Pictures of the Future

The Next Mega-Market

Spring, 2003
By Peggy Salz

Biometric systems are breaking into the mainstream. Heightened security concerns are behind some of the growth. But it's increased demand for convenience that will make biometrics a mega-market.

Biometric technologies are poised to hit about US-$ 1 billion in revenues this year—roughly a 25 % jump over 2002. According to Raj Nanavati, a partner at International Biometric Group (IBG), a biometrics research, consulting and integration company based in New York, new laws passed since the September 11 attacks that require airports, trucking firms and other businesses to monitor employees more closely are fueling much of the growth. "Security and efficiency are clearly driving the biometrics market," he notes. Interest in equipment for securing buildings, particularly airports, has risen dramatically. Also in greater demand are screening services, which fingerprint individuals and run the results against a database. 

Against this backdrop, IBG estimates law enforcement and public sector identification pilot projects accounted for 65 % of biometric revenues in 2002. A raft of new rules and regulations in the U.S., including the Visa Reform Act, which requires all foreign visitors to provide data to a biometric database, are certain to boost the number of government deployments to a record high. But pilot programs in other countries are also taking center stage.

In Yemen, for example, the government is betting on biometric cards to help eliminate ghost workers and double dippers. In Malaysia, authorities are using iris-scan technology to secure the border to Singapore. In the UK, the government is looking to include fingerprints on new national entitlement cards. In Spain, a new healthcare benefits card will include biometric data. And in Nigeria, the Election Commission is gearing up to implement a nationwide fingerprint identification system to register the country's 60 million voters "in a manner that will prevent fraudulent multiple registrations."

Cash, Check, Charge—or Finger? Struggling against a stormy economy, many retailers are boosting their expenditures on biometrics. The reason? "Biometrics can help them improve convenience, increase efficiency and drive results," says James Crawford, a retail analyst with Forrester Research in Cambridge, Massachusetts. "Despite having a lot of data, most retailers still don't know their customers. Biometrics can help close this gap."

Indeed, "biometric access" is fast becoming the new business mantra in the retail sector. "By speeding up the front-end operation, stores can process customers faster and save money, Crawford observes. More important, biometric technology can help retailers optimize marketing and merchandising to key segments.

Already, major supermarkets and department stores in the U.S., including Kroger, Thriftway and Wal-Mart, are paving the way, putting in payment systems that let consumers pay for products with a fingerprint. Tesco in the UK and Metro in Germany are also in the fast lane.

Generally, the customer places a fingerprint on a scanner device that is built onto the credit card machines found at most checkouts. The machine sends the encrypted data to a data center where the fingerprint is matched against the one volunteered when the customer enrolled in the program. After authentication, the transaction is routed through conventional financial networks like any other credit card or debit card transaction.

In the next two or three years, Crawford envisions "smart stores" where biometric systems will enable retailers to recognize customers and immediately cater to their individual needs. "People shop at Amazon because it tracks everything and can give recommendations based on past purchases. Why should a bricks-and-mortar store be any different?" he observes. Stores might be equipped with kiosks where consumers can use a fingerprint to access a list of products they buy regularly as well as special offers and coupons.

Rule of Thumb. Despite progress in biometric technologies such as facial recognition and iris scanning, fingerprint identification remains the mainstay of the biometrics industry, representing nearly half of the total commercial biometrics market.

Nevertheless, experts agree that each biometric technology has unique advantages. For instance, in the UK, Virgin Atlantic and British Airways recently announced a joint trial of a "self-service" iris-recognition system at Heathrow Airport. "There is very definitely a market for these kinds of convenience applications and biometrics is a perfect fit," notes John Chang, an analyst with Allied Business Intelligence, a biometrics research company based in Oyster Bay, New York.

But there is a catch. Biometric technologies are proprietary and lack standards. The biometrics industry is also well aware of this, which is why vendors are joining up to ease installation and lower equipment costs. "Sure, it will be another year before we're really there," Chang says. "Interest in improving biometrics won't translate into sales this year, but 2004 could certainly be a big year for biometrics."