India. There, the ATM maker contends, biometric ATMs and payment terminals, some of them portable, could bring electronic payments, microloans and other financial services to consumers who cannot read or write or who are reluctant to open traditional bank accounts.

NCR has sold some 50,000 ATMs to such financial institutions as the State Bank of India, HDFC Bank, ICICI Bank and Indian Bank. Dayton, Ohio-based NCR claims 70% of the ATM market in India and says one of its targets is the country’s rural areas.

“The interesting thing in India is that financial-services providers are reaching out to unbanked, rural customers,” says Claire Shufflebotham, director of NCR’s global security research and development organization. “They’re enrolling them with hand-held biometric readers.”

Potential Targets

NCR also has its eye on biometric authentication of high-tech payment devices that consumers in more-affluent communities around the world carry, including phones in Japan that support contactless technology similar to Near Field Communication, Shufflebotham says. “The Japanese are very forward-thinking,” she says. “Rather than carry several cards, they’re putting all these applications on their mobile phones. Now the rest of the world is looking at this space.”

Diebold Inc. has no biometric-ATM installations in Japan. But the North Canton, Ohio-based ATM manufacturer is looking to several other world markets for new types of biometric applications. Since 2004, Diebold has deployed hundreds of its Opteva ATMs with fingerprint scanners in Chile, Spain, Colombia, Dubai and Saudi Arabia, say company spokespersons.

“We’re seeing pretty varying uses (of biometrics) in different parts of the world,” says Jim Pettitt, Diebold director of portfolio strategy and global self-service fraud and security.

When registered retirees in Chile, Colombia and Saudi Arabia withdraw pension funds from Diebold ATMs, for example, pensioners prove to their governments they are still alive and that some relative or friend is not fraudulently continuing to draw payments, Pettitt says.

Smart Card Ties

Asked about the potential for biometric-payment applications beyond ATM access, Pettitt says he agrees that biometrics “has a place” at the point of sale “but probably in conjunction with smart card or mobile technology.”

So far, biometric applications have not ubiquitously found a place in checkout lanes.

San Francisco-based Solidus Networks, which does business as Pay By Touch, offers point-of-sale payments authenticated by fingerprint scans and telephone numbers of preregistered customers. The company provides its biometric payment, check-cashing and loyalty services to 2,600 merchant locations, mostly in the U.S. but with a few locations in Europe and Singapore. It also claims some 4 million consumers have registered to use the service, which compares algorithms (not actual fingerprints) (Editor's Note: Finally) of fingerprint scans (Editor's Note, whoops, nevermind, as we're right back to the problem...It's not "fingerpint" scans, it's just a plain simple "finger" scan" Just when I thought they finally got it right) with algorithms created during registration that Pay By Touch keeps in a database.

Pay By Touch’s pitch to merchants is the ability to steer customers to cheaper automated clearinghouse payments from checking accounts while maintaining the added security and speed of card transactions.

But Pay By Touch is struggling to survive (“Fingers Pointed at Pay By Touch,” December 2007). In December, a California judge allowed the company to take out a $9 million emergency loan to help it pay more than $6.3 million to help it meet payroll, avoid eviction and keep the lights on.

As vice president of marketing, Shannon Riordan has the unenviable job of putting a positive spin on what she calls Pay By Touch’s recent “bump in the road.”

Riordan says she cannot comment on many questions related to the litigation, which stems from alleged improprieties by Chairman and cofounder John P. Rogers, but tells Cards&Payments the company is operating “business as usual.” Riordan says morale among employees has improved under the temporary management of Thomas Lumsden, senior managing director of corporate finance in the San Francisco office of Baltimore-based FTI Consulting Inc.

In mid-November, the Delaware Chancery court appointed Lumsden after the feuding parties, which include company investors, mutually endorsed him for the position.

Riordan says Lumsden likely will “streamline” company operations. But she highlighted new developments around the world, including a project with Citibank Singapore, and Pay By Touch deployments at a store in Germany and at 10 Shell Oil Co. gas stations in the Chicago area.

The Shell stations in October began the pilot to test fingerprint scanners in their convenience stores and at their pumps. Each store also has a kiosk where customers may enroll by placing a finger on a reader. At enrollment, consumers may apply their biometric payment to a proprietary Shell credit card, a Shell MasterCard, or account and bank-routing information from a personal check, all of which cost Shell stations less to accept than do cards that do not carry the Shell brand.

