Tuesday, February 27, 2007

Biometric Firms Gaining Momentum

Biometrics is big and getting bigger thanks to a troika of Bay Area diehards.

Biometric technologies (and the supporting software and integrators) raked in an estimated $2.1 billion last year. That's up $800 million from 1999 and on track to hit $7.4 billion by 2012, according to the International Biometric Group.

Retinal, fingerprint and facial identification technologies (and the supporting software and integrators) raked in an estimated $2.1 billion last year. That's up $800 million from 1999 and on track to hit $7.4 billion by 2012, according to the International Biometric Group.

"Before it was primarily a matter of survival. Now it is not," said DigitalPersona CEO Fabio Righi.

Founded in 1996, the Redwood City company scored some initial interest from market movers Visa and Microsoft, but that only turned to cash in recent years. The 75-person company, which makes both fingerprint reading hardware and the software that supports it, secured customer Banco Azteca in Mexico last March. Eight million bank members registered initially, a group that has grown to 14 million. Although Righi declined to disclose revenue, he confirmed his company has been profitable since 2004, a major, and often postponed milestone.

Emeryville-based Upek, which sometimes competes with DigitalPersona, is also prospering. Having spun off from STMicroelectronics in 2004, the company logged its first full year of revenue in 2005 at $30 million. Last year it rang in $52 million and 2007 also looks strong. An IPO could be in the offing.

"Today, the biggest driver of our revenue is the notebook market," said CEO Alan Kramer, saying notebook customers IBM, Dell, Toshiba and Sony represent roughly 80 percent of the company's revenue.

Since Upek sensors debuted on IBM's Lenovo notebooks in 2005 -- the first widespread launch of biometrics to average consumers -- the company has fortified its technology and begun bundling software to create a one-stop shop for customers. Upek is now the first and only silicon sensor vendor approved by the General Service Administration for deployment by Uncle Sam.

San Francisco-based Pay By Touch, which partners with both Upek and DigitalPersona, is also on the fast path with an potential IPO on it's slate. Having raised $300 million during the past six years in debt and equity financing from angels, including Craig Ramsey and the Gordon Getty Family Trust, and hedge funds like Scout Capital Management, the company now employs 800.

The most recent $60 million infusion, completed in January 2006, enabled it to acquire marketing company S&H Solutions and accelerate its own sales and marketing. Pay By Touch recruited Mayor Gavin Newsom's father, the Honorable Judge William Newsom, and Sapient co-founder Stuart Moore as board members and added former Home Depot executive vice president John Costello to its management team also in the past year.

The company now counts 3.5 million registered users, all paying for groceries, coffee, movies and other retail items by touching their finger to a reader at the point of purchase. User prints are linked to their bank, credit cards and other accounts, so once the print is authenticated, the bank processes the payment as usual.

"The market's really starting to explode. People no longer just think of biometrics as science fiction and on the edge," said President and COO John Morris.

Pay By Touch has systems installed in the United States, Britain and Citibank outlets in Singapore.

The company will offer Chicago motorists the chance to pay at the pump this spring.

So why is the age-old technology of reading fingerprints getting new growth?

Password fatigue is increasing while biometrics costs are decreasing. Morris said it costs $300 to install a Pay By Touch system in a checkout lane, compared with $2,000 three years ago. Said Morris: "It's about getting the technology rolled out and putting it where people can use it."

lwilson@bizjournals.com / (415) 288-4939

Wednesday, February 21, 2007

Supervalu Tests PBT Personalized Marketing

Supervalu's Shop 'n Save has implemented PBT's personal marketing platform SmartShop, which will utilize the unique application to to improve its incentive marketing program, a core strategy for grocery stores.

Three Pittsburgh-area locations of the grocery store chain are testing a new program which will be called "Shop 'n Save Personalized Perks" based on a software application established by a San Francisco-based firm called Pay By Touch.

While most loyalty card programs offer customers sales prices on a variety of different products each week, the new Shop 'n Save Perks Card provides cardholders with discounts on products they buy most. This results in huge savings in terms of hit and miss mass marketing.

The program seeks to build upon each shopper's preferences, offering them customized discounts based on their regular buying habits.

