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By Jonathan BirchallFinancial Times
In Citigroup (NYSE:C - news)'s most recent annual report, the world's largest financial company began its list of achievements in 2006 with its launch of a biometric credit card in Singapore.
Citi card customers can now buy film tickets, Japanese food, or drinks at the Zouk night club by pressing their finger on a scanner, typing in a personal number, and automatically debiting their card.Meanwhile, shoppers at several Shop 'n Save supermarkets in Pittsburgh are signing up for SmartShop, a card-based loyalty system that directs special offers to each customer based on their previous shopping history
"Both Shop 'n Save and Citi are using technology developed by Pay By Touch, a rapidly expanding privately held company that wants to shake up a global payments industry dominated by Visa, MasterCard and American Express."
Over the past three years, Pay By Touch's biometric network has expanded from a pilot scheme at Piggly Wiggly supermarkets in South Carolina to more than 3,000 locations, including the Jewel-Osco chain in Chicago, part of Supervalu.Supervalu, the second largest traditional US grocer, remains the system's largest client, although a senior executive from the UK's Tesco last year highlighted Pay By Touch's system in a review of new payments technology - noting in particular the potential for integrating biometrics into its current ClubCard loyalty scheme.
Several factors lie behind the surge in interest. The biometric system still allows a customer to choose from an "electronic wallet" of payment methods, such as direct debits, credit card accounts, or state food benefits.
But for retailers such as Stop 'n Save the system offers the possibility of reducing cheque processing costs by making it easier for customers to pay from their bank accounts. But it also offers the ability to ensure that the mountains of data on customer habits accumulated using retailers' loyalty cards is accurate - since purchases can be tied to the biometric identity of the customer, rather than to a transferable card with questionable or out of date information on the customer.Beyond simple payments, Pay By Touch has sought to move further into customer loyalty with its SmartShop technology - which uses proprietary software to offer weekly incentives and special price cuts to an individual customer based on their shopping habits and preferences.
For retailers, the system offers a way to direct offers effectively to their most loyal customers, rather than supporting "cherry picking" of bargains by customers who only buy the offers.
John Morris, president and chief operating officer of Pay By Touch, says that pilots of the technology in Pittsburgh and New York have seen the card-based technology adopted by about 20 per cent of the participating store's customers - against the estimated 1 per cent of customers who respond to traditional mailings of coupons."Our data suggests they're doing more of their shopping at the store where they're getting their offers," says Mr Morris, a veteran of IBM.
Pay By Touch now has about 800 employees and is largely unchallenged by biometric competitors, since it acquired its main rival in 2005. It has also won over $300 million in financial backing, including support from Ron Burkle, the billionaire investor who made his reputation in retail
Copyright The Financial Times Limited 2007
