Banks not yet banking on biometrics
By Laura Bruce • Bankrate.com

When will the James Bond world of iris scans and hand-and-voice-recognition devices come to the world of banking?

Just a few years ago, trade magazines were touting how eagerly financial institutions were considering these devices that held promise for better identifying customers and reducing fraud and theft.

So, have you had your fingerprint scanned recently at your bank? Probably not.

Even in light of the fact that the Sept. 11 terrorists were able to open bank accounts with fraudulent Social Security numbers, the Treasury Department's newly proposed rules for ensuring customer identification contain no biometric measures.

Industry experts have a hard time putting a finger on exactly why enthusiasm for biometrics has been lukewarm recently.

"Maybe it was the newness of biometrics five years ago," says Bill Rogers of William Rogers & Associates, credit union consultant and publisher of Biometric Digest.

"Like everything else, 'Here's some new technology, let's take a look at it,' and then it kind of cooled."

Banks balk at bio-measures
Bank United was one of the first to jump on the biometrics bandwagon. The company ran a pilot program using 75 ATMs outfitted with iris scans in Kroger supermarkets in the Dallas-Fort Worth area.

But the program died a quick death when Washington Mutual bought Bank United in mid-2000 and ended what is believed to be the only effort to deploy iris-scanning ATMs in America.

Iridian Technologies in Moorestown, N.J., specializes in iris-recognition technology.

"In the past, one of our founding companies participated in programs to pursue banking and other financial institutions," says spokeswoman Lina Page.

"Although we saw some success in terms of performance, the cost of the hardware and software, which were greater than they are today, may have been a factor in not moving beyond the pilot programs.

"Iridian doesn't identify the financial services market as one of our target markets."

In addition to the cost theory, some experts think banks shy away from biometrics because customers might consider it an intrusion.

For whatever reason that progress has been slow, banks and the biometrics industry aren't giving up on each other. In fact, a biometrics infiltration is taking place.

Bio-banking making small strides
The most popular use of biometrics in banking may be a device made by Diebold called PassVault, which allows customers to access their safe-deposit box unassisted by bank personnel.

Customers are given a personal identification number and register their hand or fingerprint scan when applying for a box.

When customers want to open their box, they punch their PIN into a keypad and their finger or handprint is scanned by Passvault. The "day gate" opens and the customer then opens their box with a key.

Diebold spokesman Joe Richardson says hundreds of financial institutions have installed the device.

"Chances are you'll stay with a bank as long as you have a safe-deposit box. While banks don't like the fuss of letting people in and out of the safe-deposit area, they'll go through it to keep the customer. PassVault achieves the same thing without involving bank personnel."

Many banks require noncustomers to leave behind a thumbprint when cashing checks, but more and more financial institutions are also requiring a thumbprint when new customers open an account.

Andrew Zavonia, senior vice president at First National Bank Texas in Killeen, Texas, says it's a security feature that customers accept.

"I was told that we have had no instances where someone said, 'I don't want to do that. I'm leaving.' For the most part they seem to think it's fine."

Credit unions ahead of the curve
Leslie Nguyen, vice president at Orange County Credit Union in Santa Ana, Calif., says her institution takes the thumbprint a step further by also scanning the new customer's signature.

"We scan the information and it pops up on the teller machine so the teller can do a visual verification. There are certain characteristics the tellers use to compare. If you turn a signature upside down you can see the characteristics even better."

Orange County Credit Union requires a thumbprint and signature scan for all new accounts and offers it to customers with existing accounts.

"They go for it. When the teller explains it's for their security they think it's a great idea. They won't have to bring ID to the credit union and they know we won't cross them with someone else with the same name.

"It's also been quite successful in deterring new-account fraud," says Nguyen. "Usually, a person who's going to commit fraud doesn't want their thumbprint scanned."

Credit unions appear to be leading the way in using biometrics to enable customers to open accounts without the assistance of any personnel.

Real Time Data Management has devised a kiosk that scans a person's fingerprint and accepts their initial deposit. The kiosk can be set up anywhere.

Bill Rogers says 35 credit unions have deployed the fingerprint-identifying kiosks.

"Many credit unions serve multiple groups of members, small employee groups that are too small to open a branch at their location, but they can have a kiosk."

In addition to opening new accounts, customers make deposits, withdrawals, check their balances and even apply for loans at the kiosk without any assistance.

Credit unions, according to Rogers, often are ahead of banks in making use of new technology.

"Credit unions were innovative in sharing their ATM networks while banks often have proprietary ATMs. Credit unions, traditionally, don't compete with each other. That's changed a little over the years, but all banks compete with each other."

Experts have little doubt that banks will move rapidly toward biometrics once some key decisions are made.

"It's easy for banks to deploy biometrics internally, say, for employees to have access to a network, but deploying it for customers is a different story," says Richard Norton of the Washington, D.C.-based International Biometric Industry Association.

"Do you have to retrofit an entire network of ATMs or do you take a different approach with wireless devices that may offer greater security and flexibility?

"I think in a year or two you'll start to see a lot more biometrics in routine applications and the banking industry will be right there with the rest of the world."

Bill Rogers believes the credit card industry may be the leader in letting us forget our credit card, debit card and ATM card PINs forever.

"One of these days we'll all get a letter from Visa saying enclosed is an ink pad. If you want to use a biometric identifier send back a fingerprint, we'll bar code it and it will take the place of a PIN."

Betcha can't wait.

-- Posted: July 23, 2002