Merchants have long used loyalty programs to keep tabs on a household’s purchases, but the San Francisco biometric technology vendor Solidus Networks Inc. says its systems can monitor an individual’s shopping habits more precisely.
Solidus says it will start marketing its SmartShop loyalty technology, which is built on its Pay By Touch biometric payment system, to merchants next year. SmartShop was developed by Solidus and Green Hills Farm Store Inc., which will have the system up and running in a few weeks at its grocery store in Syracuse, N.Y.
Gary Hawkins, the chief executive of Green Hills, said that card-based loyalty systems can paint a flawed picture of people’s buying habits, because cards are often shared among shoppers.
“Larger retailers have a tremendous amount of worthless and inaccurate data in their databases,” he said; sometimes more than half the data collected is worthless.
Green Hills has worked with Solidus for more than a year to develop SmartShop. Mr. Hawkins says he has used his store as a loyalty-program “laboratory” for a number of years. “What Pay By Touch brings to the table is several things, but first and foremost is the accurate identification of shoppers to the individual level.”
People enroll for the Pay By Touch system by providing payment card or bank account information and their fingerprints; in subsequent visits, they can authorize a payment using only their fingerprints at the cashier.
Green Hills has installed scanners at the checkout counter for making payments, as well as a SmartShop kiosk within the store that can read people’s fingerprints and offer them custom offers.
Mr. Hawkins said the SmartShop system is different from loyalty programs in most other stores, where the same discounts are offered to anyone. Green Hills’ offers are tailored to each customer and based on previous purchases, and customers can view the offers online before they go to the store, he said.
“We are not trying to encourage them to switch brands or sell them something that they may not want to buy,” he said.
John Morris, the president and chief operating officer for Solidus, said he has high expectations for this type of loyalty program.
“The Holy Grail for retailing is really to do one-to-one marketing,” he said. “We’re very excited about what Gary and his team are doing at Green Hills.”
Caroline McNally, the chief marketing officer for Solidus, called Mr. Hawkins “a guru in the area of loyalty and one-to-one marketing.”
Though SmartShop will not be generally available until next year, she said the Green Hills project is not a beta test. “This is an actual implementation.”
The marketing data gathered by the scanners is retained by the store, not by Solidus, she said.
Dan Schatt, a senior analyst for the Boston market research firm Celent Communications LLC, said that the loyalty technology puts Solidus far ahead of other companies that offer biometric payment systems.
“It’s likely that we’ll see a lot more migration in the next few years to biometric payment,” he said. “As it catches on — which, I’m sure, it will — it’s going to be about how well you know your customer.”
As biometric payment systems become more common, “the loyalty component can become critical to merchants,” he said.
Mr. Schatt compared biometric payments to online bill payment. Once the bill service became common with banks, “it really became more about the underlying data that banks could capture” about people by observing bill payments, and using the data to determine how to cross-sell to them.
Grocery stores have similar needs, he said. Though card-based loyalty systems are ubiquitous today, “biometrics can ensure, first of all, that key customer data is captured consistently, which cards can’t do.”
Even if people don’t share cards within a household, he said that people often forget to bring their cards, so the loyalty data can become less valuable.
Josh Kessler, an analyst with the emerging technologies practice at TowerGroup, the Needham, Mass., unit of MasterCard International, said that Green Hills, which is known for its loyalty program innovations, was a good choice for Solidus’ “proof of concept implementation.”
Offering SmartShop may make Solidus’ payment technology more attractive to consumers, he said. In the past the vendor had touted the speed and convenience of Pay By Touch, but the loyalty program may trump that in the minds of consumers. “You have to show real benefits to the Pay By Touch product to attract the consumers,” and discounts are an effective way of capturing customers’ attention.
And for merchants, the loyalty program “would be a little more specialized than cards,” he said.
Ms. McNally said offering SmartShop is one way Solidus plans to expand. This month it announced that it received $130 million of funding from various investors. She said it would use the money to expand in three areas: loyalty, biometric technology, and processing.
This week it announced that it would buy the ailing processor CardSystems Solutions Inc., which was at the center of a massive system breach in May that may have compromised as many as 40 million credit card accounts.
Ms. McNally said CardSystems is “a very compatible component to our business from the standpoint of our overall vision of end-to-end payment processing.”
