With the recent FFIEC guidance urging that financial institutions implement two-factor authentication at their Web sites by the end of 2006, the issue of making transactions safe continues to absorb the industry - and public. Even biometrics, long resisted by consumers, is getting a second look.
Just over half (51%) of 1,000 U.S. consumers recently surveyed by Los Angeles-based Kelton Research Group said they believed a fingerprint was the form of identification that would be most difficult to forge or steal. By contrast, only 12% of respondents felt their U.S. passport, which is designed to be tamper-proof, would be so tough to compromise.
It's long been conventional wisdom that consumers aren't crazy about using biometrics to identify themselves at their bank or the store because they view it as intrusive and associate it with being fingerprinted, which has come to mean being treated like a criminal. But the Kelton survey suggests this consumer resistance may not be as deeply rooted as previously thought.
The survey, funded by a Herndon, Va.-based BioPay, a processor of biometric payments, does not suggest overwhelming consumer demand for fingerprint scanning. But it does reflect a growing trend. BioPay, for example, already processes fingerprint-initiated payments for 1,500 retail locations, including Lowe's Food and Giant Eagle stores.
BioPay processes these payments for between 15 and 30 cents per payment. The company also offers banks and retailers a fingerprint-initiated payroll check cashing system for about $5,000 to $8,000.
Purdue Federal Credit Union of West Lafayette, Ind. has been using fingerprint imaging to authenticate its members since 1997. According to senior vice president Gail Koehler, 29,000 of the credit union's 56,000 members have signed up so far.
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"Identity theft and card fraud issues have generated a major interest in biometrics," Koehler says, adding that her credit union's members also see it as more convenient than having to carry tokens or more cards with them for identification. She says that her credit union members have by and large not viewed the use of biometrics as "suspicious, because we're a trusted entity."
Indeed, Koehler points out, as U.S. citizens adjust to post-9/11 security scrutiny at airports and corporations, the use of fingerprint scanning will become more accepted in everyday life. (PC manufacturers IBM Corp. and Hewlett-Packard are already incorporating fingerprint imaging touchpads into some of their laptops; ATM maker Diebold Inc. has developed fingerprint biometric-enabled machines.)
Donita Prakash, vice president of marketing for BioPay, says the Kelton survey confirms that the convenience factor - touch your finger to a pad and you're done - has become a real selling point for consumers. Getting fingerprinted is losing its negative connotation as it's more commonly required of new bank employees and soccer coaches alike, she says.
Reduced costs might also make fingerprint authentication a more attractive proposition for banks. At the time Purdue Federal first deployed their system, the hardware and software for one fingerprint reader cost about $500, according to Colleen Madigan, director of strategic accounts for Saflink Corp., the biometrics software provider for Purdue. Today, Madigan says those same readers can be purchased today for less than $100.
Bruce Cundiff, research analyst for Javelin Research, agrees consumers are becoming more receptive to biometrics. A full 30% of the people Javelin surveyed in July 2005 said they'd prefer to offer up their fingerprint to be scanned, making it the third most popular authentication choice after answering challenge questions and using software that allowed their computing device to be recognized. "Consumers are becoming used to the fingerprint as a form of identification," he says. "It's familiar to them."
Rebecca Bace, president and CEO of Infidel Inc., says the FFIEC's guidelines will encourage use of biometrics, for select authentication applications if not for mainstream identification. It will also boost one-time passwords, hardware tokens, challenge questions and other secondary forms of authentication, she says. "For the major consumer institutions, authentication is not going to be one size fits all."
Watch for "What Lengths Will Customers Go To To Protect their Online Accounts?" in the Nov./Dec 2005 issue of Banking Strategies.
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