Verifone Inc. has made an equity investment in Personal Solutions Corp., which it says has a promising technology for portable consumer financial appliances.
Verifone's investment gives it a 19.5% stake in the privately held firm. It was founded in May 1996 by Myles Suer, David Sommers, and William Stanley with funding from the check printer Clarke-American Corp. and other "angels."
Verifone will take a seat on the Personal Solutions board, and the resulting alliance between the companies could help Verifone broaden its range of compact payment devices.
A subsidiary since last year of Hewlett-Packard Co., Verifone is actively pursuing this emerging market through its consumer systems division. Perhaps its best-known product is the Personal ATM, a hand-size smart-card reader with a keypad that can be plugged into a telephone line. Cash value can be loaded on a chip card through a phone line, hence the product's moniker.
Personal ATM is currently being tested in Citibank's New York City smart-card pilot, among other places.
Personal Solutions' first product is Electronacheck, scheduled to be available in the fourth quarter. It is a palm-sized checkbook, holding standard paper checks. And it has a keypad and display that serve as an electronic register for bill payments or point-of-sale transactions.
These companies are just part of the burgeoning hand-held technology. The capabilities are spilling over from pagers to personal digital assistants like 3Com Corp.'s Palm Pilot to set-top cable boxes, and there could ultimately be a convergence with payment devices like Personal ATM, Electronacheck, or the digital wallets developed for Mondex, Visa Cash, and other smart cards.
"The real action in the computer industry has shifted decidedly away from PCs and into mobile and networked devices," ComputerWorld editor Paul Gillin wrote in a recent issue. Because of advances in microprocessors and the ability to link to the Internet, "this market segment is about to explode just as PCs become cheap commodities."
One example came on the market late last month: Compaq Computer Corp.'s C-Series hand-held personal computer. The $599 item with the Microsoft Windows CE operating system is designed to give mobile business users secure, high-speed, easy access to information.
Security advances are also crucial, particularly if financial services are to make their way to such portable devices. Certicom Corp. of Canada and San Mateo, Calif., is getting favorable response to its elliptic curve cryptography technology, which does not require the computing capacity of other conventional data security techniques.
Certicom recently announced an expansion of its product line, which has been licensed to 3Com, Motorola Inc., and Verifone, among others. It also formed an alliance with Diversinet Corp., a Canadian public key cryptography company, which in turn announced that a leading telecommunications company-its name was not disclosed-would deploy Diversinet digital certificates in a million wireless devices starting in July.
Electronacheck is designed to let consumers track, with little or no effort, how their money is being spent. It can operate off-line with application software from Personal Solutions, which includes a register program for record keeping and expenditure reporting. The information can also be uploaded to a personal computer. Electronacheck runs on the Windows 95 operating system.
"We have created a value proposition that relates to consumers," said Mr. Suer, president of the start-up company in Danville, Calif. "The attempt is to make it a fluid type of experience and not a lot of work."
Mr. Suer anticipates there will be three types of users-people who manage their financial affairs on sophisticated software like Quicken; those who have given up using such software because they found it too complicated; and other PC users. He said, "My goal is to go after all consumers."
"As you write a check at home or a bill at a store, this device captures the check image and signature and stores it electronically," said Roger Bertman, vice president of corporate development at Verifone, Santa Clara, Calif.
The Electronacheck can also perform some basic functions such as balancing the checkbook and creating "carbon copies" or receipts. It can be tailored so that it tracks sub-balances on an account, say, for a husband and wife.
It is not just for checking accounts. It can keep track of credit card and debit card transactions at the same time.
The information in the electronic register can be transferred wirelessly, via an infra-red adaptor, into personal financial management applications on a personal computer, such as Intuit Inc.'s Quicken and Microsoft Corp.'s Money, or can be loaded into software from a bank.
"The consumer today is faced with a blurring set of payment purchasing opportunities," said Mr. Bertman. "The consumer has to deal with different interfaces and devices," he said, making reconciliation of accounts quite challenging.
Growth in personal financial software for PCs has been limited, Mr. Bertman said, adding that "we, the industry, still do not have a consistent way for the consumer to manage his money and have a convenient way to pay."
Citing market research in Chicago and San Francisco by Cheskin Masten Image Net, Personal Solutions said consumers like to know their financial position at the point of transaction and to possess their records without having to enter transaction information manually.
Electronacheck received a "consistently favorable response and broad appeal among respondents tested," Cheskin Masten reported, with the key benefit being "better awareness and control of personal finances" through portable automation of the transaction tracking process.
Respondents perceived Electronacheck as easy to use, convenient, and a time-saver. There was particularly strong appeal among women.
Consumers have never been willing to pay for a device that allowed them to pay, said Mr. Bertman. But "if the Electronacheck hypothesis is correct, then we have broken that paradigm and consumers will buy a device that helps them pay."
The cost of Electronacheck has yet to be determined but officials said it is likely to be between $100 to $200 and sell for under $100 when it reaches the mass market.
Verifone sees future improvements such as adding a smart card reader and using the keypad for entering personal identification numbers for security. The infra-red adaptor could also be added to Verifone's market-leading point-of-sale card-reading terminals. "All would be possible," said Mr. Bertman, "including transactions via PC for Internet purchasing."
Personal Solutions approached Verifone first, but the latter was drawn to Electronacheck and wanted to participate in delivering the product and testing its viability.
Mr. Bertman is optimistic about its adoption. "We will have an extension of our overall Verifone transaction offerings to consumers unlike what anyone else has in the industry," Mr. Bertman predicted.
"Our solution is a natural complement to Verifone's electronic commerce offerings," said Mr. Suer. "We believe there is a market for it worldwide."
