(We originally posted this in 2020. You can read more of our original ideas in our archive.)
Problem: The loyalty card process has lots of friction and is largely still done on paper. Attempts to digitize this through mobile apps has not been successful: customers don’t have or feel a need to download the apps. Some attempts to solve this have happened through Point of Sale integrations (i.e. at checkout) by using credit card numbers or phone numbers, however this still requires effort from the users and is not a delightful, seamless experience (5 examples of these company use cases include Square PoS, Vend PoS, Lightspeed PoS, Toast PoS, or Loyverse).
Solution: This business would create iPad’s that are paired at checkout with a PoS or cash register to create a loyalty card program that does not require paper or physical objects at all but instead is entirely plugged into a digital, biometric infrastructure.
I first had this idea and insight while walking around Hawaii in the midst of the COVID-19 pandemic: there were many restaurants where in order to enter I had to scan my face on an iPad that would take my temperature. I was fascinated by the fact that a camera could be repurposed in an entirely new way. What if I didn’t need a card to checkout, just my face? What if the restaurant could create a log of my purchasing habits in a way similar to an IP address through a numeric-face-algorithm?
There currently are a few substitutes and similar products that exist including CLEAR (which is currently used at airports for security) or PopID which allows individuals to use their face as their ID.
Images of CLEAR, which is used for airport security.
On January 24, 2021 the BBC wrote an article talking about this company and it’s implications:
With the technology now being introduced in the US, and other countries such as Denmark and Nigeria, are we all going to be using it within a few years' time? And, are there data security and privacy issues that we should worry about?
…
She [Sarah] uses facial recognition payment, via a US tech start-up called PopID. You sign up via its website, by uploading a photograph of your face, which is stored on the firm's cloud-based system. You then link your account to your bank card.
In addition, you can choose to use PopID's hand gesture tipping tool. Ms Stewart has set this at thumbs up for 10%, the peace sign for 15%, and the shaka or "hang loose" sign for 20%.
PopID is based in Los Angeles, and is now used by about 70 independent restaurants and cafes across a handful of US cities, mainly on the West Coast.
Given the growth of mobile payment and consumers’ increasing comfort with using their phone as a password or gateway to payment, I anticipate that there will be a unicorn business with an express purpose of taking this mobile-only phenomenon and opening it up to brick-and-mortar stores. As Brett King described in book tour related to his book Bank 4.0,
"Facial payment is part of the growing digital identity structure.... I appreciate the concerns about privacy, but the reality is that a [face-based] digital identity structure is inevitable for safety and security. [Digital] payments, transactions and services are becoming more and more imbedded in our life, and in our world, and that's definitely going to require biometrics, because passwords are simply not secure enough."
Perhaps, as King alludes, this future move to biometric payments is a requirement. Broadly this business would start with loyalty cards and potentially move to banking after building up a customer and restaurant base.
This move is already happening in China. 98% of Chinese mobile payments are processed by AliBaba’s Alipay and Tencent’s WeChat Pay. Given that they are both pushing for more facial recognition systems (Alipay is spending three billion yuan, $420m, or £300m) Chinese state media estimates that 760 million people will be using facial recognition payments by the end of 2022.
The biometric payments market size? About $15 trillion.
As described by MarketWatch, “Biometric recognition is a method of recognizing an individual through their unique characteristics such as fingerprints, iris scan, voice recognition and others. Biometric payment is a technology that utilizes biometric recognition to authenticate any payments or deductions from an individual's bank account. The global biometric payments market is anticipated to record a CAGR of 49.0% over the forecast period, i.e. 2019-2027. Factors such as rising number of smartphone users around the world and the development in ICT infrastructure, along with the advancements observed in the biometric payment technology are some of the factors promoting the growth of the market. The global biometric payments market is anticipated to grow by 36 times in-between 2018-2027 with an absolute $ opportunity of USD $15,587.3 billion. The growth of the market is driven by the growing concern for the increasing cases of cybercrimes and cyber frauds and the need to secure online payment systems in financial organizations.”
Even just in loyalty cards, a bit of a niche, this business could benefit from the rising tides of biometric payment and quickly eat up a market with the end-goal of being acquired by a big player in the biometric payments space.
Monetization: Percentage of transaction volume processed by loyalty cards.
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)