The man who developed the concept for what is now the most popular social-networking website has created a mobile-payments application that relies on facial recognition to confirm a user’s identity at the point of sale.
Think Computer Corp.’s FaceCash mobile app uses one-dimensional barcode technology to complete transactions at participating retailers. What makes the app different from others is that merchants verify the user’s identity with a digital image linked to a FaceCash account.
“In terms of fraud, we’re tapping into this innate ability everyone has to recognize faces” instead of relying on signature recognition in certain situations when consumers pay with plastic, Think Computer founder and CEO Aaron Greenspan tells PaymentsSource.
In 2009, Greenspan settled a trademark lawsuit with Facebook owner Mark Zuckerberg.
Consumers using the FaceCash application first must register online and link their FaceCash account to a valid bank account. To initiate a payment, the user accesses the barcode needed to complete a transaction from the FaceCash account on the app’s home page. The barcode also contains the user’s digital image uploaded during the account-registration process.
After the clerk scans the barcode, 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.
Think Computer routes the transactions through its internal database and not the automated clearinghouse. The database moves funds between the user’s account and the merchant’s account. The company holds consumers’ funds in a prepaid account and uses those to settle the transaction.
Think Computer sends nightly batches to the merchant with each day’s earnings.
FaceCash is just starting to gain traction with national retailers.
Doctor’s Associates Inc., parent of the Subway restaurant chain, announced Nov. 12 FaceCash will be accepted at certain California locations. Subway is starting with one store in Palo Alto, and Greenspan 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],” Greenspan says.
Since Subway locations are individual franchises, it is up to the owner of each to determine FaceCash acceptance.
Think Computer is offering better rates than those applied to payment card transactions, Greenspan says. The Palo Alto-based company charges a flat fee of 1.5% per transaction. That compares favorably to what Think Computer sees in the marketplace. “Our Visa/MasterCard/Discover rate for our own merchant account is 2.39% plus 35 cents per transaction,” Greenspan reveals.
Think Computer’s American Express rate is 4.85%. Greenspan has seen statements from merchants using Heartland Payment Systems. “If you add up the total fees and divide that by total revenue, you get a 3.2%” average rate,” he adds
Think Computer initially is giving away the barcode scanner to create interest but eventually will charge $30. The scanner is similar to what Target Corp. and Starbucks Corp. use for their respective barcode payment systems. Those machines scan barcodes on mobile-payment apps.
The company 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, Greesnspan says.
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 fraud-prevention tool.
Users link a bank account to fund FaceCash. Think Computer encourages users to deposit a $20-initial deposit.
The app is available for Apple Inc.’s iPhone, Google Inc.’s Android-powered smartphones and Research in Motion’s Blackberry devices. Nonsmartphone users may use the service with a print out from FaceCash’s website that contains their bar code image. The user cuts out the barcode from a printer sheet and carries it around in their wallet.
Greenspan 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 says.
Greenspan understands the challenges FaceCash faces 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.
Red Gillen, a senior analyst at Celent, believes 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 says.
Historically, the only company to overcome this barrier is PayPal Inc., Gillen adds.
Think Computer has some challenges ahead, Gillen says.
It already has established a merchant incentive to accept FaceCash payments with a less-expensive transaction rate. But the company still will have to sign up more merchants and convince consumers to use the app, he adds.
Think Computer says 10 Palo Alto merchants, mostly restaurants, accept FaceCash. Greenspan is in discussions with payment-terminal manufacturers to get a place on their machines. He did not reveal details.
Think Computer also soon will add a coupon system, Greenspan says.
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