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Biometric banking technology: the future is now

14th July 2005

Japanese bank officials have convened to discuss standardizing biometric identification systems.

In an attempt to offer increased convenience and protection to customers, the Japanese Bankers Association has announced plans to establish a standardized biometric customer identification system. If the technology proves successful, other banks may follow suit, although numerous concerns need to be overcome before this can become a reality.

Card fraud has become a huge problem in recent years. In many cases, banks are obliged to compensate for most of the financial damage incurred by customers due to forged or stolen cards. Banks also suffer setbacks in customer confidence when these events occur.

In an attempt to tackle the problem, officials from several major Japanese banks have formed an alliance to discuss standardizing biometric identification systems. The working group's two key aims are to offer customer convenience and counter crimes committed using forged and stolen cards.

The group is expected to call for standardization of two major but incompatible biometric technologies, namely a palm vein reading system and a fingertip vein reader. The goal will be to allow bank customers to use a single card with any ATM. Currently, there are concerns as to whether some cards might not work at ATMs using different systems, or that users might have to identify themselves differently at different banks.

Interest in biometric systems is not new. Biometric technology testing has been underway in the financial services sector for around a decade. However, as yet, biometrics has not been integrated into banking on a significant scale.

Yet the industry must recognize that, if there is even a small degree of error associated with these solutions, for example should they fail to identify customers or identify them incorrectly, confidence in the technology will quickly plummet.

Officials say the two systems are accurate. There is, they claim, a chance of up to one in 10,000 that the readers will incorrectly identify the cardholder, and a chance of only one or less in a million that it will identify somebody else as the cardholder.

Still, it will take some time before consumers become confident about the new technology. UK consumers, for instance, may see biometrics as a breach of privacy, a prickly issue highlighted by the controversy surrounding national identity cards. In addition, many banks will need to be convinced that investing in such high-cost technology would provide sufficient return on investment.

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