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Toppling The PIN:
Banks Eye Biometric Technology For ATM Access

by Lucas Mearian

Citibank is looking into the feasibility and cost of using biometric technology as a more efficient and secure method of identifying its customers. Meanwhile, Huntington Bancshares Inc. is studying the impact of identity theft and fraud with a close eye on biometrics as a possible approach to reducing the chronic problem.

Indeed, a growing number of financial services firms are strongly considering the use of biometrics technology sooner rather than later because of heightened security concerns sparked by the Sept. 11 terrorist attacks and skyrocketing fraud rates. Biometric identification systems use individuals' unique physical or behavioral characteristics, such as fingerprints or voice patterns, to identify them.

According to Meridien Research Inc. in Newton, Mass., consumer fears and losses due to fraud are a strong enough incentive for institutions to invest large sums of money in biometrics. And with 500,000 cases of identity theft in the U.S. each year, consumers are ready to accept biometrics at the cost of increased privacy and more intrusive methods of identification, according to a recent report by Meridien.

Deutsche Bank AG and Citibank have been using biometrics for several years for employee access to computer server rooms, Meridien said.

Tom Connaughton, managing director of risk management at Citibank, North America, in New York, said his company wants to be a leader in extending biometric technology to customers, providing them with several types of identification options, such as fingerprint and facial-recognition technologies, so they can choose which one they're most comfortable with.

Having customers use biometrics to gain access to accounts is the only way for the bank to know for sure whom they're dealing with, Connaughton said.

Steady increases in fraud have led more financial institutions to invest in biometrics. In 2000, companies spent $127 million on biometric devices, with fingerprint scanners accounting for about 44% of the sales, according to Meridien. Face recognition made up 14% of overall sales, hand geometry 13%, voice recognition 10% and iris scans 8%, the firm said. By 2004, the financial services market will spend about $1.8 billion annually on biometric technology, according to IDC in Framingham, Mass.

According to a report to be released this month by Gartner Inc. in Stamford, Conn., one in 12 online consumers surveyed said they had been victims of identity theft or of someone else using their personal information to steal money or buy products. Meanwhile, 1.13% of all online transactions are lost to fraud, representing billions of dollars each year.

Meridien believes that there are uses for biometrics in banking because the technology can offer "security to customers at their ATMs, within branches to authorize transactions and for online banking." The technology can also be used inside a company as a means to secure vaults and monitor access to doors and computer systems, according to Meridien analyst Christine Barry, who co-authored the report.

Columbus, Ohio-based Huntington Bancshares performed a study of biometric technology three years ago. At the time, the technology had too many problems associated with it, according to Huntington CIO Joe Gottron.

"The initial setup was quite cumbersome at the time, and the technology had limitations in sharing biometric data at the time between ATMs. Basically, we stepped back and said it didn't make sense at the time to push the envelope of technology," Gottron said.

Currently, Gottron has a team working on defining the effects of fraud on the bank. Once that study is complete, by midyear, Gottron might commission another study of biometrics to see which technology would fit best.

"There's going to be a lot happening [in biometrics] in the next three years. I'm going to stay close enough to biometrics given the new world we live in to make sure we make a move on it when the business case warrants it," said Gottron.

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