To use the program, shoppers scan their cards upon entering the store and receive a printout of products available for sale to them. When they buy those items, they use their cards for discounts.

"With Shop 'n Save Personalized Perks, shoppers can get extra savings on their favorite products right as they walk into the store," said Bill Lipsky, Director of Merchandising for Shop 'n Save, a subsidiary of Minneapolis-based wholesaler SUPERVALU Inc. "It's yet another way that we are delivering additional value to our shoppers."

There is no word as of yet as to how long Shop 'n Save will choose to test the program or if it will roll it out at its more than 20 other area stores.

A spokeswoman for Pay by Touch said the three Pittsburgh-area stores are the first SUPERVALU grocery locations to use the program by in the country.

In other news, Hebert's Supermarkets announced that Paycheck Secure(R), a biometric check cashing service, is available at all three Hebert's locations.

Paycheck Secure, powered by Pay By Touch, uses a simple finger scan to authenticate customers' identities to cash payroll or government checks. Paycheck Secure first was implemented in the Hebert's of Henderson store in March 2006, and now the retailer has expanded the service to Hebert's Supermarket and Hebert's Superette, both located in downtown Breaux Bridge, Louisiana.

"This is the best check cashing system we have had yet," said Ken Mouton, general manager of Hebert's Supermarkets. "It made sense to expand the service not only to provide more convenience for our customers, but also to help prevent check fraud across all of our stores."

Signing up to cash checks using Paycheck Secure is quick and easy. Customers simply provide a photo ID, two finger scans, and have a digital photo taken right in the store. Once enrolled, customers can quickly and securely cash payroll checks with a quick finger scan at any Hebert's store.

"Paycheck Secure offers a unique way for Hebert's customers to cash their checks rapidly and securely," said John Rogers, Founder, Chairman, and CEO of Pay By Touch. "The service also helps merchants like Hebert's dramatically reduce fraud by leveraging biometric technology to verify customers' identities."

Tuesday, February 20, 2007

San Fran at center of new tech boom

Competitive leases, skilled workers lure Internet, software companies to downtown office buildings

Office obsession
Tech companies are gobbling up office space in San Francisco.
Here are some of the biggest leases, in square feet, since the start of 2006:

Advent Software: 104,000
Pay By Touch: 92,900
Microsoft: 71,600
Riverbed Technology: 63,800
Yahoo: 42,800
StubHub: 37,500
Ingenico: 37,500
Source: Chronicle research

For technology companies, San Francisco is -- once again -- the place to be. Proximity to top workers, competitive lease prices and an eclectic lifestyle has made the city's downtown an irresistible draw for many Internet and software companies.

Industry superstars Yahoo Inc. and Microsoft Corp. have lead the boom by gobbling up large swaths of office space the past year. Google Inc. is on the verge of planting its flag in the city, having signed a letter of intent for space near the Embarcadero, according to sources familiar with the negotiations.

The influx of tech companies into San Francisco is part of a broader Bay Area real estate boom. New companies, along with many of the established names, are on hiring binges and sorely in need of office space.

In San Francisco, a quarter of all office space leased in 2006 went to technology companies, up from 14 percent in 2004, according to the commercial realty company Grubb & Ellis.

For commercial real estate agents, the strong demand is welcome. Just a few years ago, during the tech industry's downturn, many once-high-flying Web sites such as Pets.com and Quokka Sports shuttered, leaving the market flooded with vacancies and the city's economy in tatters.

"Space is far less available than it once was," said David Kuchinsky, a vice president at Grubb & Ellis. "In 2004, tech companies could get a lot of smaller space relatively inexpensively. That really changed in 2005 and into 2006."

Empty offices are more difficult to find these days. The vacancy rate for Class A space is 8.5 percent, half of what it was three years ago, according to Cornish & Carey, a commercial realty group.

The tighter market is driving rents up. The average asking price for Class A office is $36.80 per square foot, an increase of 30 percent from the market's trough three years ago.
Still, San Francisco remains competitive. For now, prices remain on par with Silicon Valley and the East Bay, where the cost of office space is also appreciating.

Interest in San Francisco speaks in part to the technology industry's transformation over the years from producing computers and microchips, usually in Silicon Valley. Now, many of the hottest companies are in online media and business software, niches that can draw on the city's traditional strength in design, advertising and programming.

