Are Your Customers Ready for Biometrics?
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.
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.