By Nikki Baird, Managing Partner
3/25/2008
Solidus Networks, doing business as Pay By Touch, announced last week that it will no longer be processing transactions through its biometric payment system. The move comes as no surprise, as the company has been struggling to find the right business model for over a year and finally announced three months ago that it was filing for bankruptcy.
Pay By Touch had a few things going for it, on both the retailer and the customer side. For retailers, it offered lower transaction processing costs and an opportunity to shift customers paying by check or cash over to an electronic system – reducing the handling costs of cash and checks while also reducing a retailer’s exposure to bad checks. On the customer side, it offered the ultimate convenience of never needing a payment method in hand – as long as you had your finger.
However, that was apparently where the benefits ended. Consumers – especially (but not exclusively) the kind who deliberately like to stay “off the grid” by paying cash – weren’t too keen on having a retailer hold on to their fingerprint, even though technically it wasn’t the retailer and it wasn’t technically the fingerprint. And technically, the fingerprint capture that was used was not stringent enough to be used for law enforcement purposes, so even if someone got their hands on someone’s fingerprint, they couldn’t use it for much beyond the Pay By Touch system. But these technicalities were mostly lost on consumers, especially when the company was dogged by university research showing co-eds defeating the fingerprinting technology with Play-Doh. And you were supposed to link at a minimum your checking account to this?
It was just too much to ask. By the time Pay By Touch got around to a business model that stood a chance, their chance was gone. Loyalty had always seemed to me to be the ideal use for Pay By Touch – it’s much less risky to link something “untried” from the consumer’s perspective to a loyalty account than it is to link to a checking account or credit card – even if these things are protected from fraud. If someone wants to rack up purchases on my loyalty account, more power to ‘em! But even if I’m protected, the last thing I want to do is fight with my bank to invoke that protection, while meantime my checking account has been emptied out.
Pay By Touch finally made a move in this direction, introducing a loyalty/promotions solution in May of 2007 – but it was too little, too late. In the meantime, card issuers threw their weight behind contactless payments (which, by the way, recaptured at least some consumers’ willingness to use plastic, even for the little purchases, and kept the transaction fees associated with those purchases - something Pay By Touch was targeting - in play). And a few solutions, like Leverage, have started tackling the “too many loyalty cards, not enough wallet” space. Pay By Touch simply got squeezed.
So what can we all learn from this? I’ve seen one lesson in particular coming out of this sad tale. No matter how good you think your technology is, you must make sure there is a compelling value proposition for the consumer any time you introduce a consumer-facing technology. Pay By Touch’s value prop was interesting, but not compelling – and certainly not compelling to a wide enough audience to keep the company afloat.
|