Last year, Web portal Yahoo expanded its San Francisco outpost by leasing an additional 43,000 square in the Financial District for sales staff and its online photo-sharing service, Flickr. A second office being renovated in SoMa will house a research-and-development team.

In another major deal, Microsoft recently signed a lease for 72,000 square feet in the Westfield San Francisco Centre, the expanded shopping and office complex downtown. The space will house sales staff and paves the way for the company to double its workforce there to 400 over the next five years.

Among the most highly anticipated arrivals is Google, which has signed a letter of intent to sublease 210,000 square feet from Gap Inc., enough space for up to 800 workers. However, the deal, which Google declined to confirm, has yet to be finalized and could fall through, according to two sources familiar with the negotiations.

Google's office would take up three currently vacant floors in a building on Spear Street, near the waterfront. The company's headquarters, known as the Googleplex, would remain in Mountain View.

Mayor Gavin Newsom said San Francisco has aggressively courted Silicon Valley companies, calling the jobs they bring a potential boon to the city's coffers. Each new worker, he said, translates into $1,700 in additional tax revenue, along with helping local businesses such as dry cleaners, cafes and markets.

"These are the jobs of tomorrow," Newsom said. "They bring a vibrancy to the city and an excitement, and that's great for us."

Proximity to top-notch workers is a big selling point for San Francisco in getting tech companies to open up shop. Commuting to and from Silicon Valley can eat up as much as three hours a day, prompting many residents to balk at accepting a job down the Peninsula.

Companies such as Google try to compensate for the inconvenience by offering free commuter bus rides to Silicon Valley. Opening offices in San Francisco is considered a more attractive alternative for employees and potential job candidates.

"Companies were reticent at first to come to San Francisco because of the perceived high cost of doing business," said Nick Slonek, a senior vice president at Cornish & Carey. "The fact of the matter is that they've been able to bite the bullet and retain and attract talent who otherwise wouldn't come down to the valley or in the East Bay."

A big part of the real estate demand is fueled by technology companies already based in San Francisco that have outgrown their offices, such as Advent Software, whose clients are investment firms, and Ingenio, a company that helps online advertisers connect with consumers over the telephone. To accommodate new hires, they've had to upgrade to larger spaces.

Thursday, February 15, 2007

Will Pay By Touch be a $100 Billion Market-Cap Company?

TECHNOLOGY As a Change AGENT - RedOrbit


Former Harvard Business Review editor Nicholas Carr did just that three years ago, when his article, "IT Doesn't Matter" sparked heated debate among chief information officers (CIOs) and business executive from some of the world's top companies, Actually, it was Carr's that raised hackles. Readers brave enough to venture into the article discovered a premise that is difficult to argue with today: IT's core functions within a business - the processing, storage and transmission of data - have become less expensive and more easily replicated, and they should be measured accordingly.

In the late 1990s through early 2000, many technology and business executives subscribed to what Carr describes as the "IT changes everything" school of thought. "In the height of the dot com boom, we felt that the Internet was changing the rules of the game," notes Baylor University assistant professor of Information Systems, Hope Koch. "Many companies put aside the traditional rules of the game or ways that they evaluated business investments and invested in Internet initiatives. We saw many of these initiatives fail with companies losing millions in the process. As connectivity increases and technology advances, organizations have to stay abreast of the possibilities, consider how it can help the company achieve value, and in cases where it will, they need to adopt it."

To effectively conduct the evaluation Koch describes, executives should understand the recent important technological breakthroughs, the implications of those breakthroughs on how companies conduct business and the other elements that need to be in place for the technology to make good on its promise.


Brett Moore, CFO of the McLane Group, in Temple, Texas, can recall when his company introduced the first personal computer to one of its operation divisions in 1985. Since then, Moore says, technology developments have dramatically changed how the company, which focuses on grocery distribution among other offerings, interacts with its customers and, ultimately, makes decisions.

Moore points to three technological advancements in the past two decades that have greatly improved business processes: information standards, e-mail and workflow possessing.


Since its inception in 2002, San Francisco-based Pay By Touch has demonstrated a commitment to integrating new technologies to help its customers. The company provides "biometric authentication, loyalty, membership, and payment solutions."

