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FaceCash, the mobile payment system created by Aaron Greenspan (famous for claiming Mark Zuckerberg stole the idea for Facebook from him), has been live on smartphone platforms since the end of May. In an earlier, in-depth profile in VentureBeat, Greenspan laid out his very ambitious yet convincing plans of shaking up the mobile payment business. Now the company is in talks with a major restaurant chain and hints at game-changing new features.

FaceCash is a system Greenspan’s company Think Computer has built from the ground up, meaning it’s a standalone product that doesn’t need any costly middlemen in its transactions. The system works as follows: A restaurant or a retailer buys a barcode scanner from FaceCash. A user then configures the FaceCash application on their cell phone (there is a mobile client for those phones which do not have a native app, so the system is compatible with a vast number of phone models) and a barcode is created for the business owners to scan.

The true test, though, is market adoption, a major challenge for FaceCash. Greenspan (pictured) says that there has been “significant interest and excitement” from merchants, and people are signing up on the website. He also says there is a national restaurant chain, a household name, in talks about adopting FaceCash and Greenspan expects to make a big announcement in the near future. As far as breaking mobile payments into the mainstream, Greenspan acknowledges it is still some ways off.

“Even though technologies for using cell phones for making transactions have been around [like SMS, or near-field communication, or PayPal] for quite some time, people still don’t realize that it is possible to pay with a cell phone. So, it’s a matter of telling people about it and getting everybody, including business owners, employees and customers, to be comfortable with it,” Greenspan explained.

Other big challenges for FaceCash are regulatory and technical. Regulations require that FaceCash has a license to be a “money transmitter”, or somebody who processes payments, in most states, although in California, Massachusetts and New York the service can be run without one. And the technical challenges, while important, are not something that Greenspan is worried about (“We are working through bugs, as always with a launch, but the to-do list is very manageable.”)

One of the other companies in the cluttered mobile payment arena is Square, led by Twitter cofounder Jack Dorsey, that has developed a credit card reader for smartphones. The idea is to give the reader and the accompanying software to businesses for free and take a cut on the transactions. According to TechCrunch, Square has so far delivered 50,000 devices, and Dorsey said the company needs to reach “critical mass”–whatever that may be—in the next six months. This timeline could very well apply to FaceCash, too, but Greenspan has a video analogy when talking about a breakthrough.

“Think about online video,” said Greenspan. “It was pretty well established with different ways of uploading video and watching it online, but it didn’t really take off until there was YouTube. And YouTube didn’t really take off until [TV comedy show] Saturday Night Live’s clip went viral on it. What mobile payment really needs is something similar, something that take it through the roof.”

Compared to the old credit-card system, FaceCash offers many Internet-based advantages. FaceCash can create barcodes for each of the plastic cards in your wallet and let you use those in an aggregated fashion. A person can send money to another person, free of charge. The biggest thing to Greenspan’s mind is keeping track of the transaction data. Credit card bills show who charged a card and the sum, but FaceCash is able to list what you had at dinner.

“Right now there’s no way to send that data to the credit card company. We can use that to split bills, use it for tax purposes, or build a personal spending history among other things,” said Greenspan.

Speaking of building personal histories, FaceCash (and other mobile payment companies) can conceivably have a big impact in the location-based market. Greenspan said that while he finds the recent fad around location-based services “ridiculous,” there is incredibly important potential in using location information.

“It’s in the combination of things, of location, of purchase history and so on. Right now I don’t think the location-based services like [game-like applications] Foursquare and Gowalla have a business case. That being said, there is enormous business for us in a related area,” Greenspan mused, explaining that he doesn’t want to give too much away at this stage. “We just have to build it, which is of course trivial,” he said with a chuckle.

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