The payment terminal manufacturer Hypercom Corp. has developed a biometric finger-scanning pad that attaches to its terminals and can be used to verify a cardholder's identity at the point of sale.
The Phoenix company said the device, which costs about $120 per terminal to buy and install, works with magnetic stripe cards and smart cards and that it could be a big help in fraud prevention. The product has been in development for a year and a half, and two merchants will test it in early 2002, Hypercom said.
Interest in biometrics has been running particularly high since Sept. 11, but even its enthusiasts say that it will take a while for the technology to be embraced - if ever - and that it should be an especially hard sell in the consumer sphere. Nevertheless, Hypercom says it is confident that there will be ample demand, and it is laying the groundwork for a day when biometrics, and perhaps smart cards, are in wide use.
"We have been waiting for chip cards like everybody else," said George Wallner, Hypercom's chairman and chief strategist. "This will work with or without smart cards. The whole idea is to add security to existing cards, without getting involved in the huge debate over smart cards."
Customers would enroll in the biometrics service at the point of sale, presumably on a voluntary basis, to prevent others from using their cards. They would present a credit or debit card or checking account number, place a finger on the reader pad, and show an additional ID card - such as a driver's license - for verification. The person's finger image would be scanned and a "template," or long number, would be created by assigning number codes to certain physical characteristics of the image, such as the distance between ridges or swirls. Mr. Wallner emphasized that the actual fingerprint image would not be stored, a sore point with privacy advocates who liken the procedure to the type of fingerprints taken of criminal suspects.
The person's fingerprint template would be stored in a database. Later on, when the customer returned to the merchant or other merchants in the chain and presented the same card or account number, he or she would be required to put a finger on the device again before the transaction could be approved.
Either Hypercom, which is also a merchant-acquirer, or a large merchant could maintain and safeguard the fingerprint template database. Mr. Wallner said the details of the system are still evolving, but added that, eventually, a merchant-acquirer might develop a fingerpint template database that its other merchants could make use of for their own biometric programs.
Mr. Wallner said the system would reduce fraud costs for merchants and make consumers feel more secure.
"Before Sept. 11, we felt it would not be an easy sell," he said. More recently the attitude has been, "Let's work on this. Biometrics provides such an opportunity to cut fraud that we cannot ignore it."
The readers still need to be tested in a large-scale environment, and "not everything is figured out yet," Mr. Wallner said. He said his company is in conversations with large payment processors to handle the data.
Hypercom is known as an innovator that was first to market with color-screen terminals, Internet-connected terminals, and terminals that capture the customer's signature electronically. It has long been an outspoken advocate for smart cards as a hedge against fraud, but with smart cards languishing in America, it settled on the fingerprint readers as a way to give merchants a new security and loyalty device without having to wait for issuers to come aboard.
Hypercom will work on selling the product to its acquirers, which will work directly with merchants. Mr. Wallner said the $120-per-machine price tag would not discourage merchants from adopting the technology; he said that's cheap compared with smart cards, which cost about $3 per card and have added expenses for terminals and processing.
"This is not instead of smart cards," he insisted. "Smart cards did get delayed, and now biometrics is coming in on top of them, but they will find their own place."
Some experts found the idea interesting, though they said it's hard to determine the readers' target market.
"I think if merchants are experiencing a high degree of fraud and they think this will reduce it, and cardholders think this will reduce their risk, it will be successful, said Steven Bacastow, a partner with Collective Dynamics LLC, a technology consulting firm in Atlanta. It could be popular with airlines, but consumers might balk at using it in stores, he said.
Fingerprinting has negative connotations for most consumers, Mr. Bacastow said: "They picture being arrested." Mr. Wallner emphasized that the customer's print will not be stored, only a number derived from the pattern of lines on the finger.
Theodore Iacobuzio, a senior analyst with the TowerGroup research firm in Needham, Mass., called the new product an important development. "Hypercom has a big market share," he said.
He suggested airlines as a plausible early-adopter merchant category, "not mom-and-pop stores. The caveats are, Is it reliable and scalable? The proof is in the pudding."
