Analysis on Pay By Touch/Opticard Alliance

How Pay By Touch Hopes to Use Opticard to Add Merchants, ISOs

(March 7, 2007) Pay By Touch Inc., the San Francisco company best known for its biometric authentication system for point-of-sale transactions, this week saw its merchant-processing unit take a step calculated to extend its reach into new merchant markets and attract more independent sales organizations to resell its services. Under this week’s agreement, Pay By Touch Payment Solutions will use Opticard Payment Services Inc.’s transaction-acquiring switch to route transactions from terminals in place at merchants the Pay By Touch unit can’t currently serve for authorization and capture of card payments.

Ron Carter, president of Pay By Touch Payment Solutions, says the agreement will allow the processor to reach new markets, such as restaurants, that offer high margins but that use point-of-sale software with which his system are not compatible. Using Scottsdale, Ariz.-based Opticard’s switch, he says, lets Pay By Touch perform authorization and capture for these merchants as well as approximately 2,000 other locations the company currently processes settlement for but for which it must hand off authorization to other parties. “That is frustrating,” says Carter. The deal with Opticard’s switch also allows Pay By Touch to take transactions from a wide range of terminals designed for high-volume, multilane merchants without having to certify on each one. The Pay By Touch acquiring unit, which in the main is made up of the technology assets of the former CardSystems Solutions Inc., has concentrated historically on small merchants. “We can get access [to new merchants] with one integration,” says Carter. “Opticard can route [transactions] right to our front end, and it’s transparent to the merchant. This allows us to go into markets where we were not able to go before.”

Carter says he can’t estimate how many merchants the deal will bring Pay By Touch by the end of the year, but he expects it to attract more ISOs to resell the company’s processing service. “This allows us to go out for a different group of ISOs, where if we weren’t certified on that terminal [marketed by the ISO], we couldn’t go after before,” he says. Pay By Touch currently uses 75 ISOs, most of whose contracts were assumed with the 2005 acquisition of CardSystems, and processes $1.4 billion in card volume monthly for 91,000 merchants. The Opticard service is expected to be available to Pay By Touch ISOs in the second quarter.

One market Carter has his eye on with the Opticard deal is restaurants, many of which use point-of-sale systems Pay By Touch’s data center can’t link to for authorization of transactions. “The front end authorization and capture has to be done by somebody else” in these cases, says Carter. The Opticard switch, he says, will change that, allowing Pay By Touch to perform authorizations. Pay By Touch will pay an undisclosed per-transaction fee to Opticard, but Carter says this will not be passed on to merchants. “It will make no difference to the merchant or ISO in terms of cost per transaction,” he says.

Pay By Touch is a strategic partner with Verifone. Opticard is a Verifone International Value Added Partner.

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