FB

Can you provide us with the background and history of the company, Tim?

BP

BioPay was founded in 1999 for the purpose of putting into use biometrics to initiate financial transactions. Our goal is to allow people to use a biometric – in this case a fingerprint – to go into the grocery store, gas station, video store or any other retail business and use a biometric instead of cash or a check to make a purchase or initiate a transaction.

FB

Tim, how did you become involved with Biometrics in the beginning?  That was a little bit ahead of the curve.

BP

We have two other operating companies, ArJay Data and CheckAGAIN, which are both in the transaction-processing arena. We currently serve nearly 20 thousand merchant lanes, processing check and other payment transactions. We continually see the need for more security, on both the merchant and the consumer’s part. Biometrics applications are a natural add-on to our existing transaction processing businesses. 

FB

How does BioPay’s Paycheck Secure system work, and how does it differ from other systems?

BP

Paycheck Secure uses biometrics to verify a person’s identity and confirm their check cashing history.  To date, hundreds of merchants, including grocery stores and check cashing businesses, have verified more than two million transactions with Paycheck Secure.   The Paycheck Secure system includes a PC, a fingerprint imaging device and check scanner with an integrated mag stripe reader.  During the initial enrollment, the merchant collects the customer’s index fingerprints, takes their picture and scans their driver’s license. No ID is needed on a return visit.   We then proceed to authorize the check to be cashed.  That transaction can be performed either locally or connected to our server, or a hybrid of the two.  Paycheck Secure is operational in 23 states.  We have over 300 merchants and have over 340,000 users enrolled in the Paycheck Secure system.

Our soon-to-be-launched product is bCheck.  bCheck is a payment service secured with the consumer’s unique biometric. Again, in this case, we employ a finger scan. 

FB

The Paycheck Secure enrollment number is quite a number. How does this differ from other systems?

BP

Enrollment takes less than two minutes and subsequent transactions are shorter.  We compete against ink fingerprints that are placed on the check as it is tendered.  For instance, banks, including Bank of America, First Union and Wells Fargo, require an ink fingerprint when you want to cash a check but don’t have an account.    The ink fingerprint is used as a deterrent on the front end, but is not particularly effective.  BioPay has automated the process – again, the customer is accustomed to being  fingerprinted--but now, instead of using ink, we are doing it electronically.  We’re then able to associate the fingerprint with the person’s check cashing history, enabling us to deliver security to the merchant and convenience to the customer.

FB

What are the main benefits to merchants, Tim?

BP

Paycheck Secure speeds up transaction time and reduces the cost of bad checks.  With the system, merchants can cash checks which they may have otherwise not cashed.  For example, in a grocery store check cashing setting without Paycheck Secure, the customer is sometimes put through a demeaning process of checking on the authenticity of the check.  If it’s after three o’clock, the clerk may say to the customer, “come back tomorrow and we can call the bank,” – or, “hang on a second, Peter, and we will call up findBIOMETRICS and see if this check was properly issued to you.”  And that goes on for a large percentage of the population – estimated to be between 20 and 25%.  With Paycheck Secure, once the customer is enrolled, they quickly develop a positive check cashing history so they are able to cash checks at different hours, change employers and not be hassled.  It is a faster transaction and the customer is more likely to walk out with their cash.  It offers a huge value to the consumer.

FB

I had the opportunity to hear one of your spokespeople at the Biometric Consortium Conference, where he played a video of the reaction from end-users, and it seemed extremely positive!

BP

It is.   Feedback is very positive.  We understand the value equation for both the merchant and customer.  As a result, BioPay has built the nation’s largest commercial, electronic fingerprint database.

FB

That’s right.  Your company has the largest commercial electronic fingerprint database.  Can you tell us how you have built this?

