Are Your Customers Ready for Biometrics? You can now use biometrics for point-of-sale purchases. Find out if it's right for your business.

Q:I've heard about new computer-based fingerprint identificationsystems. How do they work, and how can I determine if thistechnology is right for my business?

A:What you refer to is called biometrictechnology, which measures human traits such as fingerprints,retinas and irises, voice and facial patterns, and sizes and shapesof hands. This technology has been used by airports, lawenforcement agencies and assorted businesses for security purposesand to provide access into secure buildings. During the past fewyears, biometric fingerprint identification technology has drawninterest from the retail sector to serve as a way to identifycustomers, reducing credit card and check fraud. The technology canalso be used in conjunction with a payment terminal to actuallytransmit payments, which results in faster transactions.

Numerous manufacturers now make these biometric systems.Companies such as Indivos, BioPay, Identix and InternationalAutomated Fingerprint Card provide biometric software and sensors,which are then installed on point-of-sale terminals manufactured byHypercom, VeriFone, Biometric Access Corporation and Sagem MorphoInc. A few companies, such as International Automated Systems Inc.,Keyware Technologies and Digital Persona, offer both the softwareand the terminals.

Biometric payment systems are most widely used by supermarkets,but they are also being pilot-tested in several fast-foodrestaurants nationwide and have applications at gas stations andhotels as well. Customers register a fingerprint scan with a storeor restaurant and enter their credit or debit card account numbersto set up their accounts. When it comes time to make purchases,customers place their fingers on the sensors for identity purposesand pay without ever having to show their cards. The systems canalso be used with checking accounts, where electronic checks areprocessed through an automated clearing house at a reduced cost tomerchants, who pay only 8 to 12 cents (compared to the 54 cents itcosts to process a conventional check). Once customers haveregistered, merchants can also use the technology to keep track ofloyalty programs and eliminate paper coupons.

There are a few drawbacks to these systems, including thepossibility of a customer being misidentified, which could lock himor her out of the system, or a scanner that fails to scansomeone's print because the finger has dry or cracked skin orskin with shallow ridges. Despite these challenges, biometrics canoffer merchants a reduction in fraud and chargebacks (disputedtransactions), faster transaction turnaround times,easier-to-manage loyalty programs and improved reportingmethods.

To encourage customers to use this new technology, someretailers have tied fingerprint identification registration tocustomer loyalty programs by offering additional loyalty points tothose who register their fingerprints. Biometric systems allowmerchants 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 individualand cannot be forged.
• Provide faster transaction times.

Merchants' interest in biometric fingerprinting technologyis increasing as scanners decline in price--some sell as low as$100. The fingerprint scanners are compatible with mostpoint-of-sale terminals. The technology also has applications forrestaurant drive-up windows and gas pumps, for automated check-insystems at hotel counters and for ticket-driven businesses such asmovie theaters and amusement parks. However, none of these optionsis likely to happen in the near future--until the systems becomemore accurate. Currently, some scanners misidentify individuals(for the reasons mentioned earlier), denying them access to thesystem. According to some analysts, it will take several years formerchants and their customers to accept this technology as asubstitute for credit and debit cards and as identification forchecks.

When you investigate biometric fingerprinting systems for yourbusiness, keep the following guidelines in mind:

• Determine what your needs are. For example, do you need thesystem as an additional noncash payment option, as a way toidentify a customer who writes a check or as a tie-in to loyaltyprograms?
• Look for units with built-in security, encryption andverification software.
• Don't believe any biometric manufacturer who tells you thesystem is foolproof.

No technology eliminates all fraud and chargebacks. However, ifyou want to investigate state-of-the-art customer identificationtechnology, faster transaction times, an easy way to manage loyaltyprograms and an additional noncash payment option to offer yourcustomers, then biometric fingerprint scanners might beidentification and payment solutions to pursue.

Cardservice International Senior Vice President ofSales John Burtzloff is in charge of sales strategy andexecution and thus is responsible for managing all aspects of thecompany's marketing, communications, telesales, checkguarantee, new accounts and sales support activities.

The opinions expressed in this column are thoseof the author, not of BIZ Experiences.com. All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.