When enrolled consumers check out at a Pay By Touch customer's grocery store, they simply slide their finger into a small device that scans their unique print, enter their access code and then select their payment mode (electronic check or a full range of credit and debit cards) from the "electronic wallet" on the screen in front of them.

Many of the grocery stores link the customer's purchasing history to their loyalty programs through another Pay By Touch offering called personalized marketing.

"We think that this will be a $100 billion market-cap company," says Bill Townsend, Pay By Touch executive vice president and a graduate of the Hankamer School of Business.

"It will be just like a Visa or MasterCard, and people will just expect that when you walk into a store, you put your finger down to access your account."

It's a bold claim, but, so far, a legitimate sounding one: customers have embraced the technology, and the company's venture funding is off the charts.

Pay By Touch is approaching the market with a global view. They have already launched in both the U.K. and partnered with Citibank in the Pacific Rim, first in Singapore, with more Pacific Rim territories planned in the near future.

But Townsend also understands that technology is a double-edged sword for companies that sell technology. Townsend was part of the founding management team at Internet search engine Lycos, Inc., and has launched and managed several companies including YouthStream Media Networks (now Alloy), GeoCities (now Yahoo!), NewsAlert (now MarketWatch), Deja News (now Google and eBay), and voice-over Internet Protocol (VOIP) pioneer Really Easy Internet (now Hey, Inc.).

"A mentor once told me that you do not solve problems with computers," Moore recalls. "You use people to solve the problems and computers to help you do it. A common mistake businesses make is that we think by putting in a system it's going to solve our problem."

What truly solves problems, he adds, involves a more comprehensive change-management effort: putting best practices in place, implementing technology to support those processes, training employees to properly execute the new processes and technology and then establishing internal controls and quality controls to ensure that the people, processes and technology are performing as designed.

Adapting the company's processes, people and technology is vital, particularly in today's fast-paced marketplace and global business climate.

"You may have a wonderful idea for a business that is highly dependent on what is happening in the marketplace today," Townsend explains. "But if you don't build a culture that can adapt to the changing marketplace, you'll just be another 'dot.bomb.'"

To avoid that fate, Pay By Touch has invested in proven technology, a strong intellectual property (IP) portfolio and talented employees.

"And we have adapted the business model and the product offering almost on a quarterly basis while still maintaining our vision of making Pay By Touch the most trusted, secure way to pay for goods and also to be a trusted intermediary of a consumer's personal information," he says.

Technology matters, but it matters most when it is embraced by people to support and strengthen business processes.

Friday, February 9, 2007

Red Herring On Pay By Touch & Hedge Funds

Hedge Funds Take On VCs

Armed with piles of cash, hedge-fund investors are elbowing in on venture capitalists to get a piece of the early-stage investing pie.
By Sunshine Mugrabi
Ask Gus Spanos, CFO of biometrics company Pay By Touch, about how his company was financed, and you might feel like you’re dealing with an evangelist. He believes technology companies should have choices when it comes to assembling an investment team—and venture capitalists just aren’t making his list anymore.

His company was one of the first to go to the newest financial big kids on the block: hedge funds.

Now, the trend is picking up steam, as more startups discover a new pool of capital waiting in the wings.

“Hedge funds have expanded the number of options for financings for young and growth companies,” says Mr. Spanos.

Once largely the province of venture capitalists, technology financing deals are now attracting a host of new investors, chief among them hedge funds. While hedge funds typically are interested in investing at the pre-IPO, or “mezzanine” stages, they are increasingly getting involved at earlier stages. For example, San Francisco-based hedge fund Artis Capital Management was an early investor in web sensation YouTube.

The hedge fund industry has become intensely bloated over the past 15 years, with assets growing from $39 million worldwide in 1990 to $1.3 trillion today. That money has to go somewhere. In the past, hedge funds invested in publicly held companies—most classically taking long and short positions in order to “hedge” their investments. Now, these funds are chasing returns wherever they can be found.

