Phoenix Check Cashing Inc. of Herndon, Va., is planning to add a prepaid debit card feature to the biometric check-cashing business it acquired last week from Solidus Networks Inc.
Several veterans of BioPay LLC, which developed the check-cashing business and sold itself to Solidus in 2006, are leading Phoenix, a company formed two weeks ago specifically to take over the business.
BioPay and Solidus made their reputations with biometric payment systems, but Jon Dorsey, a BioPay founder and Phoenix’s chief executive, said in an interview last week that the new company has shifted away from the point of sale.
“Our focus is not biometric payments, like it was at one time,” Mr. Dorsey said. “We are really focused on check cashing as the centerpiece activity, and then additional financial services that will flow from that.”
The Paycheck Secure service uses biometric devices to authenticate noncustomers cashing their payroll checks. Users must enroll in the service by providing identification and an electronic scan of a fingerprint.
“There’s a lot of potential fraud associated with check-cashing transactions,” Mr. Dorsey said, but banks can use fingerprint scanners to verify a consumer’s identity.
Phoenix has one banking customer for the service — Zions Bancorp. — and is working on an upgrade that would help banks cash checks for noncustomers and put the funds on a prepaid debit card. That feature should be available in three to four months.
Banks could charge consumers fees to sell the cards and would earn interchange revenue on transactions made with them.
BioPay was working on a similar feature before it was acquired by Solidus, but the program was shelved after the purchase, he said.
Solidus, a San Francisco company that does business under the Pay by Touch brand, filed for bankruptcy protection last year after falling behind on obligations such as rent and salaries. It said in January that it was trying to sell some business lines, including Paycheck Secure.
Solidus has retained its point of sale payments business; customers who enroll in that service can use their fingerprints to initiate transactions at the checkout line.
Mr. Dorsey said that his team did not have the resources at Solidus to continue working on the prepaid debit feature. “We’re excited to be free of Pay by Touch and free to move forward on the growth path again.”
Shannon Riordan, Solidus’ vice president of marketing, said it has made biometric payments its main priority. “Pay by Touch made the decision to refocus the business solely on biometric authentication for payments,” she said. “The target audience of Paycheck Secure is pretty different.”
Avivah Litan, a vice president and research director at the market research company Gartner Inc., said Phoenix may have an easier time marketing Paycheck Secure than BioPay and Solidus had with their payment system.
Paycheck Secure has “a simpler value proposition,” she said. “The value proposition for retailers was a good one, but there were too many barriers,” such as consumer acceptance and cashier training.
However, Paycheck Secure has obstacles of its own, Ms. Litan said. Since the end user is likely to be unbanked, “it could be an issue, because a big portion of the unbanked is illegal immigrants” who may not want their fingerprints on file with a bank.
“It definitely is attractive to consumers who are not criminals or illegal immigrants.”
Banks will still like the service, Ms. Litan said, because it can help reduce fraud, and “with prepaid cards, banks make more revenue, because they get a piece of the action on every transaction.”
