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A New Imprint on Check Management

S o, what's a check transaction without a check? By now, everyone knows it is check conversion, that hot topic of conversation around the check management water cooler. We've all heard the proponents of this process proclaim, "Lose the paper trail and gain faster, more efficient and less problematic payment processing."

Opponents cry foul, pointing out that whether it's paper or electronic processing, risk is risk and without standards and regulations, it's controlled chaos. While everyone agrees check writing, processing, collection and reconciliation is labor intensive, not everyone is jumping on the electronic conversion bandwagon.

But stop the presses. If you really want heat, biometrics certainly will light your check-processing fire. At the recent 2002 FMI annual exposition in San Diego, the exhibits that sizzled were those that offered biometric services. One of those exhibitors that had a three-alarm fire surrounding its solutions was BioPay.

In 1999 in Herndon, Va., there was a modest electronic redeposit company called CheckAGAIN. One of its brightest executives, Tim Robinson, had the vision that inevitably biometrics would be used for financial transactions. It was secure, convenient and cost effective - music to the ears of merchants.

Robinson's belief that biometric technology could be used at the point-of-sale stemmed from his knowledge of the transaction process. He knew that all that was needed for check processing was a MICR number - not much different than a credit card number. His concept was substituting something for that number. That something was a fingerprint.

Robinson's philosophy of using biometrics to initiate a transaction was simple. The challenge was the infusion of that idea and the infrastructure to support it. He brought together a group of savvy developers and sales professionals and launched BioPay.

"We decided there were two fundamental battles to be fought for biometrics - technology and customer acceptance," says Robinson. "We didn't want to wade into two battles. We searched for a market where we can go for the technology and not battle customer acceptance."

They found it in banks and grocery stores that already were using ink fingerprint identification for payroll checks.

BioPay set out to replicate what the merchants were already doing, but rather than use an ink fingerprint, they introduced an electronic or digital fingerprint to identify and perform functions.

BioPay created a shared negative list, using the standard concept. But rather than license numbers, it utilized biometrics. That negative list has evolved into the nation's largest commercial, non-government proprietary biometric database. "We own the database, with our participating merchants owning the information," says Robinson.

BioPay started introducing its service at banks, grocers and check cashiers. The process was fairly easy. On initial check presentment, the customer provides the merchant not only with a driver's license or other identification number for scanning, but also with his or her two index fingers are scanned and an electronic photo is taken and input into the BioPay database. The entire process takes about two minutes. Once stored, the repeat customer need only use their fingerprints to complete future transactions with that merchant.

Today, more than 100 merchants are using BioPay's technology in 18 states. BioPay has expanded its initial target market of payroll services at banks, grocers and check cashiers. It's now targeting regular bank customers, merchants wanting to use biometrics as authorization where the check is still present, and merchants where checks are non-present.

What is the biggest challenge these markets represent to BioPay? Robinson answers that it is the issue of belief.

"Customers don't believe it works," says Robinson, "We've developed a product and it works great, but people are skeptical. They feel it's too good to be true. But it's not. You can enroll your customers with just an index finger. The TeleChecks and the Scans of the world are dependent on MICR and license numbers for their database, numbers that can be stolen and faked. You can't fake an electronic or digital fingerprint."

The one market that is not wary of biometrics is the ISO arena. It is embracing biometrics, especially since the revenue stream is extraordinary. According to Robinson, for each biometric program sold, an independent seller receives a one-time commission of approximately $5,000. It does raise one's eyebrows, doesn't it? It also raises the question of what the cost is to the merchant.

The biometric price tag is between $10,000-$12,000. While it is a substantial investment for some merchants, Robinson is quick to point out that the average merchant sees a return on his investment almost immediately with some merchants reporting as much as $2,000 a month savings on check loss. There are also lease programs, monthly payments and other options that make it easy for merchants to bring biometrics into their business model.

There is special equipment involved. BioPay works with Dell Computer on the merchant PC side, MagTech for the reader and a semi-exclusive fingerprint terminal manufacturer whom Robinson preferred not to name. Installation of the entire program takes anywhere from 48 hours to five business days.

BioPay supplies field experts for installation, should its ISOs prefer not to get that hands-on, though BioPay does offer installation training as part of its marketing and training program for ISOs.

BioPay offers support to its resellers on multiple levels since it sees the ISO community as integral to its growth. BioPay is not internally focused on sales but rather on development of world-class biometric products.

"The overwhelming positive reaction to our systems is wonderful and very surprising to what we forecast," says Robinson. "At some point, the industry overall is going to realize that folks will use biometrics to initiate all types of transactions. We're seeing it in security access, airline access, getting into a house or a car - why not financial transactions?"

Robinson also predicts that the prices will come down on equipment, which already has reached the point of cost effectiveness. Given that prediction, BioPay is gearing up for a dramatic growth of its customer base as well as its current staff of 65.

"We want to help merchants eliminate the risk of taking checks," says Robinson. "We love checks. We are fans of checks and work hand in hand with merchants who take checks. We are the new way of sharing data."

BioPay also believes it offers a great new way to combat identity theft. "When you write a check, all the info is there for the clerk to steal," says Robinson. "How do you block that leak in the system as a consumer? You do it through biometrics. You do it through BioPay. How many products are offered where you put your finger down and your picture pops up? We are entering a stage of explosive technology that is sure to become mainstream at some point in the future."

That technology has caught the eye of the government, but BioPay doesn't seem to be taken with Uncle Sam's interest. "We are very focused on privacy and commercial financial transactions," says Robinson. "We don't do data-sharing with the government, nor do we have any plans to do so."

And how does BioPay feel about electronic check conversion? "Check conversion has been around for some time now, right? So if it was such a good deal, why don't more highly technological merchants like Safeway do it?" asks Robinson. " 'What's wrong with this picture?' is what many small merchants are asking. As a software developer and supporter, we know the check conversion game has been around awhile and choose not to expend resources on such a gamble, especially not as it is being currently rolled out."

Robinson sees this decision as another example of BioPay's solid business philosophy in play. Check conversion presents two battlefronts with integration complications and customer acceptance. BioPay likes its business plans to be less risky. Its biometric model is low risk, and if the present market buzz is any indication of the future space, biometrics may very well replace conversion as the most controversial topic around the check-management water cooler.

BioPay ISO contact: Joe Zuccaro Phone: 866-324-6729, ext. 303

Company address: 580 Herndon Parkway, Suite 100 Herndon, VA 20170 Phone: 866-324-6729 Fax: 703-435-3120 Web site: www.biopay.com

ISO benefits: • Secure, convenient and cost-effective solution. • Extraordinary revenue stream: Independent reseller receives one-time commission of approximately $5,000 per sale. • Equipment becoming cost effective. • Prevents clerk from stealing information.