Japanese banks have turned to devices that read your finger or palm for sizable ATM cash withdrawals. Will U.S. banks follow their lead?
When Masahiko Ishibashi needs lots of cash, he gives his bank the finger. His right index finger, to be precise. The bank, Sumitomo Mitsui Banking, outfits its automated teller machines with scanners that take a snapshot of the veins in each customer's finger, and then compares it with a digital image stored in a chip on the customer's ATM card.
Ishibashi, a 42-year-old market research analyst, thinks the extra hassle is a small price to pay for the privilege of being able to withdraw the equivalent of tens of thousands of dollars at a time from his account. "It's convenient when I need a lot of cash or want to make a mortgage payment," says Ishibashi. "That would be above my limit if I was using a card with a magnetic strip."
Biometric ATMs are becoming a major security tool for Japanese banks. In the past two years, dozens of financial houses have added vein scanners to their ATMs in response to legislation passed in 2006 making banks liable for withdrawals by criminals using stolen or counterfeit bank cards. Today, more than 20,000 of Japan's 110,000 ATMs have vein scanners, and sales of the technology reached an estimated $70 million in 2006, according to the Japan Automatic Identification Systems Assn.
Not bad for a business that barely existed three years ago. Because of their low error rates, vein scanners won out over other biometric technologies, including iris, facial and fingerprint scanners. Both Fujitsu and Hitachi claim their scanners allow incorrect access less than one in a million tries.
To be sure, though, the technology poses a few problems. Customers complain that the scanners can't get a reading in bright light or when a digit isn't laid flat. Worse, a format war is brewing as banks line up behind one of two rival—and incompatible—technologies: Fujitsu (FJTSF) makes palm-vein readers and Hitachi (HIT) produces finger-vein scanners. Fujitsu (FJTSF) says its palm-vein technology analyzes more data to confirm a person's identity and thus is more secure against crooks than Hitachi's (HIT) system. Hitachi counters that finger-vein scans are just as reliable and can confirm a person's identity faster—0.5 seconds vs. 1.5 seconds for Fujitsu's.
So far, the technologies' incompatibility hasn't been a huge problem because most cards still have a magnetic strip that works at any ATM, though they generally allow far lower withdrawal limits. But, as banks consider phasing out strips, customers may one day find their ATM choices limited. "Having two rival standards is inconvenient for consumers," says Sumitomo Mitsui Financial President Teisuke Kitayama. "But we're hoping the one we chose for our bank will become the standard."
Hitachi's finger scanners appear to have the lead. The Tokyo company has signed up Sumitomo Mitsui Financial Group (SMFNF) and Mizuho Financial Group (MFG). And it scored a coup in October when its technology was selected by Japan's soon-to-be-privatized postal system, which also runs a bank serving 117 million customers. The only prominent bank to cast its lot with Fujitsu's palm-vein scanners is Bank of Tokyo-Mitsubishi UFJ. Although some experts and industry officials have proposed that banks install both systems on their ATMs, "that's not very realistic because of cost," says Jun Nakanishi, project manager of Hitachi's biometrics security systems division. A less costly option would be to include data for both on each card, says Akira Wakabayashi, who oversees biometrics at Fujitsu.
The slugfest between Fujitsu and Hitachi may be slowing the adoption of either technology across the Pacific. Both companies hope to make U.S. deals, but American banks haven't yet jumped on the biometrics bandwagon. Canton (Ohio)-based Diebold (DBD), the largest producer of U.S. ATMs, has tested iris scanners in the U.S., but American banks are put off by the cost of any biometric technology, says Jim Block, Diebold's director of global advanced technology. So far, U.S. banks have backed cheaper options, such as a second password to gain access to an account. Nonetheless, "biometrics holds great promise," Block says. "It's a question of infrastructure and inertia."