While 2006 is expected to be the year radio frequency identification (RFID) contactless payment technology gains a foothold among vending operators, there are other technologies preparing to compete for a preferred position. Biometric payment technology may well become a popular settlement option.
For some time, biometric authentication seemed to be a technology in search of a quality application. The idea of linking personal characteristics (e.g., fingerprint, retina, iris, hand, face, etc.) to a database of settlement sources is beginning to be adopted in grocery stores and retail outlets across the country, and it may impact select vending accounts.
A significant attraction of biometric payment technology is its inherent heightened level of security as well as the ability to integrate with product-based marketing and frequent purchaser programs.
What is Biometrics?
Biometrics refers to the use of an automated system to verify personal identity through physiological or behavioral characteristics. Biometric technologies form the basis for highly secure identification and verification systems. With identity theft and fraudulent activity increasing, biometric-based solutions can provide increased security and confidentiality of personal and financial data.
More secure than PIN numbers, passwords, social security numbers and signatures, biometrics can authenticate an individual based on unique physical attributes that are difficult, if not impossible, to copy or forge. Although fingerprints are the most popular biometric characteristic used, other measurable traits include: iris, facial, voice, hand geometry and handwriting recognition.
A card, tag, fob or cell phone can be misplaced, lost or stolen. Fingerprints, on the other hand, are portable, reliable and always in the consumer’s possession.
Unlike a credit card or debit card application, biometric payment technology requires that the user register and create a settlement account in a closed cashless payment environment in which each supplier has a network of merchants that are part of the system. In other words, negotiability is limited to acceptance only at locations connected to the source of settlement information.
Enrollment involves proving one’s identity by scanning at least two fingerprints and entering some additional information into a database system. While some applications might require specification of a unique PIN code (a 4-digit number) or identifier code (e.g., a telephone number), all systems link the biometric payment to the consumer’s choice of payment source. To complete a typical transaction, the consumer swipes a finger, enters a PIN and selects a payment source.
How it works
Biometric payment technology allows the consumer to pay with the touch of a finger on a fingerprint scanner linked to a payment file. The fingerprint template is typically linked to a router and transmission media necessary to clear the transaction through an automated clearinghouse. While many biometric payment transaction providers focus on grocery, home improvement and convenience stores, others have indicated interest in quick-serve eateries, car wash locations and select vending operations.
Biometric payment providers (e.g., Pay-by-Touch and BioPay) require completion of a pre-enrollment process in which index fingers are scanned and driver’s license and banking information is recorded in an account database. This process reportedly takes less than two minutes.
In addition to transaction settlement, biometric payment providers may also link captured transactions to loyalty reward programs, gift cards, discount coupons and Web access services.
Rapid transactions and reduced fees
Just how fast can biometric payment systems process transactions? Pay-by-Touch and BioPay state transaction times range from 5 to 15 seconds, which they claim is favorable compared to cash, credit card or debit card settlement. While the speed of the transaction may be attractive, decreased transaction fees may be more persuasive as a selling point. Since a biometric payment transaction is treated as an automated clearinghouse debit, fees tend to be significantly lower (estimated at 75 percent) than comparable credit card or signature-debit card transactions.
The first step in fingerprint identification is collecting the fingerprint using a special sensing device. This process is referred to as enrollment. In this step, the fingerprint is acquired for authentication. The captured image (called the fingerprint template) can be stored directly as an image or can be stored as a biometric algorithm.
In the case of a biometric algorithm, several data points on the fingerprint template are scientifically measured and stored, thereby leading to discarding of the actual fingerprint. Algorithm software measures 40 or more data points for each fingerprint and may store these measurements as data coordinates or encrypt them into a digital certificate for future authentication.
When the mathematical representation of the fingerprint, not the actual fingerprint, is used to prove identity, a higher level of reliability is realized. In addition, some biometric payment systems may require the consumer to also swipe or wave a smart card in addition to scanning a finger to authenticate a transaction. This approach provides another layer of security than exclusively relying on fingerprint matching.
Consumer’s response: Positive
Are consumers skeptical about having fingerprints reside in a private database? Suppliers claim that market testing has not shown this to be the case, especially when fingerprints are not stored as images but are saved as mathematical representations. Similar to other proximity payment technologies, biometric payment systems do not link settlement directly to customer credit or debit accounts, but instead often create a proxy account (biometric algorithm) to link transactions for reconciliation.
In December 2005, NCR, the world’s largest manufacturer of financial self-service devices, entered into an agreement with Pay-by-Touch to introduce biometric fingerprint technology to its self-service machinery. NCR integrated a Pay-by-Touch fingerprint scanner into its Advanced Checkout and FastLane self-checkout terminals already installed in thousands of supermarkets.
Pay-by-Touch, as a result, adapted an NCR self-service kiosk to its system to enable consumers to register their fingerprint measurements in preparation to replace former card-based settlement systems. This arrangement with NCR followed Pay-by-Touch’s purchase of former competitor BioPay.
The number of locations participating in biometric payment technology is predicted to triple in 2006. In addition to biometric payments, fingerprint recognition can help improve other commercial applications, including age verification, check cashing and frequent shopper programming.
The implementation of a fingerprint-secured, RFID contactless card is expected to be in circulation by mid-2006. This hybrid card has been designed with an onboard fingerprint scanner, embedded biochip and an RFID-enabled chip for controlling cashless transactions.
evelopers of this biometric payment card (biocard) claim it is compliant with ISO 14443 technical protocol and can be used wherever contactless payment technology is available.
Biocard is self-contained
Unlike other biometric payment technologies, the biocard features a self-enrollment process that provides the cardholder the opportunity to scan and store fingerprint images as digital certificates in an onboard memory chip (biochip). It is important to note that the biocard is self-contained and operates independent of an external database or system server.
The cardholder scans either one or more fingers to capture their prints for direct image storage or conversion to a digital certificate. When a digital certificate is used, the fingerprint is stored as an encrypted version of the mathematical coordinates of the fingerprint template. When the user’s live fingerprint matches the stored print image or digital certificate, the card’s radio frequency identification chip is activated, thereby enabling transaction processing.
Given the uniqueness of fingerprints, on-card authentication provides the highest level of security and cardholder privacy. Since the cardholder’s biometric data is maintained directly on the biocard, there is no need for new hardware or software at the point of sale. The biocard simply extends the front end of the payment processing system.