Forbes

Facing the Future  

By J. Alex Tarquinio

No one can counterfeit a face. They can steal your personal identification number, your credit cards and your birth certificate...but they can never duplicate that indefinable combination of features that allows your mother to pick you out from the rest of her brood.

At least that's the theory behind InnoVentry, a San Francisco-based firm that operates self-service check cashing machines in supermarkets, convenience stores and Las Vegas casinos. InnoVentry never asks you to keep track of an automatic teller machine card or remember a PIN. As you approach the ATM, it scans your face and matches it with a file photo. The company has compiled a database of 330,000 customer faces over the last two and a half years.

An InnoVentry predecessor company led the way in using biometrics for day-to-day financial transactions, first installing its "Mr. Payroll" machines in check cashing shops in 1997. Recently, the technology was enhanced with face-geometry software designed by New Jersey-based Visionics, a private company with plans to go public later this year. Visionics software, known as FaceIt, reduces the data needed to identify a human face to 84 bytes, small enough to fit on the magnetic strip of a smart card.

For most applications, the numbers just don't add up, with costs likely to outstrip the savings from fraud reduction.

High tech experts have been saying for years that fraud prevention would be well served by advances in biometrics, an identification process that uses biological observations such as fingerprinting. So far there's been little interest from companies--even after five years of heavy research and development--mostly because of concerns about adverse consumer reactions and high technology costs.

Fraudulent ATM transactions amount to only a paltry $12 million to $20 million a year, the American Bankers Association estimates. Credit card fraud and check fraud are much bigger problems, with a combined annual cost to the U.S. financial services industry of about $1.2 billion. But merchants are unlikely to foot the bill for biometric devices to combat check and credit card fraud at the point of sale.

Biometrics proponents hope that the rise of e-commerce will change that. "E-commerce is inherently an anonymous environment," says Raj Nanavati, a partner with the International Biometrics Group, a New York consultancy. "People see the problem of fraud as much worse, with the possibility of information being hacked into."

E-commerce also requires the consumer to foot the bill for the biometric device. Fortunately, hardware costs are coming down. Nanavati says he thinks the price of a mouse with an embedded fingerprint scanner will be sliced in half this year, to about $50. Computers with built-in video cameras will hit the market in a matter of months. These are intended primarily for video conferencing, but could also be used for face-geometry verification.

Once the hardware is in homes and offices, e-commerce sites could adopt biometric identification procedures. But as yet, there's no rush to do so. Demand would probably have to come from customers. James Hilford, chief marketing officer at Eyeglasses.com, says his site would be likely to indentify customers through biometrics only if that became a standard on the Web, despite the fact that his site already uses Visionics FaceIt software to fit eyeglasses to a customer photo.
But offering high tech identity verification may become one way to distinguish a site, especially if concerns about identity theft rise. Joseph Atick, Visionics' cofounder and chief executive, says he thinks the use of biometrics should be phased in, with online brokers offering perks to people who can be positively identified, perks such as doing away with caps on large trades, for instance.But in the offline world, your grocery store isn't likely to fingerprint you anytime soon. For one thing, years of research have yet to produce a consensus on the best biometric measurement to use, although it has narrowed the field to three: eye scans, fingerprints and face geometry. What's certain is that the process has become much less intrusive than just a few years ago, when one procedure required users to put their eye up to a laser retina scanner that gave some people pink eye.

The major ATM makers have installed improved eye scanners in machines that are now being tested in Texas. "I would have said different things were promising five years ago. I would have said that hand geometry was most promising, and a little later I would have said voice recognition," says Rob Evans, marketing director for the ATM group at NCR, (nyse: NCR), one of the leading ATM makers. Now the company, which also makes InnoVentry's face-recognition machines, is betting on eye scans.

If an InnoVentry customer fails to pass a face-geometry check, he'll talk to a call center representative, who can identify him visually.

There's little doubt that eye scans are the most reliable, reducing the chances that a machine will deny you access to your account. But they're also far more expensive, adding thousands of dollars to the cost of an ATM. Consumers aren't going to shell out that kind of money for their home computers, and merchants aren't much more likely to install one. (For an earlier Forbes.com story about eye scans, go to Spinoff City.)

If an InnoVentry customer fails to pass a face-geometry check, he'll talk to a call center representative, who can identify him visually. Face scans are so much cheaper than eye scans that the company thinks this is an economic alternative.
Visionics' Atick notes that fingerprint scanners have no other practical applications, unlike the video camera required for his face-recognition technology. What's more, most banks already have video cameras at each ATM.

"Every time you use a bank ATM, your photo is taken," says Nessa Feddis, an attorney with the American Bankers Association. She says she thinks the PIN system, backed up by time-stamped photos to resolve disputes, works just fine.
It may be that the convenience of hands-free banking, and not concerns about fraud, is what finally wins consumers over. InnoVentry customers appreciate the convenience of not having to carry an ATM card, says Frank Petro, chairman and chief executive of Innoventry, which is co-owned by California banking powerhouse Wells Fargo & Co. (nyse: WFC) and nationwide check cashing shop Cash America International (nyse: PWN).

InnoVentry has about 500 machines with face-recognition capabilities in the field and is aggressively rolling out more, with commitments to install 3,700 machines this year. "My experience with technology standards is that they are established by the people who put more technology out there than anybody else," Petro says.