Chris Suess, Shell manager of global refueling innovations, says Shell is conducting the test to provide “a more convenient, speedy and secure transaction process” and to reduce costs through lower transaction fees.

Rollout Hopes
Suess could not say whether the program will roll out nationally. “We hope that it does and, assuming the pilot goes well, we could be at stations nationwide as early as fall 2008,” Suess says.
Gwenn Bézard, research director and analyst at Boston-based consultancy Aite Group LLC, says Pay By Touch until recently did not offer shoppers enough reason to use it. “Credit card issuers offer rewards and cash back, which is a pretty big incentive,” he says.

Bézard says he sees promise in paring point-of-sale biometric authentication with SmartShop, a loyalty program Pay By Touch introduced in late 2005. Using a SmartShop kiosk near a store entrance, a shopper places a finger on a Pay By Touch biometric sensor or swipes the store’s loyalty card. The system’s loyalty-targeting program provides the shopper with individualized coupons and offers based on past purchase behavior.

Green Hills, a Syracuse, N.Y., grocery, deployed SmartShop, along with Pay By Touch, in October 2005. By December 2006, participants in the SmartShop program had increased their spending at the store by 6.1%, trips to the store by 9.8% and produced 5.4% overall revenue growth, according to Pay By Touch.

Riordan says Green Hills’ purported success may stem from promoting freebies before the payments.

“They launched the payments and the loyalty with Smart Shop at the same time, but they didn’t really market the payments,” she says. “They said, ‘Hey, get your special offers when you enter the store.’ Then, when people got comfortable at the kiosk, Green Hills started promoting the payment function. People loved it. They’re adopting it like crazy.”

Green Hills did not return calls requesting an interview by Cards&Payments deadline. But an Aite case study published in January 2007 says biometric payments at the store increased from 5% of sales in April 2006 to 27% of sales in December 2006 (See chart, page 22).

“What Pay By Touch has tried later in the game has been to try to mesh together a payment and loyalty product. That has been fairly successful,” Bézard says. “It only took a few hundred million dollars for Pay By Touch to get there.”

Despite Pay By Touch’s struggles, biometric authentication of some banking services and, perhaps, payments seems to be gaining some ground in Asia and is drawing interest from other parts of the world.

(c) 2008 Cards&Payments and SourceMedia, Inc. All Rights Reserved.

Pay By Touch Update on Cardline

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Solidus Networks Inc., the San Francisco-based biometric-payments company that does business as Pay By Touch, today announced a new board of directors. The announcement comes in the wake of management trouble allegedly caused by its founder and former CEO John Rogers and a case of involuntary bankruptcy filed by disgruntled employees (CardLine, 1/6/2007).

The company also says in a statement today that it filed for voluntary Chapter 11 bankruptcy protection in mid-December. John Morris, a director, tells CardLine the company is doing well in terms of client and customer interest but that the company was “running short of funds” and needs to bring in more financing.

Morris will serve as an advisor while the company works through its bankruptcy. Members of the new board are Morris, Art Petrie, chairman; Eula Adams, chief operating officer; Robert Sigler, chief financial officer; and founder John Rogers, who, according to a company statement, “now functions in a nonemployee director role only.” Rogers had dismissed Morris and Adams, according to a complaint filed Oct. 19 by company investors in the Chancery Court of Delaware, where Solidus is incorporated. The firm was concerned that removal of Solidus board members left the company “headless,” or without leadership, the complaint stated.

The company’s investors, which acquired the right to vote Roger’s share on the board because it was in default, elected the new board and kept Rogers on because they wanted to have him as a resource, Petrie tells CardLine. “He is a large shareholder and has a strong background in the company, and we need that resource,” he says.

The company says “all core and non-core businesses, including consumer biometric and loyalty transactions, continue business as usual.”

Pay By Touch is a biometric-payment method where retail customers use an algorithm derived from a fingerprint and key in a PIN to pay for goods at the point of sale. Funds are drawn from the participant’s bank account using the automated clearinghouse network or from a credit or debit card. Chicago Shell stations (CardLine, 11/1/2007) and Jewel-Osco grocery stores are among the merchants that support Pay By Touch transactions.

Friday, January 11, 2008

An Overview of the Past 60 Daze...

