Signatures can be forged, but Think Computer Corp. is betting that faces cannot — and it is relying on photo identification as the selling point of its mobile prepaid system FaceCash.
Users of the FaceCash mobile app present a two-dimensional bar code on their phones' screens to merchants at the point of sale. In addition to providing access to stored funds, the bar code also provides merchants with access to a stored image of the shopper's face.
"In terms of fraud, we're tapping into this innate ability everyone has to recognize faces" instead of requiring clerks to verify signatures, as many cards do, said Aaron Greenspan, Think Computer's founder and chief executive.
Doctor's Associates Inc., parent of the Subway restaurant chain, announced Nov. 12 that FaceCash will be accepted at certain California stores. Subway is starting with one store in Think Computer's hometown of Palo Alto, and Greenspan said he hopes acceptance will expand from there.
"We have to prove that there is some demand, but the nice thing is that there is nothing to lose" for the merchants, he said.
Since Subway locations are individual franchises, the decision to accept FaceCash is up to the store owner.
To initiate a payment, the user accesses the bar code from the FaceCash account on the app's home page. After the clerk scans the bar code, the user's image appears on a computer screen that is part of the merchant's POS system. The merchant uses that image to verify the customer and complete the transaction.
Consumers using the FaceCash application first must register online and link their FaceCash account to a valid bank account. Think Computer holds consumers' funds in a prepaid account and uses those to settle the transaction. It sends nightly batches to the merchant with each day's earnings.
Think Computer routes the transactions through its internal database and not the automated clearing house. The database moves funds between the user's account and the merchant's account.
Think Computer is offering better rates than those applied to most payment card transactions, Greenspan said. It charges a flat fee of 1.5% per transaction. "Our Visa/MasterCard/Discover rate for our own merchant account is 2.39% plus 35 cents per transaction," Greenspan said. Think Computer's American Express rate is 4.85%.
Greenspan said he has seen statements from merchants that have an average rate of 3.2%.
Think Computer initially is giving away the bar-code scanner that merchants need. It hopes to create early interest by supplying the scanners, but eventually it will charge $30 per unit.
Think Computer's bar-code scanner is similar to what Target Corp. and Starbucks Corp. use for their bar-code payment systems.
Think Computer incorporates other fraud-prevention measures when consumers sign up for the service at FaceCash's website. It discourages the use of free e-mail services such as Google Inc.'s Gmail or Microsoft Inc.'s Hotmail during the signup process. Greenspan contends it is easier to verify an e-mail address linked with a corporation or university because they are unique and not generally shared.
Think Computer charges a $2.99 fee if the consumer insists on using a free e-mail service. The fee helps to offset risk, Greenspan said.
The company requires users to upload a digital photo that clearly shows their face. The company recommends using a passport photo or social networking profile picture.
Users also must enter a state driver's license number, passport information or other government-issued identification. Entering a Social Security number is optional, but Think Computer recommends using it as another tool to fight fraud.
Think Computer also requires a $20 initial minimum deposit from the bank account users link.
The app is available for Apple Inc.'s iPhone, Google Inc.'s Android-powered smartphones and Research in Motion Ltd.'s BlackBerry devices.
Consumers who do not own smartphones may use the service with a printed form from FaceCash's website with the bar-code image. The user can cut out the bar code from the printout to make it wallet-size.
Greenspan said he entered the mobile market largely because the payments industry was heading in that direction. "There's no reason to carry plastic when everyone has a computer in their pocket," he said.
Greenspan said he understands FaceCash faces hurdles in a crowded mobile-payment market. He is pushing the fact FaceCash does not need to provide the consumer with additional peripherals such as a contactless sticker or a card-swiping device.
Those methods "seems kind of ridiculous, seeing the power these phones already have built in" to initiate payments, Greenspan said.
Red Gillen, a senior analyst at Celent, said FaceCash will experience the same adoption problems other alternative payment methods have faced.
"This may sound really boring or uninspiring to say, but a new payments system has to deal with the chicken-and-egg issue," he said.
The only company to overcome this barrier is PayPal Inc., Gillen said.
He said Think Computer has some challenges ahead. It already has established a merchant incentive to accept FaceCash payments with a less-expensive transaction rate. But it still will have to sign up more merchants and get consumers to use the app, he said.
Think Computer says four Palo Alto merchants, including two restaurants, accept FaceCash. Greenspan is in discussions with payment terminal manufacturers to get its technology built into their machines, though he would not reveal the details of these plans.
Think Computer is also working to add a coupon system to FaceCash, Greenspan said.