Q:
I've heard about new computer-based fingerprint identification
systems. How do they work, and how can I determine if this
technology is right for my business?
A:
What you refer to is called biometric
technology, which measures human traits such as fingerprints,
retinas and irises, voice and facial patterns, and sizes and shapes
of hands. This technology has been used by airports, law
enforcement agencies and assorted businesses for security purposes
and to provide access into secure buildings. During the past few
years, biometric fingerprint identification technology has drawn
interest from the retail sector to serve as a way to identify
customers, reducing credit card and check fraud. The technology can
also be used in conjunction with a payment terminal to actually
transmit payments, which results in faster transactions.
Numerous manufacturers now make these biometric systems.
Companies such as Indivos, BioPay, Identix and International
Automated Fingerprint Card provide biometric software and sensors,
which are then installed on point-of-sale terminals manufactured by
Hypercom, VeriFone, Biometric Access Corporation and Sagem Morpho
Inc. A few companies, such as International Automated Systems Inc.,
Keyware Technologies and Digital Persona, offer both the software
and the terminals.
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Biometric payment systems are most widely used by supermarkets,
but they are also being pilot-tested in several fast-food
restaurants nationwide and have applications at gas stations and
hotels as well. Customers register a fingerprint scan with a store
or restaurant and enter their credit or debit card account numbers
to set up their accounts. When it comes time to make purchases,
customers place their fingers on the sensors for identity purposes
and pay without ever having to show their cards. The systems can
also be used with checking accounts, where electronic checks are
processed through an automated clearing house at a reduced cost to
merchants, who pay only 8 to 12 cents (compared to the 54 cents it
costs to process a conventional check). Once customers have
registered, merchants can also use the technology to keep track of
loyalty programs and eliminate paper coupons.
There are a few drawbacks to these systems, including the
possibility of a customer being misidentified, which could lock him
or her out of the system, or a scanner that fails to scan
someone's print because the finger has dry or cracked skin or
skin with shallow ridges. Despite these challenges, biometrics can
offer merchants a reduction in fraud and chargebacks (disputed
transactions), faster transaction turnaround times,
easier-to-manage loyalty programs and improved reporting
methods.
To encourage customers to use this new technology, some
retailers have tied fingerprint identification registration to
customer loyalty programs by offering additional loyalty points to
those who register their fingerprints. Biometric systems allow
merchants to:
- Confirm a customer's identity.
- Offer customers another payment option.
- Verify check history to weed out potential bad checks.
- Make customer payments more secure.
- Offer more efficient service.
- Maintain better reporting methods.
- Reduce fraud because fingerprints are unique to each individual
and cannot be forged.
- Provide faster transaction times.
Merchants' interest in biometric fingerprinting technology
is increasing as scanners decline in price--some sell as low as
$100. The fingerprint scanners are compatible with most
point-of-sale terminals. The technology also has applications for
restaurant drive-up windows and gas pumps, for automated check-in
systems at hotel counters and for ticket-driven businesses such as
movie theaters and amusement parks. However, none of these options
is likely to happen in the near future--until the systems become
more accurate. Currently, some scanners misidentify individuals
(for the reasons mentioned earlier), denying them access to the
system. According to some analysts, it will take several years for
merchants and their customers to accept this technology as a
substitute for credit and debit cards and as identification for
checks.
When you investigate biometric fingerprinting systems for your
business, keep the following guidelines in mind:
- Determine what your needs are. For example, do you need the
system as an additional noncash payment option, as a way to
identify a customer who writes a check or as a tie-in to loyalty
programs?
- Look for units with built-in security, encryption and
verification software.
- Don't believe any biometric manufacturer who tells you the
system is foolproof.
No technology eliminates all fraud and chargebacks. However, if
you want to investigate state-of-the-art customer identification
technology, faster transaction times, an easy way to manage loyalty
programs and an additional noncash payment option to offer your
customers, then biometric fingerprint scanners might be
identification and payment solutions to pursue.
Cardservice International Senior Vice President of
Sales John Burtzloff is in charge of sales strategy and
execution and thus is responsible for managing all aspects of the
company's marketing, communications, telesales, check
guarantee, new accounts and sales support activities.
The opinions expressed in this column are those
of the author, not of Entrepreneur.com. All answers are intended to
be general in nature, without regard to specific geographical areas
or circumstances, and should only be relied upon after consulting
an appropriate expert, such as an attorney or
accountant.