Okay, here's the scoop in so far as I've been able to put together. Last May, Pay By Touch had lined up a $400 million dollar investment. However, as I recently found out, because of the mess created by the sub-prime mortgage industry, that financing fell apart in July. They began working frantically to raise more capital, but the small-cap industry was all but dead. As a result, they found themselves in a serious cash crunch. Pressures to raise money mounted, and unfortunately, these pressures caused some emotionally charged reactions in and around the board room.

To make a long story (soap opera?) short, the result was maybe some ill-advised governance decisions by then Chairman, John Rogers, including, but not limited to, the firing of former Western Union CEO, and PBT COO, Eula Adams, as well as Art Petrie, a director. Subsequently, John Morris, PBT's CEO, resigned in protest. One of PBT's investors, Plainfield Asset Management, stepped in and demanded that they be reinstated. When they were rebuked, they exercised a provision in their agreement with PBT that enabled them to seat their own board members. John Rogers attempted to block that move by filing an involuntary bankruptcy petition against Solidus Networks, invoking that he and some of his associates were owed money by Solidus.

The end result is that this "froze" the company and basically made it headless until a December 21st courtdate.
From the standpoint of preventing Plainfield from naming the board of directors, it worked, but from the standpoint of public relations, it was nothing short of a disaster.

John Rogers paid a heavy price in the media and some trade rags. Some of the allegations made by the uninformed rumor mongers were not only based only on hearsay from contentious former employees blissful with Shendenfreud, but downright slanderous in nature. On the other hand, he did make some mistakes and he was in the spotlight, and when you're in the spotlight you both shine bright, whilst at the same time you have your dark-side illuminated. That's part of the power of anonymity.

Anyway, at the end of the day, when the smoke cleared, everybody worked everything out to the point where a new board of directors was named, and the company elected to go into voluntary Chapter 11 reorganization There have been several conference calls to shareholders, the content of which I cannot comment on, but suffice it to say that they have cut their burn rate significantly and have put up for sale, some of their non-core assets. These assets DO NOT include their biometric authentication and payment division, nor does it include their personalized marketing division (consisting of Capture Resource and S&H Solutions).

They remain firmly committed to both of those divisions as they have tremendous market value and profit potential. In fact, they have some very exciting news coming out of both of those divisions during the first quarter, including a significant rollout of their SmartShop personalized marketing program. They have also been talking to Shell Oil who, according to the conference call, is very committed to Pay By Touch.
However, they are no longer pursuing money-draining divisions such as Healthcare, Government, Online and International (other than their Citibank connection, who remains committed to Pay By Touch) In addition, they are selling their Payment Solutions Division as well as ATMDirect.

Pay By Touch inherited a lot of employees with the acquisitions of several companies and their payroll was out of control, so they have trimmed some of their workforce. They intend to bring the core component workforce down between 200-250 employees up from a high of 850. From discussions I've had, they are convinced that they will come out of this cleaner, leaner and meaner.

So, what initially seemed like a disastrous blow, to a company everyone thought was a sure bet, now seems to be more analogous to a bump in the road. Although I'm not tickled about them getting rid of ATMDirect, it is what it is, and it certainly could have been exponentially worse. Here's an article that ran yesterday in Digital Transaction News:

A Pared-Down Pay By Touch Takes Bids for 'Non-Core' Units

(January 10, 2008)

Biometric-authentication and loyalty services technology provider Pay By Touch is in Chapter 11 reorganization, has cut costs drastically, and is shopping some of its subsidiaries, but the company’s former chief executive--who is now a member of the firm’s newly constituted board of directors--says Pay By Touch is solid at its core.

“This company is worth a lot of money,” director John Morris tells Digital Transactions News. “The business opportunity is phenomenal.” He adds that despite Pay By Touch’s governance troubles and bankruptcy in recent months, “there’s been virtually no erosion of the client base as a result of this activity.”

Solidus Networks Inc., which does business as San Francisco-based Pay By Touch, on Wednesday announced the new board and said it is selling what it calls non-core assets, and Morris tells Digital Transactions News at least some bids have already come in. The financially strapped company last month voluntarily filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Los Angeles after some employees tried to bring it into bankruptcy involuntarily (Digital Transactions News, Dec. 27, 2007).

