Wednesday, March 22, 2006

Chicago Advertising Campaign to Launch

Pay By Touch Looks for ‘Network Effect’ from Chicago Concentration
TV and Radio Advertising Campaign Slated to Begin April 5th

Electronic point-of-sale transactions secured by biometric scans may get a boost now that Pay By Touch Inc. has switched on processing service in 204 Jewel-Osco stores in the Chicago area.

The San Francisco company’s latest implementation represents its most concentrated installation in a metropolitan area so far. With many Jewel customers often shopping at more than one store in the chain, Pay By Touch hopes to get a lift in transaction volume. “This is the first time we’re going to see the network effect in action,” says Shannon Riordan, director of marketing for the company, whose technology allows merchants to authenticate customers via fingerprint scans. “We think that will be a driver of usage [in the Chicago area].”

In addition to the Jewel stores, Pay By Touch has been processing transactions for 35 Cub Foods stores in the Chicago metropolitan area for the past four months. These stores were until recently owned by Supervalu Inc.

TV and Radio Advertising Campaign

The market concentration also allows Pay By Touch to conduct marketwide consumer advertising for the service for the first time. Riordan says beginning in early April, advertising for the service will appear on radio and TV as well as in newspaper circulars placed by Jewel. “The time [for biometric payments] is now,” says Riordan. “It’s not a thing of the future any more.”

The Jewel installation follows a test by parent company Albertsons Inc. in four Portland, Ore., stores, which started in January 2005. Riordan, who says it took about six weeks to bring all the Jewel stores live in Chicago, reports that Pay By Touch is in talks with Albertsons about further installations, but “no decision has been made” yet.

Meanwhile, Albertsons is being acquired by Eden Prairie, Minn.-based Supervalu, which with this deal is the owner of 15 grocery banners. Supervalu in January sold the Chicago-area Cub Foods stores to an investment group. According to Riordan, Albertsons and Pay By Touch originally planned to install the system in the standalone Osco pharmacies in the Chicago area as well, but had to pull back on that plan after CVS Corp. agreed to buy all standalone Osco outlets at the time of the Supervalu deal with Albertsons.

Up to now, Pay By Touch’s installations have covered too few stores in a market area to permit marketwide advertising to users. The company currently processes fingerprint scans for 2,000 merchant outlets around the country, including 1,600 that came to the company as a result of its recent acquisition of competitor BioPay LLC. Of these locations, about 70% are using the service to authenticate customers who are cashing payroll checks. These stores are not networked by Pay By Touch except with respect to the maintenance of a negative file. The remaining outlets are using it in-lane to authenticate customers who are paying for merchandise. These stores are networked so that a Pay By Touch user can make payments at any of the locations.

The authentication can secure credit and signature-debit transactions, but many merchants have opted to use it to authenticate customers for electronic checks on the automated clearing house. E-check transactions carry far lower fees to merchants than card payments, particularly given that acquirers apply card-not-present rates to biometrically secured transactions on card accounts unless a card is swiped. With Pay By Touch’s system, fingerprint scans replace cards, checks, or other payment tokens. The system matches fingerprint scans at the point of sale to mathematically derived templates obtained when customers enroll, then links transactions to payment accounts designated by customers.


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