Mixed Welcome

For entrepreneurs chafing against the traditional venture model of high equity stakes and board control, hedge funds are welcome newcomers. Quite often, hedge fund capital arrives more quickly and with seemingly fewer strings attached. But VCs, already pressured by lower returns over the last few lean years, are hardly happy about the competition. They claim hedge funds have changed the rules of the game to the point that their gains can be at the expense of co-investors. They also say the type of financial engineering hedge funds employ can put entrepreneurs at risk.

Pay By Touch, based in San Francisco, sells a fingerprint-based payment system now used in 42 states. In 2004, the company set out to raise $30 million to $40 million in a second round of funding, having been funded in a first round by private investors.

The company was cash-flow negative, but its intellectual property was valuable, claims Mr. Spanos. And Pay By Touch had a strong management team and board of directors, including John Morris, a veteran of IBM, and John Costello, a former executive vice president at Yahoo and a top executive at Home Depot.

Backed by private investors like billionaire Ron Burkle of supermarket buyout fame, they figured they would have no trouble attracting venture financing.

VCs did come knocking. The problem, says Mr. Spanos, was that they demanded big stakes, board seats, and wanted significant control over the company—in short, standard VC stuff. That’s when hedge funds crashed the party.

In September 2005, the company closed a financing round totaling $130 million, of which $75 million was brokered by Swiss giant UBS. The financing was led by Och-Ziff Capital Management of New York City, and included two other hedge funds, Farallon Capital Management of San Francisco and Plainfield Asset Management of Greenwich, Connecticut. Between them, Och-Ziff and Farallon control over $25 billion worth of capital.

At Mr. Spanos’ request and that of Pay By Touch CEO and founder John Rogers, the financing from the hedge funds was in the form of a senior secured note. The primary collateral was the company’s intellectual property, which included over 50 patents.

The hedge funds received less than 10 percent equity, as opposed to the 20 percent or more VC firms had demanded, and no board seats. Pay By Touch raised the other $55 million in convertible promissory notes—another debt instrument—from individuals, family foundations, and smaller institutions. These notes were eventually converted into the company’s third financing round.

John Rogers, founder, CEO, and chairman of Pay By Touch, later publicly praised Mr. Spanos as a “rainmaker” for his skill in putting together such a unique financing deal.

Pay By Touch has since raised an additional $150 million from hedge funds and private investors. And though it was one of the first privately held technology companies to tap hedge funding, it is not alone. In the last two years, at least 27 private technology companies at various stages of growth have gotten hedge fund backing in the United States.

Kathryn Coffey, partner at Seven Hills, a San Francisco-based financial advisory firm, says hedge funds operate in a number of ways that differ from the traditional VC model. For example, they often pass on board seats—preferring to leave such detail and control to the management team and the VCs.

Culture Clash

That’s just one of many differences startups are beginning to appreciate, says Ms. Coffey, who has brokered several deals involving both hedge and VC funds. Another is that hedge funds tend to have lower expectations about returns.

They look for solid performers, preferring not to depend on the home-run plays VCs need to remain profitable. VCs often expect 60 percent invested rate of return (IRR), while hedge funds might expect as little as 20 to 25 percent IRR.

“A hedge fund is willing to take a lower return because it’s putting a lot more money to work in safer deals,” says Bob Machlin, CEO of SkyPilot Networks, a Santa Clara, California-based telecom startup that was recently backed by hedge fund Palo Alto Investors.

The time it takes for a hedge fund to put together a financing deal is also refreshing to many entrepreneurs—averaging about six weeks, as opposed to up to six months of due diligence in the venture world. And many entrepreneurs say they find a hedge fund’s connections on Wall Street helpful in smoothing their transition from private to public entities.

Hedge funds don’t necessarily have to cash out when a company goes public, while VC firms often have to in order to fulfill their obligations to limited partners.

“There’s no set thing we do,” says Dr. A. Joon Yun, partner and healthcare analyst at Palo Alto Investors, a hedge fund with about $1.2 billion under management. “If a company goes public at a high price relative to its value, we’ll be selling,” he says. “If it’s a low price, we’ll be buying.”

Hedge funds often have a different agenda than VC firms going into a deal, says Ned Scheetz, a partner at Aphelion Capital, a San Francisco-based healthcare technology investment firm that, while not technically a hedge fund, makes investments on both the public and private equity sides. For example, they might invest in one company simply to determine their investment strategy for an entire industry.