BP

Yes. We feel we have created a superior product.   After a customer enrolls in the system, we remove the images of these fingerprints from the local computer and bring them back to our server. If the system were compromised locally, there would only be templates residing, not images.  Furthermore, the images are not stored in an on-line fashion in our system. It would be very difficult for someone to get hold of someone’s actual images.  We use the mathematically derived templates to send around the network to compare the data.  We also do not share positive data among merchants who are not connected to each other.  However, stores within in a chain can share their customer’s information.  For instance, a customer could enroll in one store and go to an affiliated location to cash a check with one enrollment. However, if the customer went to a different business, not owned by the same chain, they would need to re-enroll.  That enrollment would be successful unless you were reported as negative on our negative database.  It’s much the same way that Telecheck or SCAN^SM operates. Everyone wants to share the negative data to avoid getting stung by the same bad check writers.

FB

bCheck is your latest offering to enable customers to pay for their purchases with the touch of a finger.  Can you tell us more?

BP

We have a variety of beta customers slated to use bCheck in 1Q03. We have not yet launched the product, so we cannot tell you about consumer acceptance, but in our test studies, feedback appears to be very positive.  The convenience factor is key for the consumer.

FB

So that is really a turnkey scenario for the merchants.

BP

Yes.  A turnkey and it can be integrated into their existing systems.

FB

Excellent.  From my standpoint that really seems to be a killer application.

BP

We agree with you!

FB

Are there other products you anticipate releasing in the next year and how do you see the year unfolding?

BP

We are really focusing and committed to perfecting bCheck. We have different market segments we are targeting to demonstrate the value equation and consumer acceptance. We are also looking at a variety of vertical segments – so low dollar tickets – high dollar tickets. One significant advantage that we have is our ability to link the transaction to the ACH (Automated Clearing House) network.  Our competitors are linking the biometrically initiated transaction to a credit card.  The problem linking to a credit card is the high rate that the merchant must pay to process the transaction.  We don’t believe the economic model is there at this time to link a biometric to a credit card because the merchant would have to pay a higher credit card discount rate.  If the biometric is linked to an ACH transaction, which is like linking to a customer’s checking account, the transaction cost is much lower.  We have built a very sophisticated scaleable ACH processing engine that allows us to handle both the successful ACH’s and the exception processing.

FB

What do you see as the greatest challenges for your company?

BP

We have system integration issues with the merchants.  It takes a fair amount of sophistication to integrate to the variety of front-end platforms.  We also need to clearly demonstrate consumer acceptance for a biometric payment application.  Our competitors have demonstrated that acceptance is a non-issue, but there is the persistent drone of pundits who say otherwise-- we expect to prove them wrong. 

FB

And finally Tim, where do you see the biometrics industry heading in the next 5 years or so. And where do you see BioPay in that time?

BP

I believe it is inevitable that people will use biometrics to initiate financial transactions.  BioPay is particularly well positioned to be successful in that arena because we have significant experience with challenging applications and front-end POS deployment.  We also have expertise with communication networks and with delivering transactions over a network and hosting real-time applications.   Last year, we carried 25 million transactions over our network and performed over 2 million transactions to the PayCheck Secure System We also have a mature sales, service and support infrastructure in place. We think there will be a variety of players who will succeed in the biometric payments processing space.

The government, at some point, will get their universal ID going for trusted travelers – we’ll see how long that takes so, in five years a lot could happen.    And, the devices are getting cheaper and faster.  So, as the front-end device cost continues to come down, it makes it easier to deploy devices at the front end everywhere.

FB 

I think that the end-users are getting used to seeing Biometrics around now, and the ease of use alone has really started to catch on.

BP

I agree with you.  It is getting easier and consumers see one place after another using biometrics, they will realize biometrics are very convenient and secure.

FB

In closing, is there anything else you would like to add about the company and moving forward?

BP

We are interested in working with additional system integrators, VARs and other resellers who are receptive to partnering.  We’re also interested in working with other players and perhaps doing some system work for other verticals or other segments.

FB

And is your focus mostly in the North American market or are you starting to move off continent?

BP

We are focused on the US/North American market.  However, we are open to international applications.  We’ve had some inquiries and we’re trying to field those.  We are also receptive to exporting some of our technology where it makes sense.

FB

Thank you very much again for taking the time to speak with us.  We are very impressed with your product lineup. Thanks for sharing your thoughts with us today.

BP

Thank you.

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