News

Cashless society may be at our fingertips

August 29, 2005

Like snowflakes, no two fingerprints are alike. Every schoolchild knows this, and yet that simple fact could have some enormous practical applications in the IT era.

Take the ongoing debate over national I.D. cards, for instance. If a suitable technology infrastructure were in place, it would be a moot discussion since everyone is already carrying around a unique identifier - and, unlike a card, we can't leave home without it.

Of course, personal identification comes with benefits for less weighty fields as well. A number of companies are jockeying to deliver the fingerprint killer-app for retail, which is a world where every second counts and a decreased transaction time usually results in an increased bottom line.

Touch 'n go

One company working to perfect the biometric payment model is Herndon, Va.-based BioPay. The company's payment system involves a one-time enrollment process for new consumers in which both index fingers are scanned while the cashier takes information from the customer's driver's license and funding source.

The enrollment time only takes about a minute - which is a pretty fast transaction -  but according to vice president of marketing Donita Prakash, the real speed comes when the customer goes to make a purchase.

"We have clocked the `tender time' at five seconds at the Lowes grocery store in Hickory, N.C.," she said. "This compares to industry averages of 30 seconds for a signature card."

The chain of 108 Lowes stores is one of BioPay's biggest successes, but not its only one. Prakash said 150 retail locations are either online with the system or working on installation, and she projects 400 more locations will be installed by the end of 2005.

Biometric company Pay By Touch also realizes speed gains for users. In South Carolina and Georgia, Pay By Touch is installed throughout the Piggly Wiggly grocery chain. The San Francisco-based company recently integrated its system with store technology provider Radiant Systems' petroleum and c-store retail application, among others.

Company spokesperson Shannon Riordan said Pay By Touch enrollment takes about two minutes. Once enrolled, transaction times average 15 seconds.

While the speed of the transaction is a big draw - particularly for those retail situations where long lines spell lost sales - decreased per-transaction fees are likely the bigger selling point. Since the sale is treated as an automated clearninghouse debit, fees are about 75 percent lower than comparable credit or signature-debit transactions.

Will consumers be skeptical about giving their fingerprint to a commercial database? According to both Riordan and Prakash, this is not proving to be an issue since they are not actually collecting fingerprints. Instead, the software generates a number of data points at the moment of the enrollment scan, stores that numerical information and discards the fingerprint itself.

Prakash added that at no point in the BioPay enrollment does the customer give out his or her Social Security number. "Today's typical identity thief has to get your SSN in order to steal your identity," she said. "What can they do with 40 data points that equate to your fingerprint? The answer is nothing."

Tipping the scales

The technology is undeniably impressive, but what will it take for consumers to adopt it in statistically meaningful numbers?

"This suffers from the classic chicken-and-egg problem that a lot of new technologies face," said Nikki Baird, analyst with Forrester Research. "The benefit to the consumer is that you don't have to carry any method of payment with you - you could be completely cashless, cardless, checkless," she said.

"The problem with that is you only can be truly cashless when everyone accepts the biometric payment format - which means, until that happens, you're still going to have to carry around various forms of payment."

Baird said that biometric payment does have strong benefits for the retailer. Cashless transactions are always beneficial for loss-prevention reasons, and when you combine that with lower processing fees, the application starts to look pretty attractive.

She also said that through anecdotal, ear-to-the-ground research, she perceives that biometric-based authentications seem more secure to consumers than magnetic-stripe transactions.

But retail has a long way to go and a lot of work to do before this killer app can begin to bare its teeth.

"The emerging biometrics industry needs to work with retailers to find a way to prime the pump," she said, "to get the level of deployment past some tipping point where there are enough of these payment devices in enough places that consumers can get away with being cashless and cardless. Then consumers will start to see the benefit, and will start pushing retailers to have it."