PushCoin Inc. aims to give parents a better handle on their kids' spending habits with a payment system rooted in the use of an assortment of items including mobile phones, wristbands and Near Field Communication stickers.
The Geneva, Ill.-based startup created the PushCoin mobile prepaid system to provide parents with "a powerful tool for allocating money into accounts and monitoring the spending" for children 12 and older, says Anna Lisznianski, PushCoin's chief executive officer and co-founder.
Neither merchants nor consumers pay any fees to use PushCoin, which generates revenue by selling its payment devices to consumers and selling data analytics to small merchants to create marketing or loyalty programs. It also sells a more sophisticated service program to larger companies.
Lisznianski and her husband created PushCoin six months ago after both worked for years in the payments and security departments of various financial and securities exchange networks.
"We saw this gap in the market for children to be able to make cash-like transactions with a kid-friendly system that was secure and private," Lisznianski says. "Kids likely do not own a banking account or have a credit card, so they rely on their parents to give them cash for allowance, or for things like movies, ice cream and pizza."
Since PushCoin allows parents to monitor spending and can be used only with its merchant clients, Mrs. Lisznianski says it can potentially prevent kids from spending their allowances in unsavory ways.
"We believe it can deter children from spending cash on illegal drugs, and if it does that alone, we'd be very happy about it," she says.
Other companies, such as Visa, BillMyParents and Virtual Piggy, offer options for parental control of teen spending. Visa's Buxx is a prepaid card that gives parents online control of the account; Virtual Piggy is focused on e-commerce spending; and BillMyParents has a foot in both worlds, offering a prepaid card that evolved from an e-commerce spending system.
PushCoin can operate on smartphones built with NFC chips, allowing users to pay at PushCoin merchants who use an NFC-equipped tablet in their point-of-sale system, says Slawomir Lisznianski, Anna Lisznianski's husband and the company's chief technology officer.
The system also works on "powerless devices" such as wristbands, NFC stickers to attach to non-NFC phones, key fobs or ID cards, Mr. Lisznianski adds. After parents open an account, PushCoin sends one wristband or sticker upon request. Extra payment devices cost $9.95 each, he adds.
Parents open a PushCoin account online. They next establish PushCoin as a payee in their bank's online bill-pay system. This allows the bank account to provide one-time or recurring funding to the PushCoin stored-value account, Mr. Lisznianski says.
Parents can establish spending parameters through the PushCoin website. In addition to limiting the amount teens can spend, parents can also restrict the merchants or geographic area where the PushCoin devices can be used, Mr. Lisznianski says. Parents can also de-activate lost devices.
PushCoin incorporates a geo-location mapping system on the PushCoin website so parents can tell where their children are spending money, he adds.
Security is a top priority for the PushCoin system, Mr. Lisznianski says.
"We are paying hackers to try to hack into our system," he says. "We have set up firewalls to protect the system because relying solely on NFC to secure anything is a mistake."
PushCoin uses a physical unclonable function as a security measure in the wristbands and other passive devices used for payment, Mr. Lisznianski says. In addition, PushCoin transactions have a "rolling key" for every transaction, meaning the algorithm changes each time a payment is made.
The devices also do not hold the user's PIN or any information related to the amount of a transaction.
"History shows us that if any payment information is on a device, it will eventually be hacked," Mr. Lisznianski says. "We have no information that describes our users on the NFC chip."
The user's PIN can be any length and can be changed at any time, he adds.
Users operating PushCoin on a smartphone can also create a "certificate of payment" that equates to giving the merchant an electronic check, essentially saying it is a one-time payment for a specific amount only, Mr. Lisznianski says.
"If you are not comfortable paying a taxi driver with a card, with PushCoin you can establish only a certain amount that will be taken from the account," Mr. Lisznianski says.
PushCoin has established a solid approach to security, even though it is a product that fraudsters are not likely to heavily target in the first place, says Julie Conroy, senior analyst and fraud expert with Boston-based Aite Group.
"It is always good to have strong security, so they are definitely on the right track," she says.
The biggest obstacle PushCoin may encounter is convincing consumers of its merits, Conroy says. "Any time you are trying to change consumer behavior, that is a difficult process, and this is a business that is tough to get to scale," she adds.
PushCoin payments to merchants go into an escrow account for the merchant, who can retrieve those funds at any time as an automated clearing house transfer or a cashier's check, Mr. Lisznianski says.
During the testing period, PushCoin has concentrated on establishing the system at local small merchants and restaurants in the west suburbs of Chicago.