For a company like Pay By Touch, hedge funds were apparently a good fit. But even Mr. Spanos acknowledges that the deal he cut isn’t for every entrepreneur. Venture capitalists offer a lot to younger technology companies, which benefit from their guidance and expertise. And without the key collateral his company had to offer, he doesn’t believe he could have requested such favorable terms.

1993-2006 Red Herring, Inc. All rights reserved.

About Gus Spanos

Prior to joining Pay By Touch, Gus Spanos was a partner with JH Partners, a private equity firm for which he helped raise their inaugural $200 million institutional fund. Some of JH Partners' portfolio companies included Peet's Coffee & Tea (NASD: PEET), Design Within Reach (NASD: DWRI) and Bare Essentials / MD Beauty. Spanos has led the acquisitions of approximately 30 companies over the past 16 years. His investment experience began in 1989 as President of a private equity firm that he co-founded, which was affiliated with Gryphon Investors, Inc. from 1996 to 1997. Prior to that, Spanos worked as an investment banker in corporate finance and mergers and acquisitions with Goldman Sachs and Co. in New York. He has eight years of operations experience in executive positions as President, EVP or CFO of private equity-backed companies. He received an A.B. from Harvard College and an MBA from The Stanford Graduate School of Business.

Right Product, Right Place, Right Time

Fearful consumers cry out for biometric security
'Security threats create need for biometrics'

In an international survery conducted by Unisys, consumers have voiced their strong support for biometrics. The rising fear of identity theft has left consumers "overwhelmingly in favor" of the widespread use of biometric technology to identify individuals through physical characteristics such as fingerprints, research has claimed.

Data released today by Unisys indicates that consumer mistrust of the current processes that government and business use to protect the security of personal information has reached new highs.

As a result, an even greater percentage of US (69 per cent) and UK (92 per cent) consumers would prefer financial institutions, credit card companies, healthcare and government organizations to adopt biometric technologies to verify personal identities safely and quickly.

This compares to other protection measures such as smart card readers, security tokens or passwords/Pins.

The research was conducted on behalf of Unisys by the Ponemon Institute which polled 1,744 respondents from a sampling frame of close to 16,000 consumers in the US and coordinated with Ipsos/Mori in the UK, which polled 500 consumers in November 2006.

This is obviously great news for a company like Pay By Touch. The study suggests that Pay By Touch and their multi-patented biometric payment platform may be in the right place at the right time, especially considering that they also identified, targeted, developed, and introduced separate divisions designed for Financial Institutions and Healthcare.

Recently introduced products like TrueMe and ATM Direct also imply correctly targeted segments and thus favorable positioning for the company. It doesn't hurt that they also identified and introduced Pay By Touch in the U.K.

"We have seen a consistent outcry among consumers for more effective technologies, like biometrics, that will better equip businesses and government organizations to protect and verify personal information in a way that's reliable and convenient," said Mark Cohn, vice president for integrated security programs at Unisys. Thus...

Right Product,
Right Place,
Right Time...

Thursday, February 8, 2007

IBM Video on Pay By Touch

IBM: "What Makes You Special?"
Click to watch a 4 plus minute video overview put together by IBM discussing why IBM's Tivoli software platform will help grow Pay By Touch into a "special" company.

Jeff Amann Joins Pay By Touch

Pay By Touch, the leader in biometric authentication, personalized marketing and payment solutions, today announced that it has appointed Jeff Amann to be its Chief Administrative Officer (CAO) and Interim Chief Financial Officer (CFO). In this new role, Mr. Amann reports to John Rogers, Pay By Touch's Founder, Chairman and CEO, and oversees the company's Finance, Legal, Human Resources, and Corporate Development departments.

Mr. Amann joins Pay By Touch from Siebel Systems, Inc. (now part of Oracle Corporation), which he joined in 1996 and helped build into an industry leader with more than $1.4 billion in revenue. Mr. Amann oversaw Siebel's worldwide legal affairs as General Counsel and a member of the company's executive management committee.

In his role as General Counsel, Mr. Amann helped guide Siebel through its initial and secondary public offerings, and successfully closed more than 20 acquisitions on behalf of the company – including its $5.8 billion sale to Oracle Corporation in 2006.

