Pajama Entrepreneur

FaceCash is a mobile payment application for the iPhone and other mobile devices. You use your smartphone to pay for groceries, pizza, and more. Your smartphone has to be able to display a barcode. It works like Paypal. You send money from your bank account to FaceCash and pay for items via FaceCash. To allow merchants to verify your identify, you upload your photo to your FaceCash account and it gets displayed when you pay (see below). FaceCash also has nifty features for budgeting, sharing of expenses at a restaurant or grocery (perfect for roommates or people who go out to dinner and have to split the bill).

FaceCash is not yet available to the public; it is still in the private beta stage.

What’s in it for merchants?

For merchants, FaceCash acts as web-based point of sale (POS) system. No expensive software installations required. Several merchants in Palo Alto (e.g. Red Mango) are using FaceCash on a trial basis. The advantage of using FaceCash is that it is not part of the VISA/Mastercard network and charges much lower fees. For example, merchants typically pay 2.5 to 4 percent to a credit card network, while FaceCash charges 1.5 percent. Moreover, FaceCash does not impose authorization or monthly fees.

Merchants need a barcode scanner, an Internet connection and a computer with a screen that displays a browser. FaceCash is targeting small- to medium-sized retailers. It incorporates a POS system with a full accounting suite in the back-end. The web-based software coupled with a clean, simple interface makes it much easier for small merchants (who don’t have a huge staff). It’s unlikely that a large retailer such as Target, which has its own POS system and thousands of cash registers and computers to upgrade, will move to FaceCash overnight. But for Mom-and-Pop stores, this could be a huge time and money saver. FaceCash is in private beta with several merchants in Palo Alto and they are getting Stanford University students to try it out.

Challenges confronting FaceCash

(1) Adoption by merchants: FaceCash needs to get more merchants on board otherwise, even if I have it on my iPhone, if I can’t find enough places to use it, I won’t transfer money from my bank account to my FaceCash account.

(2) Adoption by individuals: Many people in the US are still accustomed to paying for things using credit cards. However, as Michael Anderson (business development manager for FaceCash, who I interviewed for this article) pointed out, debit card payments in the US exceeded credit card payments in Q4 2009 for the first time in history. Because people are more careful with their money, and many credit card companies have canceled or lowered people’s credit, paying with a debit card, or with a mobile virtual debit card like FaceCash,  has become more acceptable.

Who is behind FaceCash?

FaceCash is developed by Think Computer Corporation, which is owned by Aaron Greenspan, based in Palo Alto. Aaron has worked on finance and accounting software for many years. He created FaceCash because of his frustrations with existing POS and back-end accounting systems for merchants. Think Computer Corporation has other products for enterprises (SaaS) and developers, e.g. Lampshade – a web-based programming environment that uses LAMP (Linux / Apache / MySQL / PHP).