Econ Focus

Taking Biometrics to the Bank

Biometrics has been touted as a gee-whiz solution for regulating access to computer networks, managing high-security areas, and verifying customer identities. Yet few industries have been sold on the technology. Financial services companies have used physical characteristics – particularly fingerprints – to conduct employee background checks for many years, with some banks using speedier electronic fingerprint scans. Still, accuracy and privacy are the biggest hurdles to widespread adoption of biometrics, according to John Hall, spokesman for the American Bankers Association.

Customer Drives Demand
"Banks would never want to be seen as foisting these new technologies on customers," Hall says. When customers feel comfortable using a fingerprint or retinal scan instead of a personal identification number and decide it's worthwhile, "then banks may make a wholesale change," he says. For example, biometric technology could reduce identity theft, a $54 billion problem in 2004, according to a study sponsored by the Better Business Bureau.

In the meantime, financial services firms are moving slowly, with biometric deployments occurring here and there. The Purdue Employees Federal Credit Union in West Lafayette, Ind., has operated fingerprint-authorized self-service stations at its branches since 1997.

Recently, Bank of America installed a palm scanner at new locations for safety deposit box customers. The device saves on time and manpower, says Pam Langfitt, manager at the bank's Short Pump office in Henrico County, Va. "In any retail-type business, you staff to your volume of transactions and sales, not to how many people need to get access to their safe boxes."

Customers also like the convenience. "They don't have to wait for someone to become available for them to get into their box," Langfitt says. Instead, customers simply enter an identification number and use the scanner for access. It beats the old system that required an employee to pull a signature card to verify identity.

Voice Recognition
Financial services firms are investigating the use of voice verification, according to David Ostlund, a consultant at New York-based International Biometric Group. The physical infrastructure to support voice recognition services – communications networks – is already in place, he says. "You just need software infrastructure," Ostlund says. And it's secure. "It would be very difficult for someone to synthesize your voice over the phone," he says.

International Biometric recently tested voice verification of a phone caller's identity for a major credit card company. Although Ostlund couldn't reveal the name of the firm or the outcome of the test, he noted that the results varied from vendor to vendor. Also, land lines performed more reliably than cell phones.

Government Catalyst
Many credit card companies, including Visa, Chase, and Citibank, have at least piloted biometric programs. Ostlund declined to say whether the systems are actually in use. "A lot [of firms] are testing and it's under the radar," he says. "They're waiting for the government sector to embrace and do the legwork to prove to the American public that these technologies are safe, and are intended to increase security."

Government projects such as US-VISIT, which requires that passports of all non-immigrant visitors to the United States have a biometric feature, will be watched closely. Success or failure of these and other federal projects is likely to influence the future of