BioPay Chief Sees Flaws in Rival’s CardSystems Strategy

Biometric-payments processor Pay By Touch Solutions' plans to use CardSystems Solutions Inc.'s processing platform and reseller relationships to help market its point-of-sale authentication system to merchants may hit a few snags, in the view of a leading competitor. BioPay LLC, a Herndon, Va.-based processor that like Pay By Touch authenticates transactions based on mathematical derivations of consumers' fingerprints, says its competitor's pending acquisition of CardSystems' assets could prove to be more a hindrance than a help. In an interview with Digital Transactions News shortly after Pay By Touch won the bidding for CardSystems, a senior executive of the San Francisco biometric payments company laid out a strategy by which the troubled acquiring processor and its merchant base of 120,000 locations?together with its relationships with some 27 independent sales organizations?could be leveraged to sell Pay By Touch's point-of-sale authentication system, which links fingerprint templates with card and checking accounts, allowing consumers to pay without a card or other token (Digital Transactions News, Oct. 18). Tim Robinson, BioPay's president, says his company also has plans to use ISOs, merchant processors, and other resellers to sell its system. But, unlike Pay By Touch, it has no plans to acquire a card processor, pointing out that the strategy could lead to conflict with resellers. “We don't want to compete with a channel that's working with us,” he says. He adds that running CardSystems' platform could also divert management attention at Pay By Touch away from its mainstream business, particularly given the difficulties the processor is in with card networks. “We also don't want to get distracted,” he says. “We're sticking to our knitting.” Both Visa USA and American Express Co. have said they will terminate CardSystems' connection to their networks after a massive hacker intrusion at the processor exposed data related to some 40 million accounts to thieves. But Eric Bachman, chief operating officer of merchant services at Pay By Touch, said in the interview with Digital Transactions News that negotiations with Visa could lead to a lifting of the network's sanction. A further complication lies in the fines Visa and other card networks are likely to impose as a result of the data breach. The fine from Visa alone could amount to $500,000, and is likely to hit the ISOs representing CardSystems merchants. Meanwhile, BioPay, which says it has now enrolled 2 million consumers in its database, received a patent this week covering its process for enrolling consumers for its payroll-check cashing service. It has another 40 patents pending. It has also installed its system, which currently secures check-cashing and ACH payments, at some 1,500 merchant locations, including those of Bi-Lo LLC and Marsh Supermarkets Inc. The company became embroiled in a patent-infringement dispute early this year with Pay By Touch, which holds more than 24 patents on its system (Digital Transactions News, Feb. 1).