Mr. Amann helped Siebel expand its operations to approximately 5,000 employees in more than 30 countries worldwide, and also helped Siebel to build one of the largest patent portfolios in its industry.

"We are extremely honored to welcome Jeff to Pay By Touch. He is a world-class executive with remarkable operating experience and a proven leader in the technology industry," said John Rogers, Founder, Chairman and CEO, Pay By Touch. "We look forward to working with him across all corporate functions to bring best practices to the company as we continue to gain momentum."

"I am extremely pleased to be joining Pay By Touch as we approach an inflection point in the mainstream adoption of biometrics in everyday life," said Jeff Amann, CAO and Interim CFO, Pay By Touch. "I look forward to working with John Rogers and the team to deliver the next generation of innovative services centered on identity management, rewards and recognition. I am eager to help the company achieve these powerful goals."

Pay By Touch & Sage Partner

Pay By Touch Teams with Global eTelecom

Destin, Florida - February 9, 2007

Global eTelecom, Inc (GETI), announced today that Pay By Touch has chosen to offer their partners and merchants GETI's Check conversion & guarantee products.

Integrating Global eTelecom's customized technology into Pay By Touch Payment Solutions' existing programs will enable merchants to accept and process paper checks electronically, thus adding increased value and efficiencies. GETI is raising the bar in the Check processing industries by providing exceptional support and service combined with flexible and scaleable solutions to meet the needs of small, medium and large merchants nationwide.

"Pay By Touch has continually demonstrated their leadership as an innovator in the payments industry," said Chris Brundage, COO / EVP of Global eTelecom. "By selecting our service, they reinforce the importance of providing total payment solutions to their merchant base. We are honored to be a part of Pay By Touch's solution, and to be working with the company's highly respected team."

"GETI is a proven leader in the check processing arena," said Ron Carter, President of Pay By Touch Payment Solutions. "Teaming with GETI enables us to offer complete and robust payment processing solutions to our partners and merchants."

Note: Ron Carter was also President and COO of Verus Financial Management, which acquired Global eTelecom. Verus, which processed $10 Billion annually with 100,000 merchants, was an intended target acquistion for Pay By Touch. Instead, it was acquired last February by Sage, whom outbid Pay By Touch with a $325 million "cash" offer.

About Global eTelecom, Inc.:
Global eTelecom provides proprietary electronic check processing and Gift/Loyalty services to over 35,000 merchants nationwide. Global eTelecom's products are marketed through a sales channel of banks, independent sales offices and credit card processors. Global eTelecom's value added solutions include: Electronic Check Conversion, Traditional Paper Guarantee, ARC Lockbox Conversion, Recurring ACH Debit and Gift/Loyalty Card Processing. GETI is part of Sage Payment Solutions, a division of Sage Software, Inc. For more information, please visit the Web site at

About Sage Software
Sage Software supports the needs, challenges, and dreams of more than 2.7 million small and mid-sized business customers in North America through easy-to-use, scalable and customizable software and services. Our products support accounting, operations, customer relationship management, human resources, time tracking, merchant services and the specialized needs of the construction, distribution, healthcare, manufacturing, nonprofit and real estate industries. Sage Software is a subsidiary of The Sage Group plc, a leading international supplier of accounting and business management software solutions and related products and services for small and mid-sized businesses. Formed in 1981, Sage was floated on the London Stock Exchange in 1989 and the Group now has 5.2 million customers and employs over 13,000 people worldwide. For more information, please visit the Web site at
www.sagesoftware.com/moreinfo or call (866) 308-2378.

About Pay By Touch
Pay By Touch (
http://www.paybytouch.com/) is wowing the world one touch at a time as the global leader in biometric authentication, personalized marketing and payment solutions. To date, patented Pay By TouchTM biometric services enable 3.5 million shoppers to quickly and securely access personal accounts using a finger scan to identify themselves, make purchases and cash checks at 3,000 locations nationwide. The company also provides robust payment processing solutions for ACH (electronic checking), card-present and card-not-present debit and credit transactions for retail clients. Founded in 2002 and headquartered in San Francisco, Pay By Touch employs 800 professionals and holds more than 50 patents worldwide on secure, convenient and cost-effective transaction solutions.

