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A Thing
Issue 04:01:02

Industry Update

Use of Electronic Payments Growing

More Consolidation in U.S. Check Clearing Infrastructure


ISOs Head to the Great Outdoors

By Ann All, Senior Editor,


Dinner Conversation: MasterCard and eFunds Partner for Debit Processing

By Patti Murphy


Street Smarts:
Help Me, Help You!

By Ed Freedman

Big Payments Events in 2003 Mean Big MLS Opportunities in 2004

By Steve Eazell

Updates for the New Year

By David H. Press

Interchange Untangled-Part 8

Privity of Contract: Know All Parties to Your Agreements

By Adam Atlas

New Products

Get Ready For PIN-based Payments

Managing the Channel With the Click of a Mouse

Company Profiles



A Rose is a Rose is a Rose...



Resource Guide


What's New in Biometrics

On Jan. 5, 2004, as part of its U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program, the Department of Homeland Security began scanning fingerprints of foreigners entering the United States. The fingerprint scans are being gathered at 115 airports that handle international flights and 14 major seaports.

This recent national news brought more attention to a method of identification (and authentication) gradually making its way into the mainstream: biometrics.

In the financial services industry, especially at the point of sale, the biometrics technology that is primarily being tested (and being implemented on a limited basis) for authentication at the point of sale is also fingerprint scanning.

It's been almost two years since The Green Sheet's last report on biometrics ("Big Brother is Scanning You" April 15, 2002, issue 02:04:01), so what's changed since then? Are payment companies succeeding in bringing this technology to the POS, and are merchants and their customers embracing it?

A number of issues still surround the widespread adoption of biometrics in payments-consumer education and trust, technology and merchants' willingness to test and change their current POS system.

But most experts agree that the technology does work, and now that it's becoming more affordable, it's just a matter of convincing merchants and their customers that the use of biometrics at the point of sale is the right method of payment for them.

"Biometrics is not a technology story, it's more a consumer behavior story," said Jim Nickerson, Global Communications/PR Manager for VeriFone, Inc. "The idea is to get consumers to accept this new weird way of payment."

There are many benefits to be realized using this type of payment authentication. For consumers, biometric authentication at the point of sale helps protect them against identity theft; and tender time is typically faster and more convenient-there's no need to fumble through a wallet or purse.

"Speed is an important attribute of the shopping experience, particularly for grocery, convenience and dollar stores," said Susan Landry, Vice President and Research Director for GartnerG2, a technology research and advisory firm. "Positioning payment solutions as being faster, particularly if there is unique privilege associated with its use, will be a compelling value proposition for consumers."

For merchants, there's greater security and more protection against card and check fraud; and improved customer loyalty. One biometrics solution, offered by San Francisco-based Pay By Touch, provides an automatic link to consumers' membership and rewards programs. The Terminal Manufacturers

Many point-of-sale terminal manufacturers have not yet developed proprietary biometric devices, but instead are designing their current equipment to be ready to implement a biometrics solution at a later time.

Merchants using these types of payment terminals in their stores have more flexibility in the long run, depending on what the next widely adopted payment method will be.

VeriFone, Inc., a provider of point-of-sale solutions, released the Omni 7000MPD in February 2003. This terminal is a modular payment device with an open platform that gives merchants the option to purchase necessary components now and upgrade later to other capabilities and emerging technologies, including a biometric solution.

And better yet, merchants and their account managers can do this upgrading right in the field rather than sending the terminals back to VeriFone.

"Retailers are no longer forced to predict the future by buying terminals loaded with unnecessary features," Douglas Bergeron, VeriFone's Chairman and CEO said in a statement on the release of the product. "With the Omni 7000MPD, they can add functionality on their schedule, when their business demands it."

"I like to use the term 'modality agnostic' to describe our biometric strategy," Nickerson said. "We can't tell what the leading technologies are going to be, but we can design our own technologies to be prepared for them."

Ingenico, another developer of point-of-sale solutions, said it is not doing too much with biometrics right now in the United States, although the company partnered with South Pasadena, Calif.-based Cogent Systems, Inc., a global provider of integrated biometric systems, at the end of 2002 to develop a biometrics system for the future.

Cogent and Ingenico teamed up to offer an end-to-end solution based on digital fingerprints, secure PIN entry and smart card technologies for Ingenico devices in emerging markets such as Nigeria and Hong Kong and down the road for the United States, Spain and other European countries.

Ingenico offers a free white paper on fingerprint recognition on its Web site (visit to download the document).

Many of the leading terminal manufacturers are also partnering with providers of biometric technology to test and offer a full solution at the point of sale here in the United States. VeriFone teamed up with Pay By Touch (which bought Indivos, a developer of biometrics solutions for the POS) in May 2002, contributing its payment terminals, as part of a pilot program at a Thriftway Supermarket in Seattle. VeriFone's terminals were equipped with a simple finger-image reader through which consumers access the Pay By Touch service.

In September 2003, Hypercom Corp. announced a partnership with BioPay, LLC, a provider of biometric systems for processing financial transactions. BioPay has had many successful implementations of its products-including bCheck, its check authorization service and Paycheck Secure-in many retailers in the United States.

