The good old debit card can't beat new biometric payment systems in the "wow" factor. But as far as most analysts and bankers are concerned, it remains a clear front-runner in the "now" factor.
Despite biometrics' growing impact and hype in the public sector, biometric-based payment systems could remain on the back burner of financial services companies for awhile. Standards issues, technical difficulties and low-tech hurdles-like a finger cut or a cough-ravaged voice-can play havoc with biometrics systems, raising the bar further for wide adoption of biometric options. "From an open-loop perspective, whether we're talking about bank cards or ATMs, we're a long way from [biometrics] becoming a reality," says TowerGroup senior analyst Ed Kountz.
According to a TowerGroup report on challenges for biometrics in bank card systems, fingerprint technology at best has achieved a 99 percent success rate against "false non-matches." With tens of millions of payment transactions done daily, hundreds of thousands of improperly denied transactions (or in TowerGroup's terms, "insults") would take place through the ubiquitous use of fingerprint-reading verifications, which are currently the most used and most cost-effective biometric option domestically.
Thusly, rollouts for consumer use of biometrics in financial services have been limited. Discover teamed with San Francisco biometrics firm Pay By Touch last year, but only in a marketing alliance to promote transactions through PBT's retail POS sites. Most biometric options at banks, such as Citibank's new fingerprint-based authentication for branch employees, have been for in-house security.
The biometrics payments field has so far been tied to the fortunes of Pay By Touch and rival BioPay of Herndon, VA, primarily through deals with grocers and convenience-store chains to install fingerprint-authentication technology for transactions at the register. The merchants want to reduce hot checks with better security, and to tie payment systems into store loyalty programs. Customers enrolling in a store's program are sold convenience, transaction efficiency-and peace of mind about not having to carry around checks and credit cards. Each enrollee ties a bank account or credit card to his profile, and can authorize a payment with his index finger, along with a passcode.
One thing consumers don't have to worry about with old-school cards is trying to make it work with a Band-Aid on the magnetic stripe. For a finger, on the other hand (well, on either hand), a nasty gash or a dirty scanner can interfere with verification and override a sophisticated algorithmic template behind a payment sensor. A problem may also arise if the original finger scan didn't gather enough data for a match, or was programmed to look for too many identity marks for an optical or capacitive scanner to collect. The customer might also simply be at the wrong store, since his print is only enrolled in the system of one merchant location or chain.
"Certainly the technology has improved over the past 10 years," but the need for biometric improvements remain, says John McNally, CTO of BioPay. Algorithmic templates remain proprietary, so systems don't work without bilateral agreements between companies. No third-party processors exist to centrally warehouse or convert the profiles, which McNally thinks will likely be the outcome for open biometric payment systems. "I don't see the standard platform happening in the biometrics world, as much as its going to be more of a conversion process," he says.
One step toward standardization took place two years ago when the American National Standards Institute adopted a biometrics framework for the financial services industry. ANSI only establishes minimum standards for enrollment, verification, security, storage and physical access control. Individual biometric technologies choose a number of varying attributes above ANSI that for fingerprint validation alone has created "dozens" of competing technologies, according to TowerGroup research director John Gould.
What will it take to overcome the obstacles to an ATM-like biometrics network? John Morris, president and COO of Pay By Touch, believes it will come through the marketplace. In particular, through Pay By Touch's technology, which the company says is supported by dozens of issued or pending patents. "Our patents are very broad and very deep, and we have the only patents that anybody has that are issued in this space," Morris says. "What we think we're building for, ensuring for and scaling for, is for Pay By Touch to be the method that people use for biometrics, for payments or loyalty transaction."
Morris also hinted that deals between Pay By Touch and financial services firms are on the horizon, though he declined to elaborate.
The issue of patents has resulted in a bitter legal battle between the top two vendors, launched earlier this year when BioPay filed a suit in federal court over the issuance of a check-cashing authorization patent that had been awarded Pay By Touch. PBT responded with a lawsuit of its own in February alleging infringement on its check cashing and tokenless biometric patents. BioPay currently has no patents, but reportedly has several applications pending.
If lawsuits or market dominance doesn't pave the way for open payments standardization, perhaps simple and steady growth in the industry might smooth things out, according to Philip Youn, a consultant with the International Biometrics Group. "Once they build a certain number of deployments and a certain number of people are rolled into the system," says Youn, "then the technology will catch momentum and grow at a better rate."
Fingerprint scanning has gained a substantial and perhaps insurmountable lead for payments, but other biometric systems are still in the picture for payments. Vein-recognition, iris/retinal scans, voice-recognition or face-pattern options have generally been kept on the sidelines due to high costs or consumer wariness (particularly the overly personal eye-scan). In Kountz's report, he found no vendors marketing any other biometric other than subderminal chip implants-a highly unlikely option for financial institutions.
However, more standards are coming into place in the public sector, where government investment in the technology, primarily through homeland security, has propelled more activity from standardization bodies and solutions on the horizon. The federal government plans to issue biometrics data into the next generation of passports, according to Kountz.
Ultimately, cost may be the driver that has to justify the biometrics investment. Gould estimates in his report that the bank card industry would need to invest hundreds of millions of dollars, including the upgrade of ATM terminals and merchant, acquirer and issuer systems. That cost is roughly equal to the venture into smart-card technology and its established EMV global standard, which may ultimately prove to provide a sufficiently strong authentication platform.
But it's what consumers want that will win out, says Morris, and he believes they'll want biometrics-not another piece of plastic. "This is a technology which even people who heretofore have not been excited about other methods of electronic transactions, can get excited about," Morris says. "To the degree that our technology can help move more people toward using electronic transactions of any kind, we're pouring water into the harbor, which can make all boats rise."
