Hands-on or not?
Biometrics sign on, finally

Banks are introducing biometric technologies for security as well as improved service levels – but the UK is still lagging behind, writes Will Cain.

For a technology considered so cutting edge, it may come as a surprise to learn that biometrics have been a part of banking for over 50 years.

Its earliest known use was in the 1960s when the New York-based Shearson, Hamill Investment Bank implemented hand geometry technology to monitor employee attendance. Banking and biometrics have both come a long way since those days – so why has the technology been so slow to take off?

Ian Collard, biometrics manager at Siemens IT Solutions, says it is partly because of the high costs involved with replacing infrastructure which use biometrics, like AT Ms. “In the UK and parts of Europe, the majority of bank AT Ms are not so much last generation as the generation before – they are not highly engineered or featured and pretty basic,” says Collard.

“Recently, in places like Spain and Poland there has been a push into this next generation and an interest in machines which have a biometric interface. The usage of biometric AT Ms will be limited for some time at both national and European levels, so there will be a need for biometric and existing systems to run side by side for some time.”

Only in the last five years have banks started to employ biometric solutions into consumer facing applications. The business case for banks has been different in different markets, ranging from security in Japan, cost reductions in Mexico and ease of access in Europe.

Biometrics started to become mainstream in Japan in 2005 because of concerns about high levels of AT M fraud in the country. Banks adopted the technology when the Japanese Bankers Association recommended the introduction of smart cards and biometric identification at AT Ms. There are now around 80,000 of the machines in the country using either palm or finger vein readers.

There has also been interest in AT M biometrics from banks in countries with big rural and unbanked populations. In Mexico, where around 70 million people do not have access to traditional banks, Banco Azteca employs fingerprint readers to cater for customers who do not have identification documents. It has around 10.5 million savings account customers and 10 million borrowers on its books.

“I don’t think biometrics is something which is only applicable to banks with high levels of rural unbanked,” says Luis Niño de Rivera, Azteca Bank’s vice chairman.

“The reason other institutions [in Latin America] don’t use the technology as widely is because they probably have a smaller number of clients and can’t justify the investment. For us, it is a very intensive business with a high volume of clients transacting with us, so it’s important the system is as efficient and low cost as we can make it. For most banks it’s too high an investment for too few savings and credit clients.”

In Europe, Warsaw-based cooperative BPS became the first European financial institution to install a biometric AT M in May 2010. Another cooperative, PBS , a regional lender in the south east of the country, has also started introducing biometric AT Ms and a third, as yet unnamed cooperative is to start soon. BPS and PBS are planning to install 65 AT Ms each, while the third bank wants 100 of the terminals.

All of the biometric technology in the Polish AT Ms was provided by Hitachi. Rather than using fingerprint recognition, Hitachi’s solution reads the unique vein pattern of an individual’s finger. Peter Jones, Business Manager, Security Solutions Group, Hitachi Europe, oversaw the installation. He says Polish banks installed the technology to make benefit payments more efficient.

Cooperative banks in Poland are required to disburse state benefits to individuals, particularly pensioners, who may not have bank accounts. PBS , for example, closes some of its branches to normal business on set days each month to allow it to make the benefit payments. Now, armed with identity cards and the finger vein AT Ms, people can pick up their pensions and benefit cheques automatically, freeing up tellers for other banking business.

“There are many different reasons banks have introduced biometric technology,” says Jones. “In Japan, it was led by security, in Europe it’s less about this and more about service and access.”

Improvements in voice recognition software have meant a new range of biometric possibilities is now being opened up. Banks have been able to streamline call centre operations through the use of systems which automatically identify a customer’s voice pattern.

In July last year (2010), National Australia Bank (NAB ) introduced a voice recognition programme which removed the need for its customers to remember their telephone banking PINs and password. The system, provided by speech recognition specialists Salmat, requires customers to register their ‘voiceprint’. Once this is completed, they can be identified for telephone banking by phoning a contact number and reciting their account number.

“Our objective is to provide customers with a more convenient, faster and easy-to-use telephone banking experience while simultaneously improving identity security,” says NAB ’s Sam Jackel, who oversaw the project.

“One of the most telling statistics is the actual conversion rate that we’re getting of customers that are agreeing to participate and roll in to the service – it’s extremely high, above 90%.”

After an initial pilot, NAB has opened up the service to its 3.3 million retail banking customers in Australia.

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