Innovative developments in biometrics technology have given financial institutions a chance to make ATM facilities more secure and convenient. Developing economies are leading the way in its adoption, but experts believe it won’t be too long before banks across the globe embrace it.
In April 2014, the Federal Financial Institutions Examination Council (FFIEC), an umbrella group for US financial regulators, warned the country's banks of a new wave of automated teller machine (ATM) robberies using a combination of cyber-attacks and stolen account details.
Termed ‘Unlimited Operations' by the US Secret Service, since the perpetrators were able to extract money beyond account balances and withdrawal limits, this new style of robbery put the banks at risk of losing large amounts of cash. In an instance provided by FFIEC, an attack that caused the loss of $40 million was done using just 12 debit card accounts.
ATMs, since their introduction to the financial industry in the 1960s, have made life easier for consumers as well as banks. Cards and pin numbers have helped to keep the facility safe in the past, but as thefts become more sophisticated, banks look ready to pursue a modern technology – biometrics.
Modern Technology for Safer Transactions
Biometrics technology is already popular in various sectors across the developed world. But when it comes to ATMs, its adoption has been slower in US and Western Europe, compared to some of the emerging economies of Asia and Latin America. But this situation may change soon as experts expect a global increase in biometric ATMs in the future due to increasing concerns on safety and convenience.
According to Guillaume Mandret, Business Development Manager for Biometric Solutions and Philippe Le Pape VP of Sales for Biometric Solutions at Morpho (Safran), strong biometric solutions prevent many widespread attacks on ATMs such as skimming, card trapping and shoulder surfing, and bring more convenience and ergonomic services.
Sujan Parthasaradhi, Director of Biometric Applications, APAC at HID Global, agrees, adding, “Fingerprint sensors have become the most widely used biometric modality at the Brazilian ATM, and the latest technologies ensure sensor reliability both at enrollment and, later, during high-volume use, while also delivering field-programmable liveness detection capabilities to prevent fake fingerprints or spoofs.”
But although fingerprint recognition technology is the most common biometrics-based authentication system today, it is only one kind of technology that is being utilized at ATM facilities. In fact, a crucial aspect of biometrics technology is that it is an umbrella term used to refer to a number of specific technologies. The industry may not have reached a consensus on which technology is better than the rest as companies try different approaches, but this is more because each approach has its own strengths.
One Concept, Many Approaches
Fingerprint sensors may be popular in several industries but there are several concerns associated with them. One such concern is readability of fingers with cuts or bruises, another is the wear and tear that would occur to the sensor when used over a long period. An often cited third issue is that of hygiene as several people have to touch the sensor.
Some companies have recognized these hesitations and have focused their efforts on more accommodating technology. Hitachi, the Japanese technology major, uses finger vein pattern recognition method for its biometric applications in the financial sector. In its operation, the process of data collection does not require the user to touch the sensors.
According to Saya Harada from the Public Relations Department of Hitachi, this technology has higher accuracy, with transactional false match rate (T-FMR) of 0.01 percent and False Acceptance Rate (FAR) of 0.0001 percent, and low risk of forgery as it is virtually impossible to forge and replicate the pattern of veins, unlike fingerprint. Additionally, authentication cannot be performed without bloodstream. It is also more convenient because of its quicker verification process.
Fujitsu, another Japanese company that's betting high on biometrics, goes one step further and uses palm vein pattern recognition technology for its authentication system. The company's biometric sensors use a near-infrared light scan to capture user's palm vein pattern, generating a unique biometric template that can be matched against palm vein patterns of pre-registered users. Just as in Hitachi's technology, the user does not have to touch the biometric reader and hence is considered a non-intrusive and hygienic system.
“Our biometric authentication, provides a high degree of authentication accuracy, ease of use, and also excels from a hygiene perspective,” said Akira Wakabayashi, Director of Palmsecure Business Development Department at Fujitsu.
In the end though, analysts expect banks to adopt a multi-factor authentication system, where in biometrics will be combined with traditional password or card authentication system. This will not only increase safety but also help accommodate customers with physical conditions that do not allow biometric readers to identify them.
A Gradual Rise in Global Demand
A survey from Deloitte Center for Financial Services found that 72 percent of its respondents in U.S. would appreciate the use of biometrics identification to enable a device for financial services transactions. The U.S. in particular has been slow to move towards this new system mainly due to privacy concerns, but analysts point out that rising concerns of theft, increased convenience and eroding confidence in financial institutions would prompt more users to welcome biometric technology.
Meanwhile several banks in Eastern Europe, Latin America, Asia and the Middle East have already adopted biometrics technology for their ATM facilities. In Japan alone there are currently more than 80,000 biometric ATMs with over 15 million customers using them. In some places, governments are taking the initiative to bring this technology to prevalence.