The new board represents a victory for Plainfield Asset Management LLC, which in a fight with Pay By Touch’s former chairman, chief executive, and controlling shareholder, John P. Rogers, went to Delaware Chancery Court late last year to seat its own directors. Plainfield, a hedge-fund firm with equity and debt investments in Pay By Touch, said the company was in default of its lending covenants, which gave Plainfield the right to seat its own board in such an occurrence. Rogers, who had fired independent board member Arthur Petrie and chief operating officer Eula Adams, fought the move, starting the legal fight in Delaware, when Solidus is incorporated. But rather than wait for a court determination, the two sides settled the governance issue last month, according to Morris. Plainfield declined comment.

Plainfield wanted to bring back the ousted members and keep Rogers on but only as a director, which is now how the board is composed. Members include Petrie, who is now the chairman; Adams, again chief operating officer; Morris, who court documents say resigned when Petrie and Adams were fired; chief financial officer Robert Sigler; and Rogers, who has no executive duties. (Rogers has filed for personal bankruptcy in the Los Angeles court.) The top executive remains corporate-turnaround specialist Thomas Lumsden of FTI Consulting Inc.’s San Francisco office, whom the Delaware court appointed in November on an interim basis and whose title is chief restructuring officer.

Morris says he is playing an advisory role as the restructuring gets into high gear. He says the company has cut up to three-fourths of its operating expenses, has adequate interim financing, the amount of which he can’t divulge, and is current in meeting payroll obligations. A news release Wednesday said staff has been pared, but the company didn’t disclose the number of layoffs. Pay By Touch also has hired investment banker Jefferies & Co. to find potential investors. “We’re trying to move forward very rapidly on this,” says Morris.

On the block are several so-called non-core subsidiaries operating under bankruptcy protection, including Paycheck Secure, ATM Direct, and Payment Solutions, the merchant processor that formerly operated as CardSystems Solutions Inc. Some observers were surprised that Paycheck Secure, which provides biometric-based paycheck-cashing services and came to Pay By Touch when the company bought rival BioPay LLC, is on the block. But Morris says Paycheck Secure serves convenience stores and other small businesses while Pay By Touch is focusing on larger retailers such as Shell Oil outlets and SuperValu Inc.’s Jewel/Osco supermarket-pharmacies. “We have not done that integration work” with Paycheck Secure, he says. “The core is viewed as being more around big, multilane retailers.”

Core subsidiaries not part of the bankruptcy filing include Loyalty Acquisition, which does business as Capture Resource, and S&H Marketing Services, which does business as S&H Greenpoints. As part of its effort to focus on biometric authentication, payments, and personalized marketing, Pay By Touch says it has suspended its efforts in health care, government, online, and new international businesses other than a project with Citibank in Singapore.

Morris is optimistic that buyers will be found soon for the subsidiaries, and he hints the entire company could be sold if a “strategic” buyer is found. “We’re beyond serious lookers, particularly on the subsidiaries,” he says. “We’ve received specific bids."

Wednesday, January 09, 2008

Solidus Announces New Board of Directors

Solidus Networks (Pay By Touch) Announces New Board of Directors Solidus Networks Inc., doing business as Pay By Touch, has announced a new Board of Directors: Art Petrie, Chairman; Eula Adams, John Morris, John Rogers, and Robert Sigler.

According to the company, "the new Board is overseeing the structuring of a new executive team. Tom Lumsden serves as Chief Restructuring Officer, directing activities at Solidus Networks. Eula Adams continues as COO, Robert Sigler continues as CFO, and John Rogers, founder of the Company, now functions in a non-employee director role only."

The Board is steering the Company through the involuntary filing in bankruptcy under Chapter 11, which occurred in mid-December. They are executing against a robust reorganization plan that includes streamlined operations to develop both investment and acquisition opportunities.

The new operating plan is in connection with a financing agreement made with the Company's senior lenders upon entry into bankruptcy, where the Company agreed to meet various milestones.

Several of the Company's non-core subsidiaries such as Paycheck Secure, ATM Direct, and Payment Solutions continue to operate under the protection of the bankruptcy court, and are being marketed for acquisition.

Core subsidiaries not part of the bankruptcy filing include Loyalty Acquisition (dba Capture Resource) and S&H Marketing Services (dba S&H Greenpoints).

As part of the process of focusing the direction of the Company on biometric authentication, payments and personalized marketing, activities supporting healthcare, government, online and new international (other than the Company's existing implementations with Citibank in Singapore) have been suspended.

