With customers demanding more and more self servicing systems, it is imperative to have strong authentication systems in place to minimize fraudulent incidents. Strong authentication is a basic expectation of the consumer. It is absolutely necessary for any financial service company to meet this basic expectation. There is no point in having the best processes in place, the best services at the most affordable cost; if the consumer cannot trust the tools of trade.
When discussing authentication, we usually hear the term “three factor authentication”. The three factors are:
Something you know: passwords, PINs, etc.
Something you have: tokens, cards, digital certificates, etc.
Something you are: biometrics—unique physical characteristics.
In this article we are going to address the biometrics realm and address the following questions:
Why do financial services institutions employ biometrics?
What are the technology options in biometrics for financial services companies, and what are the adoption drivers and barriers for these technologies?
How do financial institutions deploy biometric technologies, and what are the key deployment areas?
What are the key future technology and adoption trends in biometrics?
Biometrics demystified:
Different people have different understanding of the term “biometrics” and hence there is ambiguity associated with the term. In general biometrics is defined as the collection and storage of data related to someone’s finger, face, hand, iris, retina, handwriting or voice.
Some of the salient features of biometrics are as follows:
Biometrics strengthens an identity assertion when the proper biometrics is bound to the rightful identity.
Biometric is great for “authenticating” that a previously enrolled person is who he or she claims to be. They are not good for identifying persons and should not be used as the sole authentication factor.
Biometrics data collection can become intrusive. The rule of the thumb is that, intrusive biometric may be employed for employees but should be avoided for customers.
Is biometrics ready for prime time?
The answer to this question is both yes and no. It depends on the technology, application and its implementation. If any of the above goes wrong, the customer would not be satisfied. Figure-1 illustrates revenues earned by different technology streams.
The different technologies that can be used for biometrics are:
Finger imaging: This technology is cheap, pervasive and highly accurate.
Facial recognition: This is a low cost technology. It requires little more than the end user looking at the camera.
Hand geometry: Easy to use and difficult to fool, with little end user stigma.
Voice recognition: Non-intrusive technology is easy to use and has strong end user acceptance.
Iris scans: Good accuracy and difficult to fool.
Retina scans: Extremely accurate and extremely difficult to fool.
Many applications have been piloted since 1998 in the financial service industry. For example:
In the US more than 500 million checks are forged each year. Herndon, Virginia based BioPay is addressing this issue with a biometric a finger scan system that allows retail merchants to share negative customer financial transaction information in real time, significantly reducing risk of “bad check” acceptance.
Biometric Access Corporation (BAC) has been working with Kroger’s supermarket chain in Texas. Customers link their finger scan to any number of payment vehicles including ATM, ACH or credit cards and with the use of a pin or by swiping an identifying card, can select their method of payment for groceries. BAC reports tremendous success in terms of achieving high levels of consumer acceptance and satisfaction and demonstrable return on investment (ROI) for the supermarket operator in terms of payment processing peed, reduction in check fraud, time pre consumer checkout and overall paperwork reduction.
ATMs: In fact as early as in 1998 iris scan ATMs were piloted in Texas with success. 95% of the consumer’s who used the same were satisfied.
A smart card could potentially hold a finger print scan of its owner and when the card is used at a super market, the system could ask the user to scan their finger to supplement the fact that they are the owners of the card. This type of application is also referred to as offline verification.
In other words, there are many opportunities in this industry. The key drivers for the same are:
Consumers’ desire for self service and hence the need for strong authentication techniques to minimize fraudulent activities.
Consumers’ basic need of secure transactions.
Appropriate application of this technology can significantly reduce risk of high-value transactions and provide a measurable ROI.
So far, we have discussed in brief the opportunities, the technologies and key drivers involved in biometrics. I cannot do justice to this article if I do not discuss in brief the risks associated with the same.
The risks/barriers associated with a project on biometrics are as follows:
Perception of consumers in relation to privacy and security. However consumers need to be educated that they are providing biometrics data only to supplement their existing authentication process and this is a lot more secure than one reading out their SSN or pin or code word on a phone or punching the same on the ATM.
There are multiple standards today but in order for this industry to grow they need to collaborate and for that, it is necessary that one set of standards emerge.
Cost (ROI) and complexity of deployments need to understood and managed.
Figure 1 (Biometric Revenues by Technology):
References:
Biometrics in Financial Services “See me, hear me, touch me” – Allen Weinberg – GlenBrook Research series, Feb 2003
Financial Institutions give Biometrics A Thumbs Up – Christine Barry – http://www.biometritech.com/features/celent.htm, May 20, 2003
Biometrics and Financial Services – Show me the Money! - C. Maxine Most - www.Digitalidworld.com Jan/Feb 2004.
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