“In Europe, Poland and Turkey both have commercial networks of biometric ATMs,” Harada said. “Other countries have made experiments but there is nothing more than proof of concept activity at the moment. Turkey has the largest population of biometric ATMs. IsBank in Turkey deployed Hitachi's finger vein authentication technology to around 3000 ATMs in 2011.” She added that Poland is expected to have 2000 biometric ATMs by the end of 2015.
“More and more governmental projects are implementing biometrics in their registration process (Aadhaar project in India), in their ID documents and passports issuance, as well as in their online services platform,” Mandret and Le Pape added. “Banks are strongly encouraged to use these technologies as well, as this industry is likely to face similar issues.”
Industry analysts expect a higher demand for biometrics in the banking sector in the near future, but the trend of developing countries leading the way in adopting the technology might continue. Wakabayashi said his company believes that going forward Europe and China, as well as the rest of Asia, will be markets with high-potential for adoption of their Palmsecure ATMs.
According to Biometrics Research Group, revenue streams for biometrics utilized in the global banking sector will rise from US$900 million in 2012 to $1.8 billion by the end of 2015. Revenue will primarily be driven by adoption in emerging economies, but market and technological research will continue to be conducted in developed countries.
Not Just Safer and Faster, but also Cheaper
Ease of use and security are the primary motives driving the demand for biometrics in the financial industry. With banking becoming electronic, financial institutions can reach customers across the globe and conduct transactions. Although this has helped the industry to grow at a massive rate, it has also increased the risks of malpractice.
“Convenience is a significant driver for adoption of biometric authentication. With biometrics, bank customers enjoy PIN-less and even card-less transactions,” Parthasaradhi said, further elaborating on a project in Brazil where HID's biometrics technology has been used.
“The fingerprint biometric authentication used at Itaú Bank in Brazil is so effective that today, limited value transactions are available to customers who key in a portion of their account number and press their finger to the sensor. This ‘beach program' allows customers to leave their wallets at home when they go to the beach or to a nightclub and still have access to cash. Their finger is their wallet, the ultimate in banking convenience!”
To Harada, there is another aspect driving the demand for this new technology. With the introduction of biometrics, the traditional cards may not be needed anymore. This means decreasing the usage of card service providers like Master Card and Visa, and the expenses associated with them. “In the end it means cheaper cash withdrawals across different banks,” she said.
Biometrics Beyond ATMs
Automated teller machines (ATM) are one of the most obvious areas in the banking sector where biometrics technology can be applied, but it is by no means the only one. Last year, Hitachi teamed up with Barclays bank in U.K.to introduce finger vein authentication system for customer verification. From this year, the bank's corporate customers will be able to easily access their online bank accounts and authorize payments within seconds, without the need for PIN, passwords or authentication codes.
Several banks have already been using voice biometric verification technology to authenticate users who transact through mobile devices, telephone and online. This technology compares various features of a person's voice like inflection, pitch and dialect and matches them with pre-registered data. Banks that have set up such automated login systems not only boost customer satisfaction levels, but also reduce their customer-care costs, according to Biometrics Research Group.
An additional major application that has recently received a boost is mobile banking. Major mobile phone companies like Apple and Samsung have already released fingerprint authentication systems on their handsets. Earlier this year, U.K.'s Royal Bank of Scotland and NatWest had incorporated fingerprint login technology to their mobile banking apps through Apple iPhone's fingerprint reader. In April, South African financial institution Standard Bank also launched a similar facility.
“Several of the large European banking groups are investigating the use of biometrics for a variety of applications including retail (branch counter and self-service), corporate customers (corporate treasury and cash management functions) via their regional banking operations,” said Saya Harada, from the Public Relations Department of Hitachi. “This may lead to increased take up of biometrics in banking in the coming years.”
From Security to Product Differentiation
Biometrics Research Group estimates the implementation of new biometrics technologies in the financial industry can potentially reduce an institution's operational risks by at least 20 percent over the next 10 years. Biometrics companies are also encouraged by the response that they have so far received from banks and their customers.
However, although the initial purpose of using biometrics was to improve safety and convenience, the technology has surpassed this role to aid banks differentiate themselves in the market.
“What started out as a security issue has ended up being a product differentiator that satisfies existing customers and attracts new customers,” said Mandret and Le Pape.
“Banks enhance security with biometric authentication while offering customers the convenience of doing all those things people would like to do at the ATM, without the constraint of remembering a PIN or holding a bank card.”
Looking ahead, biometrics technology is certainly set to play a major role in the financial industry as banks and their customers appreciate and understand its potential. As with any new technology, there is the initial reluctance to adoption, but given the obvious advantages, it may not be too long before biometrics authentication system becomes the norm for ATM facilities.