The following is an article reprinted with permission from the WWR Letter:
Biometric Security: On the Horizon
By: John J. Grieger, Esquire
Biometrics can be defined as the measurement of biological characteristics that are distinct to each person and that are used in identifying that person. Biometrics can identify an individual’s fingerprints, face, iris, voice or hand shape.
A common biometric application is the fingerprint. The fingerprint is reduced to digital data, making duplication extremely difficult. Personal identification numbers and identity cards can be lost, stolen, or falsified. However, a user’s fingerprint is always “on hand.” Fingerprint biometrics is safe, convenient and accurate.
Biometric technology can help cut down on identity theft and the great loss that it causes to banks and consumers. Unlike a system based on Social Security numbers, a biometric system puts identity information into a format that is nearly impossible to compromise.
Biometrics need not replace current means of verifying a consumer’s identity. It can be used to supplement existing means. Indeed, the Federal Financial Institutions Examination Council (“FFIEC”) recently published Authentication in an Internet Banking Environment. In the report, the FFIEC writes, “Where risk assessments indicate that the use of single-factor authentication is inadequate, financial institutions should implement multifactor authentication…to mitigate those risks.”
The banking industry is beginning to feel the impact of biometric technology in point-of-sale transactions. Retailers seeking refuge from the high transaction fees paid to credit and debit card issuers can use biometrics to allow a customer to pay for goods with the touch of a finger. The customer provides his bank account information and fingerprint to the store and then can pay by touching a pad at the cash register. No credit card, check, or cash changes hands.
Internationally, bank customers and the banks themselves have begun to accept biometric technology. Three major banks in Japan have installed biometric readers on their ATMs, but some banks have balked at such devices. Banks in Chile and Colombia use fingerprint readers for teller and ATM transactions. South Africa’s banks are actively updating their ATM’s with fingerprint readers. A survey of seven European nations found that 57% of consumers would be more likely to change to a biometric-friendly bank*.
The U.S. has been slower to embrace biometrics, with some citing fears of identity theft, Big Brother privacy intrusion, and even hygiene concerns. One analyst noted that American banks have begun to use biometrics for their internal employee security, but that full acceptance of biometrics by U.S. banks is years away, “if not a decade or more.” However, in a recent article** an author stated that Utah-based Zions Bank has launched a new biometric check-cashing product to consumers who wish to cash payroll and government checks. Twelve branches in Utah and Idaho will be the first to pilot the program. This marks the first time a major financial institution has used a biometric tool to provide check-cashing services.
The trend toward the use of biometric security is becoming a part of everyday life abroad. As the cost of biometric applications declines along with the public’s reluctance to use biometrics, American banks and consumers will likely recognize the convenience and increased security offered by biometrics and they will become more common in the U.S.
John J. Grieger, Jr. is an Associate in the Bankruptcy department of the Chicago office. He can be reached at (312) 786-9676 x 29814 or firstname.lastname@example.org.
*“Biometrics may encourage Europeans to switch banks, research suggests”, Computer Business Review Online, May 23, 2006, http://www.cbronline.com/article_news.asp?guid=1750817C-B9E1-4BB1-9BF0-873770291015
**“In Brief”, Ohio Banker Direct, July 12, 2006