American Banker

Fingerprint Payment Systems Going Live at U.S. Retailers

March 25, 2003
By Will Wade

The prospect of consumers' using their fingertips to make payments or perform other transactions at the point of sale has long tantalized entrepreneurs and others in the payments business -- and alarmed privacy advocates.

Despite the odds against biometric-based payment systems, three pay-by-touch companies with varying business models are deploying their technology and setting the stage for the first consumer responses to it.

Two of them -- Biometric Access Corp. and Indivos Corp. -- have gotten some grocery stores and others to start using their technologies. The third, BioPay LLC, expects a Baltimore supermarket to start using its system in the second quarter. All three rely on the existing payments infrastructure, namely the card processing networks or the automated clearing house, to conduct transactions.

"I believe it is inevitable that people will use biometrics to initiate payment transactions," asserts Tim Robinson, the president and founder of BioPay, of Herndon, Va.

Even if consumers do indicate their willingness to use the system, it would be hard to predict how a national biometric-based payment option might emerge, especially since one of the three companies currently pushing the technology disagrees with the other two about how such a system should be run.

Indivos and BioPay favor creating an archive of people's finger images, so that after a consumer who has enrolled once could use the technology at any participating retailer. But the concept of a central fingerprint database that ties the images to financial and other information is particularly odious to privacy advocates.

The other model, which Biometric Access has forwarded, relies on a private authorization network that would require consumers to register separately with each merchant.

Ron Smith, the founder, president, and chief executive officer of Biometric Access, emphasizes that he is not creating a single biometric payment network for multiple merchants. However, he also said that the distinction may not ultimately matter, since such networks are already being built.

"I'm not trying to become the great repository of information in the sky, but I'm not suggesting that there won't be one," Mr. Smith said. "The question is: Who's going to be the keeper of that data? I think it's going to be hard for somebody that's not already a household name." Companies like Visa U.S.A. and MasterCard International have "already spent billions, and those networks are already in place."

Biometric Access, of Round Rock, Tex., been offering its SecureTouch-n-Pay service since early last year, and it is currently in place at several grocery chains. Kroger Co. is conducting a pilot program in Texas, and the system is being used at 18 Falley's Food 4 Less stores in Kansas and Missouri. Customers can register both their bank accounts and credit cards and use either for payments.

Mr. Smith said his company generates revenue primarily by selling the scanning devices and other systems, not by charging per-transaction fees. However, a spokeswoman for Biometric Access said that some clients are paying fees based on transaction volume.

His competitors have their eye on larger, interoperable systems. Indivos, of Oakland, is pushing for a single unified payment network authorized by fingerprint data, and a Thriftway grocery store in West Seattle is already using its system, which accepts bank accounts and credit cards. The company underwent a management shakeup in recent months and is in the final stages of being acquired by a payment processing start-up, Solidus Networks Inc.

BioPay entered the financial industry in 1999 with a check-cashing service built around its proprietary fingerprint comparison software. Last month it introduced the bCheck service, which it says will help it reach its long-term goal of creating a national network using fingerprints to authorize transactions.

Customers enroll in bCheck by providing their bank account information and having two of their fingers scanned into the BioPay system. They then can authorize payments at participating stores by placing a fingertip on a reader. Once the machine confirms the customer's identity, the purchase amount is deducted from the appropriate account through an automated clearing house transfer.

BioPay stores the scanned fingerprint information, operates the payment authorization service, and charges the merchant a fee of 9 to 25 cents for each transaction.

"We want you to enroll at grocery store A and then be able to use your finger to pay when you go to video store B and gas station C," he said.

To date only one store, Santoni's Supermarket in Baltimore, has signed up for bCheck. It plans to start offering the service in the second quarter. Mr. Robinson said BioPay already has finger image information for 400,000 people from its biometric check-cashing service.

Trevor Prout, the director of marketing for International Biometric Group, a New York consulting firm, says the BioPay model makes more sense in the short term, because it generates recurring fee revenue. "BAC revenues will come from selling the devices, and there is a limited number of devices that will be needed."

In the long-term, one of the payments industry's big players might absorb a BioPay-style system, he said. "I think their model is good, but when the larger retailers start to try this, the question is whether they are going to look to BioPay as their trusted partner."

While the concept seems to be gaining converts in the retail industry, some civil rights advocates have expressed concern about companies amassing digital files of individuals' fingerprints.

"One of the risks is what to do when the system is compromised, which will happen," said Marc Rotenberg, the executive director of the Electronic Privacy Information Center. "It's easy to change a credit card number, but you can't change your fingerprint."

Privacy advocates say they are more concerned about whether the information will be shared with other groups.

"I think people are more and more aware that personal information that is collected at one point can be used at another point," Mr. Rotenberg said. He also said that there is an important distinction between security and privacy and that it is possible to increase safety without giving up anonymity.

Policy papers from his Washington think tank have said that biometrics, by their very nature, are tied to unique physical characteristics and therefore are incompatible with efforts to preserve privacy.

Both BioPay and Biometric Access say there is little value to the information they are compiling, because they are not storing actual fingerprint images on their payment servers. Both companies use similar, though incompatible, algorithms that scan fingerprints in search of unique shapes and structures, known as minutia points. From this, the system creates a long string of numbers that becomes an individual's template.

When a person wants to make a purchase, the scanner creates another template and compares that code to the one on file. BioPay stores the actual fingerprint scans in a separate electronic archive; Biometric Access does not but says it can work backwards from its template to recreate the fingerprint if needed.

Brian Bixenman, the manager of the Thriftway store that is using Indivos scanners, said consumers have had very few criticisms.

"When we first put them in, a few people complained about the Big Brother image," he said. "But I haven't heard any complaints at all in a long time." Instead, many customers appreciate the convenience and the speed of paying by finger. "It's pretty cool. I use it two or three times a day myself."