Buying In to Biometric Payment Systems
By George Anderson
Cub Foods is testing a biometric payment system in four of its stores in the Minneapolis/St. Paul area to give consumers the option of storing their financial information and paying for groceries with a scan of a finger. The goal, according to a report on the Retail Systems’ Web site, is to provide customers with greater convenience, security and speed at checkout.
Shoppers can enroll in the payment program at special kiosks in participating stores. Consumers need to provide proper identification, a voided check or credit/debit card and have a finger scanned.
Cub Foods is using a system developed by the San Francisco, Cal.-based Pay By Touch. According to Retail Systems, enrollment does not include scanning a person’s actual fingerprint but instead uses a process where “a set of 40 data points, based on unique heat sites on an individual’s finger” are captured for future verification. These cannot, says the report, “be reverse engineered into a fingerprint. The data points are encrypted and converted into a mathematical equation that allows for a secure identity match at the point of sale. The system is completely secure and customer information is never sold.”
Moderator’s Comment: What do you see as the advantages/disadvantages of biometric payment systems? Will these types of systems become widespread at retail
in the future or do you see another technology that consumers will prefer to biometrics? –
George Anderson – Moderator
The advantages include speed, ID security and one less card to carry. The main disadvantages will be with the hardware and software IF there is a problem with reliability and accuracy. Of course, there will be the obvious issues with identity theft and the ability to beat the system but these will probably prove to be no more troublesome than current problems.
Considering the transaction fee issue, if I were a retailer, I wouldn’t put this into effect unless I KNEW it would ensure my customer used a payment system that saved me transaction fees.
Considering the security issue, as a consumer, I won’t participate in anything unless all the companies in the process start to wise up and offer me a guarantee, in the form of assumed liability, that the security of my information will be protected.
If anyone ever figures a way to hack this (and though it sounds like it ain’t easy, that’s not a lot of comfort if they are wrong ten years from now), I am not looking forward to having to replace my finger.
Roundy’s tried this in Milwaukee at one of their new stores. Not sure how it is going or if they are still doing it, but I liked the idea. The advantages are obvious – speed, security, etc. The disadvantage is that you have to sign up separately at each chain store you shop. Also, think of the time and effort involved in getting people to sign up. Do customers want to go through the sign up process at every store they shop? After the first 2-3 times it will get annoying.
Just last summer I did a market study for a rural Colorado retailer who still had to call in credit card purchases manually on a rotary phone. I wonder what he would think of this?
The thing is, fingerprint payment systems are only truly convenient to customers if every merchant accepts the same payment method. (Otherwise, I’d still have to carry my ATM, credit, and frequent shopper cards.) You might call this a “network” benefit, but it’s also a concentration of information power in the hands of the firm that processes the transaction.
The purveyors of these systems may have a big goal in mind: Capture whole household shopping profile data across multiple retail platforms and sell the profiles back to brand marketers for targeting purposes. Didn’t work when Citicorp and GTE tried to corner the market on consumer information in the early 90’s. At the time, retailers resisted firmly – they wanted to retain control of their customer relationships, not cede them to the credit card companies.
Now we can smirk all we want about the inadequate job most retailers are doing in managing customer relationships today, but most retailers still know who is number one.
On the old Saturday Night Live, Joe Piscopo and a female cast member used to portray “The Perpetually Surprised Couple.” My favorite PSC sketch had the Couple standing in a supermarket checkout line chatting with others in the line and, eventually, with the checkout clerk. It wasn’t until their order was completely bagged that they realized — Surprise! — it was time to pay. Only then did they begin digging in pockets and pocketbook, slowing the line.
We’ve all had the experience of being in line with someone like The Perpetually Surprised Couple. Wouldn’t it be great if they just had to stick their finger in a reader to pay and get the heck out of the way?
Bernice…sorry, I feel like the misconception police today…
The system confirms the identity of the individual and makes the connection to whatever financial options that person has pre-determined for their Pay By Touch account. So if they had decided to tag three of their credit cards and a debit card to the account, those pop up as options after they do the touch verification. Credit cards charges and bank charges would remain the same, I believe, even though there could be other factors involved that may affect the rates….not sure.
