Fingerprint payments taking off despite security concerns
Let your fingers do the talking
Consumers embarking on a shopping spree may be able to leave their wallets behind in the near future, despite some security and privacy experts' concerns. This week, Pay By Touch Solutions, a San Francisco-based firm whose system allows customers to pay at participating grocery stores with the press of a finger, announced that investors have pledged $130m to fund the company's expansion plans. And, rival BioPay has already enrolled more than two million people into its service for cashing payroll checks and paying at the supermarket checkout.
Paying by fingerprint is a hit with consumers, because people want convenience and faster check outs, said Shannon Reardon, director of marketing for Pay By Touch.
"The primary reason consumers sign up is for convenience," Reardon said. "They don't need a wallet or purse. When it become more ubiquitous, consumers won't have to carry cards around."
Moreover, the systems are popular with merchants, who stand to save a significant amount in processing fees if their customers pay using fingerprints linked to their bank accounts - up to 75 per cent over straight credit card fees, according to BioPay. The market for such point-of-sale equipment and services will jump to $440m - or 8.4 per cent of the market for biometrics - by 2010, up from $31m - or two per cent of the market - in 2005, according to research firm International Biometric Group.
Yet, the security of the systems largely remains a question mark. Security and privacy experts worry that pay-by-fingerprint schemes could lead to hard-to-combat identity fraud and greater threats to civil rights.
"What are their security practices and how much more extraordinary are they compared to a ChoicePoint, a LexisNexis, or a CardSystems?" said Pam Dixon, executive director of the World Privacy Forum. ChoicePoint, Reed Elsevier's LexisNexis, and CardSystems Solutions have all had high-profile incidents where consumers' financial and personal data has been leaked.
"Stealing a credit card number is one thing," she said. "But if your biometric is stolen and can be reconstituted, then that is a big problem."
Both Pay By Touch and BioPay pledged that their customers' security and privacy are of paramount importance.
Both companies require customers to physically enroll and link their fingerprint and customer ID number to one or more financial accounts. Social Security numbers are not used and accounts are only identified by the last few digits of the account number. The merchant never sees any of the information and nothing is left behind, said Donita Prakash, vice president of marketing for Herndon, Virginia-based BioPay.
"It is the least amount of information left behind about you for any of the possible ways of completing a transaction," Prakash said. "Nothing physical passes to the merchant that could be skimmed, and it's not leaving your body."
Moreover, neither system uses the actual fingerprint to identify the user, but creates a template of the fingerprint - generally a set of numbers measuring specific features of the print. The data format reduces transmission time, but also makes it impossible to reconstitute the original fingerprint, said Larry Hollowood, chief security officer for Pay By Touch.
"When we explain to our consumers that we are not taking the full fingerprint, but that we have 40 data points that can't be turned into a fingerprint, that increases the adoption rate," he said.