Automated teller machine manufacturer Interbold is stepping up its research into alternatives to personal identification numbers for ATM users.
Personal identification numbers, or PINs, are the industry standard for authorizing an ATM or point-of-sale device to debit money from an ATM cardholder's bank account.
In recent years, PINs have proven increasingly susceptible to fraud. The most recent and glaring example is the Connecticut ATM scam, in which a bogus ATM installed at a shopping mall recorded the PINs of people who tried to use the machines.
More common examples include street criminals who "number surf" a PIN by looking over an ATM user's shoulder during a transaction and then rob the user of their card.
A Chorus of Warnings
While the incidents of PIN theft have been minuscule relative to the total number of ATM and point of sale transactions, security experts and ATM network chiefs insist this type of fraud is on the rise.
"You are only going to see more of the type of scam that just happened in Connecticut," said Richard P. Yanak, president of Neni Corp., which operates New England's largest electronic banking network, Yankee24.
To combat this problem, Interbold, the ATM joint venture between Diebold Inc. and International Business Machines Corp., has been developing several alternative mechanisms for identifying ATM cardholders.
The most intriguing of these are based on biometric technologies, which identify people through physical characteristics, such as fingerprints and voiceprints.
Interbold has already installed such technologies in modified ATMs for a financial institution in South Africa. The ATMs, which are in place at factory work sites, are used to dispense weekly pay to workers who do not maintain regular banking relationships, and thus do not have ATM cards.
On payday, the worker approaches the machine and places his thumb on an electronic pad that compares the print against one that is on file in the bank's system. When a match is made, the pay is dispensed from an account that the worker's employer maintains with the bank.
Representatives of the South African bank, which requested that it not be mentioned by name in this article, said the biometric terminals have dramatically reduced fraud associated with card-based withdrawals. The banks has been using the biometric technology for nearly three years, and now has fingerprint readers installed on over 50 terminals.
Increase in R&D
Buoyed by this success, Interbold has stepped up its research and development of biometric technology over the last year.
The North Canton, Ohio-based company is prepared to integrate any one of a number of technologies into its ATMs in the U.S., including devices that recognize fingerprints and voiceprints.
In conjunction with IBM, interbold is also developing a number of more progressive biometric technologies, including devices that scan the human eye and those that use the veins in the back of a person's hand for identification purposes.
C. Neil James, director of product planning for Interbold. believes that U.S. financial institutions will eventually embrace biometric technology and combine it with some other security system to create a truly secure ATM environment.
For example, the computer chip on smart cards - which many, banks believe will replace traditional ATM cards - could carry information that could be used as a cross reference in biometric identification.
"[Biometric] technology is similar to interactive video banking in that it's here, but bankers, are still kicking the tires," said Mr. James.
"It's really of matter of when the cost will hit the level for bankers to be able to embrace it."
Interbold officials said no financial institution in the U.S. has installed ATMs that make use of biometric identification.