www.PortraitCheque.com

Would you accept this check? If AnyBank USA was replaced by Citibank, American Express, or Visa, you probably would. Downloadable traveler’s checks could be a short-term solution for remote cash access, at least
until rechargeable-at-the-desktop smart cards become common.

The Company: PortraitCheque.com is a privately held start-up based in Evergreen, Colorado. The company began operations in January, but the concept has been used in New Mexico for more than a decade at founder Thomas K. Reed’s Santa Fe company, Vivigen, a health services firm which paid employees a portion of their salary in PortraitCheques. The check’s were guaranteed by United New Mexico Bank of Santa Fe and were widely accepted in the local market. Reed is a long-time entrepreneur, having been involved in 24 start-ups.

Newly appointed President, Brent Abrahm, briefed us on the concept. He’s trying to take the it national with priority number one: signing a big-name backer, such as American Express, to guarantee the checks and add much-needed credibility. He’s also been gauging interest among potential distributors, especially the Net-only banks looking for a way to differentiate themselves and meet the cash needs of remote users.

But the key person on the team may be patent attorney LeRoy Hahn, who will likely be called in to protect the company’s provisional patents, should they be approved, and the product takes off.

The Product: The company has created a patented process by which customers can print out their own “traveler’s checks” via desktop or Web-based software. Users would countersign the checks in the presence of the merchant to use in lieu of cash.

The Patents: The company holds two provisional patents on the downloadable traveler’s check concept:

Pricing to User: Approximately $0.50 per check in lots of 100 for $50 (four per page).

Pricing to Distributors (banks): negotiable

The Business Model: The company expects to make money selling the check stock at approximately $0.50 per check as well as licensing the concept to distributors, both financial and non-financial companies. A financial institution that steps forward to guarantee the checks on a national/international basis is likely to garner the lion’s share of float and lost check revenue. But this company will also be on the hook for the lost, stolen, and fraudulent checks successfully passed to merchants.

Security Features:

•  SSL encryption during authorization process
•  watermark and fraud deterrents in paper stock
•  user’s picture and signature on check

How it Works: Online demo available at www.portraitcheque.com/demo/members.html .

•  Users submit signature, photograph, and checking or credit card account info to bank or other agent.
•  Agent authorizes the user.
•  User installs client software on PC (Web version coming).
•  When user wants “cash,” they send a request to the PortraitCheque.com server with username, password and social security number.
•  PortraitCheque authorizes the transaction after checking for funds availability, debits customer account, and sends encrypted instructions back to user’s PC authorizing the transaction.
•  User prints the check on their desktop printers using PortraitCheque check stock, preprinted with the user’s picture and signature.
•  User takes the check to any retail location where it is countersigned in front of the merchant and used in lieu of cash or personal check.
•  Merchant deposits the PortraitCheque in its bank along with other paper items.

Contacts: Brent Abraham is Pres., (303) 670-6818, babrahm@portraitcheque.com ; Thomas Reed is CEO, (505) 983-8299, treed@portraitcheque.com . LeRoy Hahn is Patent Attorney at Christie, Parker and Hale, (616) 795-5843.

The conventional wisdom is that some day smart cards, rechargeable from the desktop, will free Net banking customers from the drudgery, and expense, of using ATMs to get cash. PortraitCheque.com proposes to move that day forward by a decade or so (at least in the United States) with an interim paper-based system. But significant hurdles in merchant and user acceptance remain. And a big-name guarantor of the checks must be found before the product moves off the drawing board.

PortraitCheque.com’s Web site is relatively low budget, but they’ve only been in business since January.

There are also major control and fraud issues yet to be resolved. Under the current system, users don’t actually fund the checks until they initialize an authorization and printing process via their PC. This takes place after the user has received the check stock. There are obvious concerns with forgery and the passing of bad checks.

Although the picture and signature would provide some safeguards, the system is by no means fool-proof. Since the checks represent guaranteed funds with no point-of-sale authorization, they will have to be treated much like a Visa Check Card (off line debit): provided only to good credit risks, with ATM-like maximum daily limits (e.g. $500 per day in downloaded checks), and with an expiration date of
a year or less. It’s also unknown what consumer protection regulations would apply to the instrument.

If and when these hurdles are overcome by PortraitCheque.com or someone else, there could be an advantage to being first in your market offering “instant cash from the desktop.” It could differentiate your online product, deliver value to end users, create a buzz in the media, and cut your foreign ATM expenses. There could also be modest revenues from paper check sales.

Realistically, most of your remote users will prefer to get their cash through ATMs and POS cash-back. We see only a small minority of subscribers willing to bother with Web-based traveler’s checks. But, as a copy point and marketing tool, it has considerable appeal, at least while it is new.