Pay By Touch, an idea whose time has passed

The payments industry is a fast-changing place, where the next great thing can quickly become obsolete. No one knows this better than Pay By Touch. In case you’ve missed the news (here and here), Pay By Touch’s founder, John Rogers, has filed for personal bankruptcy, while the company itself is fighting for its life against an involuntary bankruptcy petition.

Pay By Touch’s pay-with-your-finger approach was an interesting idea. But, let’s explore the reasons why it has failed. First and foremost, the company’s problem stems from the fact that its solution requires specialized hardware at every point-of-sale location. Compare this with Visa’s payWave and MasterCard’s PayPass initiatives. Even with the deep pockets that these organizations possess, convincing merchants to pay for new hardware to process payments under a new paradigm will take years before critical mass is reached.

Second, biometric payments have been bypassed with the emergence of mobile payments. Consumers don’t mind using a device to make purchases; they just won’t accept having “yet another” device that they have to carry around. But, with mobile payments, consumers simply use their mobile phones as the payment mechanism. And, according to recent surveys, people are more likely to forget their wallets than to leave the house without their cell phones. So, the mobile phone is already a must-have device.

Mobile technology also has some great advantages over POS biometrics:

• Mobile payments can be conducted remotely.
• Mobile payments technology can give you more than just payments. You can also do balance inquiries, check transaction histories, take advantage of mobile coupons and more.
• Mobile payments work anywhere you are, anytime you want.

Pay By Touch failed because its solution was made obsolete before it gained critical mass. Pay By Touch failed by trying to build a new consumer brand (a strategy that wasted $300 million from investors). Pay By Touch failed because the value proposition wasn’t great enough to convince consumers to change their behavior.