Nearly 25 merchant locations in Virginia and Maryland, including General Nutrition Center (GNC), are implementing BioPay's biometric payment services along with Hypercom's own BioPIN finger scanning pads and ICE 5000 payment terminals.

Hypercom also recently partnered with I-Med Red M‚dica, a network of financial, suppliers and beneficiaries of the health system in Chile to rollout its biometric technology. I-Med is also using Hypercom's BioPIN pads and ICE terminals.

"If you look at Chile, it's going from an almost non-existent paper system to a huge electronic system," said O.B. Rawls IV, President of Hypercom North America. "It makes sense that if you're going to build infrastructure to build new infrastructure."

Rawls said Hypercom has been exploring biometrics for quite a while and became interested in it because "how better to prove who you are at the point of sale?" Hypercom calls it the "oldest form of identification."

"I think that biometric technology will take off, but I don't think it's going to leap out of the starting gates," Rawls said.

"For biometrics to be really successful it will have to be introduced by the government in some security module for it to work, and I think it will be in combination with a smart card and a matching biometric. There is a lot of public trust that has to be gained." Finger Scan Provides Access to e-Wallet

Pay By Touch is a newly reorganized private company offering biometrics payment solutions. The company's management team consists of seasoned professionals from the technology and financial services industries, including Eula Adams, former Senior Executive Vice President of First Data Corp. since 1991, who now serves on Pay By Touch's Board of Directors.

Pay By Touch (formerly known as Solidus Networks, Inc.) acquired Indivos Corp. in April 2003 for its portfolio of more than 35 patents (12 of which are pending) dating back to 1994 that cover tokenless biometrically authenticated financial, loyalty and related transactions. Six months following the acquisition, Solidus received $10 million in financing and changed its name.

The Pay By Touch technology was first released in May 2002 as part of a pilot program at a Thriftway Supermarket in Seattle. The program has been successful, and it is still up and running today. Pay By Touch is also currently in use as part of a trial program in five stores of a large video retailer.

"In the first 30 days of the pilot at the video retailer stores, we had over 60% of the consumer population sign up for the service," said Craig Ramsey, CEO of Pay By Touch. "At the end of 120 days, we had over 80% of the consumer population enrolled."

The Pay By Touch product works like this: During checkout, customers place their finger on a scanner and enter their access code; they then are identified and linked to their financial accounts (Pay By Touch calls this an e-wallet or e-purse). Next, they select their payment method-credit or debit card or electronic checking account-and pay for their purchases.

Consumers sign up for the system by visiting any retailer using Pay By Touch. They put their finger down, and then swipe cards that they want to access through their e-wallet: loyalty cards, gym memberships, video store cards, etc. "You do this once, and then at any store that supports Pay By Touch, you are able to access this e-wallet by putting your finger down, entering a 7-digit PIN code (which is your telephone number) and all the vehicles that you put in your wallet are presented to you," Ramsey said.

All consumer data, including the fingerprint scan, are captured in a highly secure IBM DB2 database that resides in an IBM data center.

In mid Jan. 2004, Pay By Touch signed a deal with IBM that would allow retailers using Pay By Touch technology to give their customers the option of paying for purchases on IBM point-of-sale (POS) systems using a finger scan to access their financial accounts.

Ramsey believes that convenience, reduction of tender time (once customers are given the total, the length of time it takes for them to provide the method of payment and the transaction to be completed) and affordability of the technology will be the main drivers in the adoption of this point-of-sale system.

He said that with Pay By Touch, tender time is reduced to 10 seconds (versus about 20 seconds when paying with a credit card or about 65 seconds when paying with a check).

"I think the most significant thing that has happened is that we're now at a point in the technology where we've reached the economics that make it feasible to put this out in market in mass," Ramsey said. "One thing that came out of 9/11 for our industry is that it expedited the investment and the progression of the technology."

He said the technology being used two years ago at the Seattle Thriftway location cost a few thousand dollars. Today, it has advanced to be available right off the shelf for a fraction of that price.

Pay By Touch currently sells through its own internal sales force, but sees potential in the ISO sales channel down the road.

"Our primary focus over the next year is to get all the $2 billion-and-above retailers to adopt our product, and then via telesales and potentially through ISO channels, we would address how we get to the middle tier and lower tier marketplace," Ramsey said. Touch Me: A New Report on Biometrics

A report titled "Biometrics in Financial Services: See Me, Hear Me, Touch Me," released in April 2003 by Glenbrook Partners, a consulting and research firm for the financial services industry, explores the emerging role of biometrics technologies in financial services.

It provides guidance on the best way to manage a biometrics deployment project and identifies common obstacles and misperceptions that companies must overcome before project launch.

Allen Weinberg, author of the report, a co-founder of Glenbrook Partners and a former Vice President for Visa U.S.A, said implementing biometrics at the point of sale is still a little tricky, but not because of the equipment, but rather that it's a change in conventional practices.

"This is not a short sales process, and it won't be in the early lifecycle phases," he said. "Merchants have to come to grips with the whole value proposition-forget the equipment itself-that's an afterthought."

"If biometrics can be used to spot terrorists..., says conventional wisdom, there must be commercial applications in financial services," according to Weinberg.

Using biometrics at the point of sale still may be considered an emerging technology, but what's been proven is that it does work. Now it's a matter of proving that to merchants and their customers.

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