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U.S. consumers are shopping with payment systems that scan their digits
It means no cards, PINs, cheques. Just give them the finger
If you have wallets stockpiled in your closet waiting for the perfect gift-giving moment, make presents of them quickly. The bulging masses could soon be as quaint as hat pins.
The wallet of the future may be nothing more than a fingerprint or a signature. Biometric technology, used in secure areas for some years, is just beginning to be applied to ordinary retail transactions.
To the uninitiated, the use of unique biological characteristics to identify a person conjures uncomfortable feelings of a looming, sinister Big Brother, but in fact, biometric technology has the potential to simplify our lives with less chance of fraud and identity theft than a pocket full of plastic cards.
"Our customers have embraced the new technology and the benefits have become increasingly obvious to all," says Rita Postell, manager of community and employee relations for the U.S. supermarket retailer Piggly Wiggly Carolina Co. Inc. "Speed, convenience and security is now offered with the touch of a finger," she says.
Piggly Wiggly Carolina is in the process of rolling out a fingerprint biometric system, Pay By Touch, throughout its network of 114 grocery stores in South Carolina and coastal Georgia. Postell says the company thought the technology would draw new customers to the store, but they've found their regular customers use it the most, with a welcome result: "Our regular customers have increased their purchases by 12 per cent." Although a number of retailers in the United States have been using biometric identification to cash payroll cheques for their customers, Piggly Wiggly is the first retailer in the United States to embrace biometric payment technology chain-wide, according to Pay By Touch marketing director Shannon Riordan.
"A lot of things have converged to make it something that many retailers are very interested in now," Riordan says.
She says public angst about security, the increased speed and accuracy of the technology and its dramatically declining cost, as well as the desire to improve efficiency and customer convenience, all contribute to the appeal. Retailers are also interested in the technology's easy fit with loyalty and age verification programs.
Pay By Touch is one of a number of biometric payment systems vying for retailers' attention. Developed by a technology company in San Francisco called, not surprisingly, Pay By Touch, the system works by matching your scanned fingerprint to one you provide during enrolment.
During enrolment customers also supply identification and information for the financial accounts they would like to access over the system.
To make a purchase, customers place their finger over a scanner at checkout. Then they enter a "search number" (usually their phone number) on to a keypad, which helps the computer find stored biometric information so it can more quickly match it to the finger scan.
Once the customer is identified, they are linked to their financial and loyalty accounts. The keypad allows them to select the account they wish to use — chequing, credit or debit. After approval, the customer's reward points are recognized automatically, eliminating "the fumble factor" of digging about for cash or plastic and a loyalty card.
Advocates of biometric systems like this say a consumer's financial information is more secure in this arrangement than ever before; no one can look over the customer's shoulder as they type in PIN numbers, there's no card to lose or steal, and the personal and account information on cheques is no longer circulated among all the people handling them during processing.
And what about the image of the fingerprint itself? Should consumers worry about it wandering around in cyberspace, where it might be captured and somehow used?
It turns out that fingerprint biometric systems do not store the entire fingerprint image, and this is significant.
Holly Rios, marketing manager for Biometric Access Co. in Round Rock, Texas, a competitor to Pay By Touch, explains how it works:
"The technology looks at specific points on the finger image and calculates that into a mathematical equation that we then encrypt and store. If someone were to ever get that information, they could not, from the information that is there, recreate anyone's exact finger image.
"There isn't some image of your fingerprint stored on a database that anybody could just go look up."
The system is supposed to speed transactions and cut costs for the retailer, even as they pay for it. Where they are now being used, Pay By Touch's finger scanners sell for around $50 (U.S.) each — low for a piece of retail infrastructure — and the company says the scanners work with most existing point-of-sale systems.
The retailer pays Pay By Touch a transaction fee each time the system is used, over and above the fee charged by the institution handling the final transaction chosen (credit and debit card fees apply as before, when those payment options are chosen). Pay By Touch says its own fees are "pennies per transaction," though it won't give an exact figure, saying that each retailer negotiates a fee schedule with the company.