Source: Company press release

Friday, February 2, 2007

Internet PIN Debit Brochure

ATM Direct, which provides secured debit card payments on the Web, plans to bring live a link to a second EFT network within 90 days, says Robert Ziegler, senior vice president and general manager of the Irving, Texas-based technology company.

For 2007, Ziegler says, look for ATM Direct to process PIN debit payments on handsets as it rolls out a mobile version of its software.

Also on tap for 2007, he adds, is a recurring-payment capability for utilities and other biller categories that may now accept so-called PIN-less debit transactions. When launched, this product will allow these billers for the first time to accept recurring debit card payments, since EFT network operating rules currently do not permit recurring payments using PIN-less debit. To open and view the PDF file of the ATM Direct Brochure click here or the picture

On top of this, ATM Direct has also begun marketing its software to banks as authentication technology that complies with guidelines released in October by the Federal Financial Institutions Examination Council that push banks to adopt multifactor authentication for online banking.

The flurry of developments caps months of behind-the-scenes work by the company, whose software allows consumers to enter debit card PINs securely on a computer screen, to bring its product to market following its acquisition last year by Pay By Touch

Those efforts bore fruit last year with the announcements that the Bellevue, Wash.-based ACCEL/Exchange network has agreed to switch transactions processed by ATM Direct (Digital Transactions News, June 5) and that The J. Paul Co., a Dallas promotional-goods merchant, in July began accepting PIN debit payments on its Web site through ATM Direct.

Transactions will build over time, Ziegler says, as more and more of ACCEL/Exchange’s 3,500 banks bring their cards live on the system. “It’s a managed rollout,” he says. “Some issuers will be able to transact immediately, and we’ll add others over time. We want everyone on the network to have a real good experience.” By year’s end, he projects, some 60% of ACCEL/Exchange’s 80 million cards will be enabled for ATM Direct.

Transaction growth should accelerate, too, with the addition of the second EFT Network, which Ziegler refuses to name, as well as the large retailer. ATM Direct’s selling proposition to smaller merchants is lower transactions costs, coupled with the fraud-management and guaranteed-funds features traditionally offered by PIN debit cards. For larger retailers, says Ziegler, his product’s appeal lies in a 5% to 6% incremental sales increase the company’s research shows online merchants can gain by enabling customers to pay with PIN debit.

Though he won’t give specific pricing, he says ATM Direct’s fees to merchants should result in acceptance costs that are on average about 60% what e-commerce sellers now pay in card-not-present rates. Larger merchants will enjoy a bigger break, he says. Pricing, he says, will follow “multiple models,” sometimes including both percentage and fixed-fee components, sometimes not.

As do other alternatives to credit cards for Internet merchants, ATM Direct faces the thorny issue of how to handle so-called exception items, including chargebacks, disputes over goods, and the like, all of which electronic debit systems were not originally designed to deal with.

Indeed, NACHA, the rules-setting organization for the automated clearing house, is struggling to define rules for handling transactions involving so-called split shipments in connection with a product it is developing to allow online merchants to accept guaranteed ACH payments. ATM Direct’s answer, says Ziegler, is to rely on merchants to handle disputes and other broken transactions. “We look to the merchant to resolve that,” he says. “They need to look out for the consumer. If they don’t deliver as promised, that could affect their relationship with us.”

ATM Direct’s system works by downloading digitally unique code to the consumer's desktop, setting up a process of multifactor authentication in which the company can authenticate the consumer by recognizing the code and by means of technology such as geo-location. The company also sweeps the consumer’s PC for keyloggers and other trojans.

When the consumer is ready to buy and ATM Direct is satisfied the PC is secure, the system presents on the screen a keypad for PIN entry. The pad is called a floating PIN pad because a different numerical configuration is presented each time. This process disables the computer keyboard, allowing entry only by mouse click. Once PIN entry is complete, ATM Direct returns a signed token to the merchant, asking if the merchant wants to go forward with authorization. If so, it creates a transaction message, including a PIN block with PINs encrypted at two-key triple DES, to go to the relevant EFT network for authorization and settlement at the issuing bank. In this sense, it operates as if it were another processor hooked into the EFT network’s switch.