Biometrics: New technology to secure ATM transactions

Mohamad Nazirwan, Contributor, Jakarta

The rapid development of banking technology has changed the way people conduct their banking transactions. For many people, the automatic teller machine (ATM) has now become a necessity.

With a simple procedure a customer is able to undertake various transactions, such as cash withdrawal, money transfer and paying phone and electricity bills. In short, an ATM provides customers with a quick and convenient way to access their bank accounts and conduct financial transactions.

However, technology is not everything. In many ways, extensive use of ATMs without reliable security systems can lead to fraud.

From the time the first ATM was introduced nearly 20 years ago, thieves started tapping into the system. At first, their approach was crude, such as peeking over a bank customer's shoulder at a machine, copying down the person's PIN, and then figuring out a way to steal the card. Recently however, many of the schemes have become highly sophisticated and difficult to detect immediately.

Based on survey conducted by the American Banking Association as cited in csmonitor.com, in 2002 fraud involving ATMs cost banks roughly US$51 million. Moreover, cbsnews.com reported that roughly 365,000 ATMs are skimmed in the U.S. every year costing millions of dollar. In Australia, ATM crimes involve organized criminal rings that steal hundreds of thousands of dollars from bank customers' accounts. Although there are no official statistics on ATM fraud in Indonesia, the number of cases has been increasing over time.

The use of passwords and personal identification numbers (PIN) is one of the important aspects of the ATM security system used to secure and protect the financial details of customers from unauthorized access.

This system compares the code against a stored list of authorized passwords and users. A PIN typically consists of a four-digit combination of numbers that are entered through the ATM panel. If the code is legitimate, the system allows access at the security level approved for the owner of the account.

In general, a PIN is sufficient to protect against fraud and effectively eliminates most run-of-the-mill attempts to gain unauthorized access. A four-digit PIN is also easy to memorize and can be punched in quickly with few errors.

In practice, however, the security provided by a PIN is often easy to get around, particularly in cases where people use numbers that are easy to guess, such as the birthdays of family members, consecutive numbers such as 1234, phone numbers and so forth.

The most recent cases show that theives are using sophisticated cracking programs to steal account holders' money via ATMs. For some people, who are bombarded by a great deal of things that they have to remember, such as computer passwords, credit card numbers and so on, memorizing their PINs is not easy. For these sort of people, writing down their PINs on small pieces of paper or card appears can be the best solution. However, with this practice, the benefits of a PIN as part of the security system can be negated.

Biometrics Security System

Biometrics means "to measure life". A broad definition of biometrics is the science of identifying a person by way of a unique biological characteristic such as a fingerprint, a handprint, the pattern of an iris -- all of which can be read by a scanner and matched against an electronic file version.

Biometrics were firstly used by the Chinese and Ancient Babylonians, who used fingerprints to substitute for a written signature. In 1890, Alphonse Bertillion a Paris police department clerk, introduced biometric identification to identify criminals who had changed their appearances.

Then Sir Edward Henry, a British police inspector, developed a fingerprint classification system that has become one of the most important identification standards. The modern concept of biometrics was explored in the early 1960s, when the primary purpose was to meet the need for a high security system in military supply industries.

In the U.S., biometric security systems were deployed widely after the Sept. 11 attacks to protect vital facilities such as military compounds, government offices and airports.

The U.S. Department of Homeland Security is also making use of biometric technology, using fingerprints and photos to identify citizen of 28 countries who want to enter and leave the country.

The commercial application of biometrics was firstly introduced at the University of Georgia, which used hand geometry to identify students.

Presently, biometrics is being employed by the retail sector, such as in grocery stores. This application is commonly referred to as "Pay By Touch". The users claim that the benefits of biometric technology are significant in reducing costs, improving productivity and reducing fraud.

Biometric security in the banking industry is still in its early stages. In the UK, the application of technology that uses iris recognition is at the trial stage, although the results of the initial tests show that the public like it.

Interestingly, in Bolivia a biometric security system has been introduced to a poor society by Prodem, a private financial fund that provides microfinance services, micro credit and micro savings to Bolivian's poor urban and rural population.

Prodem uses ATMs with a fingerprint security system in order to allow its customers to access to their accounts during non- banking hours.

Operated only with a smart card and a fingerprint scanner, the machines offer excellent security to card holders since there is a very low possibility of fraud. If a customer loses the card, it is difficult for another person to use it because of the digital fingerprint.

According to Prodem director Eduardo Bazoberry Otero, whom I met in Bali during the Microfinance Network Annual Meeting, the idea of using a fingerprint is not only for security but also to overcome the lack of customer understanding of the ATM concept.

He explained that there is a significant percentage of Bolivians who are illiterate and do not understand numbers. In addition, many of Prodem's customers have never used an ATM before.

Furthermore, there is a sense of mistrust with PINs. Some people feel PINs are unsafe because if they lose their card, the people who find it may be able to steal their money.

By using fingerprint recognition, customers will feel more secure that their savings are safe because if they lose their ATM card, no one can replicate their fingerprint and take their money.

Indeed, the evidence shows that with innovative approaches and creativity, biometric technology works well at all social levels, even among the uneducated poor. -- Senior MicroFinance Specialist of Bank Rakyat Indonesia