As for the “mark of the beast” thing…hey, what can you do? Every day, little by little, we sell our souls to gain these little conveniences.
This payment system will further inflame religious conservatives and conspiracy theorists who see it as fulfillment of Biblical prophecy:
“[The beast] causes all, both small and great, rich and poor, free and slave, to receive a mark on their right hand or on their foreheads.
“And that no one may buy or sell except one who has the mark or the name of the beast, or the number of his name.
“Here is wisdom. Let him who has understanding calculate the number of the beast, for it is the number of a man: His number is 666.”
The benign intentions of retailers aside, there are quite a few people who will be thoroughly resistant to this idea.
At the risk of echoing Scanner yet again (I promise, we are not one and the same person and we do not collaborate on our answers), I do not altogether see the benefit for the retailer. There are already so many costs involved in offering customers alternative ways of paying that yet another one will either reduce their own profits further still or force them to increase prices and potentially alienate those customers they’re trying to attract. Attracting customers is, after all, what it’s all about. Nor do I see the banks and credit card companies encouraging this as they will lose a considerable chunk of what they charge both retailer and consumer. They are not likely to take that possibility sitting down.
Great for security, but what about ROI. Sorry, but this along with the card news released by Chase this week are approaching the edge of diminishing returns. This takes us down the road again to greater and greater investment in technology with great ‘promises’ yet very little real return.
Imagine if the same amount of dollars where spent on training, coaching, selling skills, education, etc. These are the things that really enhance the consumer experience.
It may very well become widespread. So too will likely the card to be issued by Chase. I simply see the gains here as with the other card as approaching the edge of diminishing returns and misdirecting the small pool of dollars available from what really matters.
Call me crazy, but I simply don’t think I’ll be hearing, “I only shop here because I can shop with my thumb!” Maybe I am wrong, but I think of so many other reasons to say, “I only shop there because…”
I too believe this can have tremendous potential for a lot of different businesses, not only supermarkets. But the industry will have to be careful not to have customers think they are suspects on an episode of CSI.
David…according to Pay by Touch’s Web site: “After a quick one-time enrollment, you can Pay By Touch at any participating merchant!” I don’t know if Roundy’s is using their system, but Pay by Touch is promoting that as a primary benefit to consumers…being able to chuck all those plastic keychain danglers and even leaving credit cards at home.
I think the potential benefit of this is enormous and, in addition to on-site, I’m looking forward to seeing it adopted for online purchases as well.
Our local library is going to either this system or one very similar. I wasn’t sure what to think about it but it probably will be a very good system for the library and shouldn’t be a problem for the user. It is fairly expensive to install but is expected to pay for itself in increased security and lower operating costs.
Concerning the issue of having to sign up at every store, most of us don’t shop at that many different stores, so that is not a big issue in my opinion. We shop at 6 stores tops and most purchases are made at two stores. Should be interesting.
I think this technology could be a boom to the payment processing industry and enhance the speed of check-out. Retailers, I’m sure, will love the idea. And consumers, always having your identification, quite literally, at your finger tips; no fumbling for cards nor the risk of losing them. A winner.
Every enhancement in convenience, customer service and cost-reduction, and this certainly appears to be an enhancement for retailing, has some hurdles to clear. If no glitches occur in its early introduction at forward-thinking Cub (such as some form of identity theft, etc.), this system has a bright future in retailing … but, as we all know, the “future” is getting shorter and shorter in this era of technological ubiquity.
I believe this is just the first step in this technology. When bank cards start to offer a standardized biometric identification, the process becomes streamlined with no additional sign-up by retail chains.
Imagine this: Place you finger on the pad and a list of eligible payment methods appear on the screen: checking, debit, credit, etc. You choose the account and the cash back options. No carrying of cards or checks and assured identification.
The underlying strength of biometrics is that it uses patterns that are unique to each individual. Your fingerprints belong to you alone, and, unlike that password to your online bank account, you can never lose it. While victims of identity theft can get a new credit card number, change their address and even apply for a new Social Security number, they can’t change their DNA. Makes sense.