Headcount has been reduced, facilities have been combined, and other cost-cutting measures have been implemented.

The new board also confirmed the engagement of Jefferies & Company to serve as investment banker to lead communications with potential investors and structure a transaction that will present the highest value result through the bankruptcy process.

The Company continues to maintain its patent portfolio and technology platform to serve biometric authentication and payments covering existing applications as well as potential future applications in the financial, online, healthcare, gaming and international segments.
All core and non-core businesses, including consumer biometric and loyalty transactions, continue business as usual.

"We have seen Solidus Networks through a lot of changes, and we remain committed to Pay By Touch because it has the unique potential to actually change how the world transacts," said Art Petrie, Chairman of the Board.

"We have a solution that is customized and simple for consumers, economical and brand-building for retailers, and helps Consumer Packaged Goods (CPG) companies build loyalty more efficiently."

Biographies of the new Board of Directors can be found at .

Tuesday, January 08, 2008

More About HomeATM...

Having been on a PIN Authorized Internet Debit tangent lately, I thought I'd expand on that and provide more background on HomeATM, a company who sees the value of, and, (seemingly, unlike PBT) is AGGRESSIVELY pursuing the Internet PIN Debit market.

With that said, here's an overview of HomeATM Payments, as published in The GreenSheet:

HomeATM Payments creates innovative solutions for processing secure debit and credit card transactions on the Web. You may wonder why this is newsworthy. After all, many companies process transactions online.

HomeATM has a twist: It processes all transactions as card present. Yes, you read that correctly.

(Editors Note: The "Yes you read that correctly" statement perfectly exemplifies the vast potential of this market. The reason for the statement is obvious, A card-present rate for interent transactions? It sounds too good to be true thought the author of this story. And ISO's, banks, and web merchants will surely think that as well, so I should prepare for their double-take with the "yes you read that correctly" addendum) Moving forward....

With HomeATM, consumers make e-commerce purchases using their ATM or credit cards, and payments are processed as PIN debit transactions. HomeATM Chief Executive Officer Mitchell Cobrin said the company's mission is to "expand current payment options on the Web by enabling consumers to use their debit/bank ATM cards, a growing payment option of choice.

The company was founded in 2002 by a group of payment industry experts and Internet entrepreneurs. It recently switched headquarters from Chicago to Montreal, and its 25 employees are spread among offices in Chicago, Montreal and Hong Kong.

While HomeATM is just four years old, its founders have more than 40 years of combined experience introducing e-commerce solutions. Among them, they have more than 30 patents.

After three years of research and development and spending more than $3 million, HomeATM owns one patent and has six more pending. They all pertain to innovations in payment processing and encryption.

"HomeATM owns the worldwide patent for PIN debit or credit transacted through a Web browser," Cobrin said. "We are capable of enabling e-consumers to use their PIN debit/bank ATM card from the comforts of their home with participating merchants. We will defend our patent and pursue infringers."

The nitty gritty

The HomeATM process requires only a computer, a HomeATM ScanPad and an ATM/debit card. No registration or enrollment is needed. To deploy, a consumer simply connects a ScanPad to a computer, swipes an ATM card and enters a PIN. That's it.

"Our bank-level secure technology operates via a USB peripheral and offers the consumer dual authentication," Cobrin said. The plug-and-play devices are supplied to merchants at cost. Merchants then give the devices to their customers, free of charge.

Merchants determine which clients receive devices. For example, a merchant may decide any consumer who spends a certain amount of money within a given time deserves the device.

Cobrin realizes some consumers may resist changing their online purchasing habits. For them, merchants can offer incentives. For instance, an airline may offer three miles for every dollar spent with the device, rather than the standard one mile for every dollar spent using other payment methods.

HomeATM does not seek to profit from equipment sales. Rather, it wants to get the ScanPad into the hands of end users. The situation is analogous to cell phone service or satellite television subscriptions. In these models, the hardware is typically provided at no cost to the consumer. The provider earns profits on the use of the service.

The company is also beta testing PIN-entry software that has the same capabilities as the ScanPad. But Cobrin noted its release is not imminent. HomeATM continues to collaborate on development with processors and banks.

HomeATM's target merchants have large, recurring client bases. Cobrin said it is advantageous for these merchants to convert consumers from card not present credit transactions to PIN debit transactions because there is less risk.

