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Are You Ready to Give Your Wallet the Finger?

Karina Tanny | State Street Corporation

April 25,2017

It's a problem that befuddles many a beach-goer: What do you do with your wallet when it's time to take a dip?

Put it in your shoe? Sneak it into the folds of your towel and hope would-be thieves don't notice? Imagine if you didn't have to bring your wallet to the beach at all. Instead, if you needed cash, you could head to the nearest ATM and access your bank account simply by placing your finger on a scanner.

If that situation sounds ideal, you may want to book your next vacation to Brazil, where many ATMs have been outfitted with biometric technology that reads fingerprints and disburses cash to customers—no ATM cards necessary. Phil Scarfo, the vice president of worldwide marketing for biometrics with HID Global, says that in Brazil and elsewhere, biometrics allow banks to provide more convenient solutions to customers, while simultaneously addressing security concerns. HID Global worked with several major Brazilian banks to install fingerprint readers featuring multispectral imaging technology—an advanced form of fingerprint authentication—that stymies scammers who otherwise employ creative strategies to fool sensors, such as fashioning fingerprints out of wood glue.

"The key is to stay one step ahead of the bad guys," Scarfo said. "In Brazil, some banks have found that multispectral imaging is secure and reliable enough that they could actually allow people to conveniently do business in a true cardless fashion; which is ultimately the most convenient form of security that all of us are looking for in this complex digital world."

Fingerprint-based transactions aren't just appealing to traditional ATM users. Brazil's Bolsa Familia program, which provides money to low-income families, uses fingerprint readers to disburse funds to its beneficiaries through ATMs. Before the adoption of fingerprint authentication, beneficiaries were asked to key PIN numbers into ATMs, but for a population unaccustomed to using banks, that posed major hurdles. PIN numbers were often forgotten, leaving bank managers with the time-consuming task of helping beneficiaries get new PINs. "For folks with language and literacy issues, a biometric was the preferred alternative," Scarfo said. "You can't leave home without it and it's pretty simple for anyone to use."

Biometrics allow banks to provide more convenient solutions to customers, while simultaneously addressing security concerns.

The use of fingerprint biometrics to distribute government benefits isn't a new phenomenon. It dates back to at least the mid-1990s, when the province of KwaZulu-Natal in South Africa loaded ATMs and fingerprint readers on trucks and sent them out to villages so residents could receive pension payments. "They'd make the rounds with these vehicles. On a set day of the month, your pension truck would come and everyone would line up and use fingerprints as proof," said Alan Gelb, a senior fellow at the Center for Global Development, a nonprofit organization that tackles global poverty.

What made the South African initiative different from many programs today is that in KwaZulu-Natal at the time, there wasn't the digital infrastructure necessary to connect the ATMs to a central biometric database or to pay by mobile phone. Instead, users were issued cards storing their biometric data. When pension day came, their fingerprints were compared to the data on their cards to confirm their identities. It was less convenient than today's cardless or mobile transactions, but it was also far less vulnerable than one of the older methods of identity confirmation: having a trusted local authority, such as a village elder, vouch for the person receiving the pension. "In that sense, it is quite empowering," Gelb explained. "You have an entitlement. You don't need anybody to intercede for you."

Such empowerment is especially critical for women, he added, who in some societies are pressured to let men manage their earnings and access to government disbursements. With biometric authentication systems, "a woman's transaction cannot be handed off to her husband or guardian or whomever while she just sits in the background," Gelb said. Biometric authentication, for instance, is key to India's Bhamashah program, which requires that the woman of the household be designated as the head of her family to access government benefits. "It's really quite a revolution in a part of the world that has traditionally been male dominated," Gelb said.

As biometrics revolutionize the delivery of financial services and the disbursement of cash in the developing world, parts of the developed world are plodding along more slowly. Scarfo says that financial institutions in developed countries have sophisticated analytics tools to pinpoint, track, and even predict fraud in ways that don't rely on biometrics, so biometric authentication hasn't been implemented with the same urgency as it has been in developing countries struggling with rampant fraud. There's also, he said, more of a stigma associated with the use of biometrics from banking customers in countries like the US, where, not long ago, the technology was more commonly associated with criminals than average consumers. "There's this notion that biometrics, up until recently, was something that's more for bad guys, not the rest of us," Scarfo said.

But times are changing. For users of Apple mobile devices around the world, fingerprint scanning has become the norm since iPhones have been equipped with fingerprint sensors, which can be used for both unlocking phones as well as making certain purchases, since 2014. In the US, banks have recently allowed a variety of biometric authentication methods, including fingerprint scanning as well as iris scanning and voice recognition, to replace passwords for users accessing their bank accounts through their mobile devices. Will more secure and convenient ATM-based biometrics — the kind that render ATM cards (and wallets) unnecessary — be next? It could take some time, but Scarfo believes it will happen. He envisions fingerprint scanners working in combination with US consumers' mobile phones, with a secure wireless exchange from a person's phone serving as a second form of authentication.

Yet it's not necessarily security concerns that will drive this change, Scarfo added, but rather expectations of convenience. He said some consumers would likely be willing to sacrifice security for the sake of convenience. The good news is, they don't have to.

Topics: Advanced Technology

Karina Tanny | State Street Corporation

As Strategic Solutions Director, Karina Tanny is responsible for client solutions and business development activities for Performance & Analytics at State Street.  Her role includes strategically engaging with clients and prospects to understand their investment analytics needs and identify ways to best leverage State Street’s solutions. Karina is currently listening for ideas on which country to add to the list of 7 West African countries she travelled through primarily using taxis.