How Pay By Touch Plans to Rely on CardSystems’ ISOs to Ramp up Fast

Pay By Touch Solutions, which earlier this week said it will buy the assets of CardSystems Solutions Inc. for an undisclosed price (Digital Transactions News, Oct. 17), plans to rely on the Atlanta processor's links with some 27 independent sales organizations to help sell its biometric-payments product to tens of thousands of merchants. “We think these ISOs are going to be excited about the possibility of selling Pay By Touch,” says Eric Bachman, chief operating officer of merchant services at San Francisco-based Pay By Touch and an architect of the acquisition. Bachman says Pay By Touch, concerned about ISO and merchant attitudes toward troubled CardSystems in the wake of sanctions the processor is facing from major card networks, is already talking to CardSystems' ISOs to reassure them about the company and about opportunities selling Pay By Touch. “We want to make sure they're comfortable and knowledgeable,” he says. He concedes ISOs linked to CardSystems “were living in limbo for a while,” but he says Pay By Touch now wants to use their services to sell the company's product both to the processor's 120,000 mostly small merchants and to new merchants. “There's fertile ground for cross-selling” Pay By Touch to existing merchants, he says. Founded in 2002, Pay By Touch sells a point-of-sale authentication system based on electronic scans of consumers' fingerprints. Mathematically derived templates of the fingerprints are stored in a massive database and are linked to card and checking accounts designated by consumers. Keeping both merchants and ISOs in the fold may be a challenge. The security breach, which exposed card data on 40 million accounts, triggered action from both Visa USA and American Express Co. to terminate the processor on their networks. Visa's action takes effect Jan. 31, while AmEx for now says it is sticking with an Oct. 31 deadline, though it is “reviewing” the situation following the announcement of Pay By Touch's offer to buy CardSystems. The termination notices may have prompted some ISOs to switch some merchants, Bachman says, but so far not many. The 120,000 figure, he says, “is a good approximate number.” Visa, whose original deadline for cutting off CardSystems was Oct. 31, had extended the deadline originally to accommodate negotiations surrounding a deal CyberSource Corp. had made to acquire the processor's assets. CyberSource backed out over the weekend in the face of a higher bid from Pay By Touch. Bachman, who says the extended deadline stands, is upbeat about talks the company is having with Visa. “We believe we're well on our way to getting [the deadline] eliminated,” he says. He adds that, as result of a $2 million investment CardSystems has made this summer to shore up its security, the processor is not likely to sustain further breaches. “It's one of the most secure processors out there,” he says. Pay By Touch has pursued a similar strategy before, albeit on a smaller scale. Early last year it acquired a merchant processor called Intercept Payment Solutions, which served some 12,000 merchants, for $30.5 million. The company has installed its authentication system mostly in supermarket chains, including Piggly Wiggly Carolina Co., Albertsons, and Cub Foods.