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Fingering suspects

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[Dave Birch] Biometrics continue to advance in Japan with the news that Hitachi is teaming with Japanese issuer JCB to develop a biometric payment system based on its finger vein authentication technology that can be used as an alternative to cards and cash at the point of sale. Hitachi is set to begin testing the system with 200 employees in September to determine whether the technology is commercially viable for introduction in banks and shops. The system identifies the veins on a person’s finger when it is held over a scanner and matches the image with customer data already stored in the application. The vein authentication system has been available in the Japanese market since October 2006 and has already been deployed by Sumitomo Mitsui Banking Corporation as the user ID system for ATMs located in am/pm convenience stores throughout Japan, which is why I thought the technology deserved its own podcast. Japan isn’t the only place where biometrics are being rolled out in this way. Banks in India are looking at deploying biometric ATMs targeted to reach the unbanked population in rural India. Using thumbprint and voice guidance in ATMs reduces literacy requirements to a considerable extent. Thus, establishing the identity of a rural depositor through biometrics makes it possible for illiterate or barely literate people to become part of the banking user community.

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So is the triumph of biometrics around the corner and and is the end of cards assured? Well, not really. Biometrics work well in controlled environments such as ATMs, it’s true. But it’s not clear — despite a number of roll-outs — whether they offer a realistic alternative to cards at POS because, as we have consistently advised our clients, biometrics at POS are driven by convenience, not by security. Therefore, developments in mobile and contactless payments will stunt the growth of retail biometrics. A few years ago, biometrics at POS had what seemed to be a bright future. By registering a card or bank account against a fingerprint, customers could pay without plastic, and it has to be admitted that this does have its attractions. Biometrics offered things to the retailers as well: security and a permanent CRM association. If the customer changed accounts, address, names or mobile operator, the retailer wasn’t affected and the fingerprint would still allow all purchases to be associated with an individual customer. But, as that article highlights, vendors — particularly market leader Pay By Touch (which had the distinction of having purchased the infamous CardSystems, of data breach fame) — focused on queue-busting and convenience. But this wasn’t that smooth a path and retail deployments — such as the Piggly-Wiggly grocery chain — began to feel the pain of consumer resistance.

But the biggest problem turned out to be technology innovation. The rapid acceptance of contactless payment cards by the incumbents essentially usurped the speed/convenience argument away. When I last used my Barclays OnePulse contactless Visa card in London (a couple of days ago), it took a couple of seconds at most to take the wallet out of my pocket and hold it to the POS terminal, hear the “beep” and then put it away again. And as contactless merges with mobile, the convenience/functionality curve moves further away from fingerprints.

Biometrics still has a very robust future in many verticals outside of retail payments right now (eg, ATMs), and will undoubtedly come to retail payments in time. I don’t even think it will be that long (five years?) before biometric PIN augmentation for higher-value transactions enters the U.K. mass market. So, were the biometrics guys deluded to think that they had a place in retail payments already? Maybe not. Maybe there was another dynamic behind stakeholder actions. It’s not really a conspiracy theory, but let’s just say for sake of argument that retailers were playing around with biometrics because they wanted something on their side of the table for future discussions with the cards business and now that interchange looks to be on the way down (and the principal of lower interchange rates for below-the-threshold contactless transactions is established), they don’t really need them anymore. Perhaps that’s why Pay By Touch is backing off the retail payment at POS, according to The Nilson Report (issue 890), which says that

Pay By Touch has shifted its focus away from being a company that provides biometric-based payments at the point of sale to becoming one that provides target marketing services… As a result, its payment processing assets are no longer part of the company‚Äôs core business and are being considered for sale. Those assets include Pay By Touch Payment Solutions and Pay By Touch Processing, which handle merchant card processing contracts and a proprietary card-not-present gateway.

I wrote on the Digital Identity blog that cards plus biometrics offer a much better solution than either cards or biometrics alone, and I’m sure that when biometrics do return to retail, mass-market POS it will be in that mode.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

2 thoughts on “Fingering suspects”

  1. Well now. Biometrics at the counter. Neat idea but not fit for purpose, yes I know there are lot’s of registered users in the USA using pay by touch.
    Being able to not leave an extensive footprint is an option that we should have. Get to close to me when I am buying something from you, I’ll walk out the door, isn’t it all a bit intrusive.
    To open the door to my house or car, YES. To access a computer systems, Yes Please.
    To make a small payment! I think I’d rather tap my card. Or if its more expensive enter my PIN. Biometric at the border, I’m ok.
    Fit for purpose designed for security that is where biometrics work. For the mass market no thank you.
    In your shop,
    George Orwell taught me better.

  2. Dave Birch says:

    “Fit for purpose”
    This is quite right Philip. If the purpose is security, then a fingerprint is reasonable, but if the purpose is convenience then a card, keyfob, watch or phone looks a much better choice.

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