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Fingers Doing the Walking and ISOs Doing the Talking

F rom notes on a piece of paper - make that a lot of pieces of paper - comes a company that sees biometrics as the definitive answer to the storm that threatens every merchant's calm business environment - check fraud. Greg Cohen is the author of those notes. In 1999, he read an article on the Kroger biometric pilot. With his background in checks, he surmised there was a viable solution to combating bad checks.

With Directors Harry Patel and Sandip Patel, Cohen created IDentecheck and, as its General Manager, put together a biometric application to do two things: create a low-cost check guarantee product and track customers' spending habits. His vision was to decrease fraud while increasing productivity. The challenge was in acceptance.

"Different people are trying to capture this data up front," says Cohen. "The most difficult process is the enrollment process. If you can passively enroll an individual, that is where the rubber meets the road. ... Not enough merchants are utilizing biometrics yet to have it come to the forefront to address privacy issues."

IDentecheck's philosophy is centered around creating a low-cost check guarantee product that the market will embrace. IDentecheck's mission is to be a leader in generating other acquirer-based revenue streams. The strategy consists of a strong marketing and sales organization that also architects a solid biometric database with most other functions outsourced.

"What sets us apart is the fact that we are partner-open," says Cohen. "We are looking to increase strategy by partnering with anybody and everybody. Other than our database and biometrics, we look to partner with companies that will drive our products. We support a sales channel. We don't have any internal sales force."

That's good news for ISOs eager to put biometric solutions into their service package. IDentecheck doesn't compete against its agents. Rather, it competes against other biometric solution providers such as BioPay and Indivos.

IDentecheck is focused on the small to midsize merchant segment and is continually developing and adding specific features for that market segment. Its product implements cash register functions, third-party authorizations and third-party guarantee, and a full check-cashing solution.

IDentecheck's systems process up to 20,000 matches per second and authenticate a check writer's identity in less than one second. The claim is that merchants can move customers through 30-50% faster using biometric technology than with traditional check processing.

IDentecheck is marketing its product to merchants with less than $10 million in annual revenue, including check-cashing outlets, convenience stores, grocery stores and liquor stores. Since its initial rollout in January 2002, IDentecheck already has signed up between 20 and 25 merchants.

The cost of the biometric product is another obstacle to overcome. "For similar apps, we are very competitive, but all the products are too expensive now," says Cohen. "It's a barrier to entry and operations. I think right now you have developers and manufacturers trying to recover their costs while the merchants are comparing the cost to terminals."

IDentecheck's product is a PC product. Even Cohen admits that for this market to embrace biometric solutions, a true POS terminal will have to be developed. He believes it will happen within the next year.

"This is a sales-driven product," says Cohen. "Those who can get it on the POS devices fast and get mass acceptance will make it."

The PC system incorporates a MagTek check reader, a fingerprint terminal, a camera, jet printer, cash drawer and IDentecheck software. The key to a quick turnaround time and installation is credit approval. Another factor to consider is the amount of time it takes to make the sale.

Cohen stresses that this product requires a two- to three-call close. "It's not a one-call close," says Cohen. "Once all paperwork is complete, it will take about 10 days from the time we get the green light to the time your merchant is up and running." IDentecheck suggests using its own PC equipment because there have been occasional conflicts with peripherals with other PC systems. Wholesale prices for the IDentecheck solution are less than $5,000, and end user prices are around $7,000. ISOs, you do the math for potential revenue!

As for the databases IDentecheck utilizes, there are two. One database is proprietary, one is not.

The negative database IDentecheck accesses is used by 100,000 merchants with 19 million negative records. Its biometric database is much smaller and proprietary. "Being new, our biometric database has a little to be desired," says Cohen. "It will grow as product usage grows."

IDentecheck is banking on ISOs to motivate that growth. Nearly a dozen ISOs are aboard with IDentecheck. "We are really looking for key players as opposed to anyone who can fog a mirror," says Cohen. "We're looking for people who will drive this product as opposed to just thinking, 'Here's another thing in my bag of tricks.' "

Cohen notes that his product does exceptionally well with ATM distributors as opposed to traditional credit card sellers, in part because of the sales cycle as well as the ticket price. Multiple close calls, price and lease issues are common challenges to ATM resellers. Cohen sees it more as a price-point issue than a biometric issue.

Nonetheless, the appeal is there for savvy ISOs. Strong up-front income, residual income and a non-commodity product that works from a check standpoint in a retail marketplace - it all translates to high-income potential and merchant satisfaction.

"Right now, small-tier check cashers don't have anything to use," says Cohen. "Nobody guarantees their checks. Now we have a product you can take in and truly say, 'I've got something that will decrease your fraud.' Fraud is the lead-in."

IDentecheck is committed to helping ISOs with that lead-in. It has a training manual, support desk and plans for quarterly training seminars. IDentecheck wants not only to teach ISOs how to install the product but also how to sell it. And IDentecheck WILL sell it. According to Cohen, biometrics will be the fastest-growing authentication tool in the payment business.

"Everyone agrees biometrics decreases fraud," Cohen. "What will take time is wide acceptance and usage. We have just seen the start. Every major player will be getting into it, and as every major player gets into it, IDentecheck will play the role of the enabler. We enable the processor or acquirer to easily get at those businesses who are putting biometrics in place."

Cohen continues, "We want to have full-payment biometrics on a traditional POS device. We want lots of happy merchants. We have a business plan and a number in mind. We want to grow slowly; we don't want to implode."

IDentecheck would like to bring another couple of hundred merchants online with biometrics within the next year. IDentecheck's staff of 12, together with its development partner, is working on the next phase of its biometric solution with a prediction that it will create a solution that 10,000 customers can get on. That solution, like IDentecheck's present offering, will be promoted exclusively by ISOs.

"The one thing I try to get across to ISOs is that because of our background in the ISO community, we have true support built around them," says Cohen.

"The ISO is our true customer. We want to build a strong distribution channel with them. We are not there to take deals away. If they make money, we make money. Together, if we can eliminate some of the barriers, it will become a true accepted product."

IDentecheck ISO contact: Sandip Patel Phone: 888-IDENTEX E-mail: sandip@identecheck.com

Company address: 3511 Church Street, Suite L Atlanta, GA 30021 Phone: 888-IDENTEX Fax: 404-499-1090 Web site: www.identecheck.com

ISO benefits: • Low-cost product that also can track customers' spending habits. • Aims to be a leader in acquirer-based revenue streams. • Implements cash register functions, third-party authorizations and third-party guarantee, and a full check-cashing solution. • Can process up to 20,000 matches per second and authenticate a check writer's identity in less than one second. • Strong up-front income, residual income and a non-commodity product that works from a check standpoint in a retail marketplace all translates to high-income potential and merchant satisfaction.