A way the company says it can cut retailers' costs is by programming the devices to present the customer a menu of payment choices listing the ones cheaper to the retailer first — such as a chequing account or debit card — while costlier options such as credit card purchases can be lower on the list.
Retailers operating a loyalty program, like Shoppers Drug Mart's Optimum card, might benefit because it is cardless, overcoming a growing point of resistance — consumers' reluctance to drag around yet another card in their wallet.
The fingerprint system also allows retailers to identify shopping behaviour by the individual instead of the household because each person registers separately. This means they can use the information they are already gathering in their loyalty programs for more directly targeted specials. "Jane Smith, come celebrate your 50th birthday with our special on blue rinse!" If that seems more ominous than useful, it is not much different from what is being done now in other ways.
Like credit cards, once a consumer is registered in a biometric payment system with a merchant customers will be recognized in any other store using the same branded system. Instead of cards, you have a finger.
Fingerprint matching seems to be at the forefront of retail biometric applications right now, but there are many other unique biological or behavioural characteristics that could be used for biometric identification. Technologies have been developed to identify faces, hand geometry, retinas, irises, vein patterns on the back of the hand and wrist, your voice and even your signature.
The expense of the detection equipment, its speed and the reliability of the outcome have mediated in favour of fingerprint in the retail environment so far, but signature recognition may be closer at hand in Canada.
A Mississauga-based biometric company is planning to introduce a retail service next month that will be able to analyze a signature on an electronic tablet and identify the person to whom that signature belongs.
"We can determine if it is you within a few seconds," says Casey Witkowicz, president and CEO of Rycom Inc. He doesn't think the system is likely to be tricked. "We're not just looking at what you see visually. We identify the speed, pressure, angle and a few other key parameters."
Then an algorithm converts it into bits and bites that form the kernel of the comparison to the original signature on file.
The system detects forgeries and can also identify the forger, says Witkowicz.
If your signature is in the system and you sign the name of another person whose signature is also on record your forgery will be discovered and, with a search, the system will be able to determine that you were the forger.
The reliability of signature analysis and identification makes it an alternative to PIN numbers, says Witkowicz, and a "more of a natural evolution for human technology interface." More naturally, he believes, than fingerprint scanning with its unfortunate association with criminality.
Yet those associations don't worry the finger scanning folks. "People in the States are getting very accustomed to having biometrics in their daily lives," observes Biometric Access Co.'s Rios.
"In Texas you have to provide your thumbprint image to get your drivers license now. There are lots of areas where consumers realize this is not just associated with criminal activity."
Biometric industry advocates say education and familiarity will relieve consumers of most of their concerns, but Penny Gillespie, senior analyst with Forrester Research says people "may feel strongly about how you fix something tied to your fingerprint if it is wrong."
"We can fix it at any point in time," responds Riordan. These virtual wallets can be blocked, deleted and revised as necessary, she said.
The ultimate danger is giant databases that aggregate personal information from different sources.
Samir Nanavati is a partner with International Biometric Group LLC in New York City, a biometric security consulting firm. Nanavati was involved with a Bioprivacy Initiative that set out bioprivacy best-practices.
He says, "The biometric on its own does not have much ability to infringe on your privacy. Your fingerprint template doesn't tell anything about you."
Privacy implications begin, he says, when fingerprints from one database are crossed with another database and are used to identify individuals who might be presenting as two different people. Although database crossing is hardly a problem unique to biometric databases, Nanavati says previous methods of identification gave you more control in that you can change or lie about them.
"Any time you give an individual control over a situation you're increasing the overall privacy of that situation," says the consultant. "You're not given that opportunity with the biometric because you can't change your fingerprint."
Clearly companies using biometric information have to adhere to a strict code of confidentiality and use the information only for the purpose for which it was collected.
Consumers already trust many companies to do that, with more conventional and far more personal information.
So it may not be long before your best budgeting tool is a pair of gloves.