"We guarantee 100% payment in real time with no chargebacks or reserves," he said. The company is able to make this guarantee because PIN debit transactions take place in real time. "When the transaction occurs, the funds are set aside at the issuing bank. Those funds settle at 3:00 a.m. Eastern Time that night. No chargebacks," he added.

Cobrin also pointed out that PIN debit transactions are more cost effective: HomeATM can often save merchants 100 to 150 basis points.

"Debit is a cheaper transaction on the whole," he said. "The rates across the board in
the debit world are less. With debit we have a point of sale rate that allows us to pass the savings on to the merchant."

Merchants also benefit from the system's flexibility. They can use any processor because the HomeATM software works with all existing debit and credit networks.

Another attractive feature of HomeATM transactions is their security. Transaction information is not entered into merchant databases. It doesn't even go to merchants; it goes directly to consumers' banks. Therefore, the risk of consumer data remaining on merchant servers is eliminated.

Additionally, all customer data is encrypted in the ScanPad's PIN pad before it even reaches the computer. The card data is never visible, eliminating the risk of theft due to phishing, key logging and other criminal tactics.

Consumers can even use this technology to send funds person to person by simply swiping their bankcards. The intended recipients can retrieve the money from any ATM worldwide, or use it for POS transactions at any merchant who accepts debit cards.

When asked if PayPal is a competitor, Cobrin said, "It can be a friend or foe. HomeATM can be an instrument to load a PayPal wallet, or it can be a direct competitor at the checkout. We can do everything PayPal can and a whole lot more. And our rates are much more advantageous."

Good news all around

HomeATM is good news for consumers who want to use their ATM cards online. It is good news for merchants who want access to that market. And it is good news for ISOs and merchant level salespeople (MLSs) because HomeATM is interested in forming relationships with the ISO and MLS community.

We are a dexterous and nimble company eager to add ISOs, MLSs and merchants, and we are open-minded to strategic relationships and partnerships," Cobrin said. The company uses hybrid buy rates and offers agents commissions and residuals

HomeATM already has several established relationships with agents around the world. "We are a company that offers a lot of support and collaboration to our ISO/MLS agents throughout the sales, integration and customer care processes," he said. "We view these organizations as partners; our success relies on their success."

The company is interested in working with ISOs that are sector-based and have expertise and contacts in industries such as e-commerce, travel and hospitality.

"We want to align ourselves with companies who have established relationships with appropriate e-merchants who fit our markets," Cobrin said. ",, and so on - those are the people we envision doing business with." ISOs and MLSs choosing to add HomeATM to their merchant offerings will be able to help their customers access consumers who have previously been out of reach.

E-commerce security is an ongoing and growing concern. And, debit is the largest growing transaction method. Both of these factors contribute to an environment ripe for an effective PIN debit e-commerce solution.

There is a huge market of people who don't use credit, and there is a huge part of the market who are petrified to put their data into a Web browser," Cobrin said.

Not only can HomeATM help ISOs and merchants reach the debit community, it can help them reach the credit community and other profit areas.

"Debit can be a conduit to grow sales," Cobrin said. "It is generating sales growth potential. Even micro payments are an opportunity. Because of our cost system, we can make it affordable."

HomeATM can also process credit cards: The HomeATM device is chip-and-PIN-ready. And when a credit card is swiped using HomeATM's device, track 2 data is captured.

"We can still do credit better than anyone can do remotely," Cobrin said. "From a chargeback, repudiation and fraud consideration, capturing track 2 data is nonexistent from home" with other providers.

HomeATM's focus is to make payments easy for all parties. It can work with any industry in any region. The company's process is compatible with all banks and acquirers.

"Since we are technology-centric and bank-agnostic, we are flexible to integrate and work with an unlimited amount of processors and banks," Cobrin said. "We are happy to work with our clients' processors and acquirers."

Of particular interest to merchants, HomeATM custom designs programs to accommodate each industry's challenges. This honors HomeATM's commitment to flexibility and ease of use and is another selling point for ISOs and MLSs.

"Our solution can be applied to every industry including person-to-person money transfers, travel, MLM, taxation, parking meters, airlines, car rentals, hotels, tour operators and so forth," Cobrin said. "When it comes to PIN debit over the Internet, there is only one place to go, and that's with our worldwide patented technology."

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Scottsdale, Arizona, United States