Face Value Gets Big Boost as ID Goes High-Tech

Supermarket owner Rafik Shuman cashes customers’ checks at his East Palo Alto store, a service that brings in many shoppers. But fraud was costing him as much as $20,000 a month.

So Shuman bought a computer system made by BioPay, a year-old company based in Herndon, Va. It takes fingerprints and pictures from customers cashing checks and compares their records with what it says is the country’s largest commercial database of fingerprints. Installed in April, the BioPay system has reduced Shuman’s check-cashing losses to only a couple hundred dollars a month.

“I had a couple of kids come in and give their fingerprints, and as soon as they saw me typing on the computer they ran away,” Shuman said.

Another time, the system flagged a group of teenagers who recently had cashed fake payroll checks from nearby e-mail marketer ClickAction Inc. and were trying to do it again. “It’s fantastic,” he said.

A combination of technological advances, falling prices and increased demand is moving a variety of so-called biometric devices--which use unique biological data to verify an individual’s identity--from the world of James Bond movies into a range of businesses and government agencies.

Hospitals trying to safeguard patient records, schools wanting to monitor student Internet surfing and city agencies keeping closer tabs on licensed cab drivers all are buying systems that identify people through fingerprints, iris patterns or voice recognition.

Sales of Biometric equipment were growing before the Sept. 11 terrorist attacks. Since then, financial institutions, big buildings and a raft of government agencies have been scrambling to beef up security.

“A lot of deployments that were on the back burner have moved forward,” said Jake Hong, an associate at International Biometric Group, which has done consulting work on identification technologies for companies such as Lockheed Martin Corp., Intel Corp., J.P. Morgan Chase & Co. and Visa International Inc.

Market researcher IDC projects that biometrics sales will climb 60% this year, to $190 million, and soar to nearly $900 million by 2005.

It’s not clear which companies will benefit most. Many of the firms are small or have shaky financial histories because they invested heavily either in Internet-related services or in developing systems that until recently were riddled with bugs.

But industries are starting to gravitate toward several authentication methods, hardware and software vendors are linking up and big computer makers are placing their bets by including identification sensors in more machines. Such developments will lead to more widespread adoption of biometrics.

“It is almost inevitable over the next two or three years,” said analyst Joseph Arsenio of J.P. Morgan Securities.

One of the biggest forces behind the surge in biometrics has an unlikely origin: federal regulations on medical patient privacy that are still being drawn up.

Part of the Health Insurance Portability and Accountability Act of 1996 called for fines of as much as $50,000 and jail time for medical or insurance workers who allow unauthorized peeks at patient records.

Many hospitals that post records on their in-house computer networks are having to monitor who looks at each page. With highly mobile workers, some employees logged on once and allowed others to use the same terminal. And different computer programs required distinct passwords, so workers often would forget which password to use and when.

“You wound up with Post-It notes surrounding the monitors and passwords on pieces of paper under keyboards, in drawers, things like that,” said Steve Raynes, manager of audit and compliance at Scott & White Hospital in Temple, Texas.

The old system made accountability impossible, and it was expensive. Of about 8,000 monthly calls to the technical support line, costing an average of $35 each, about 60% were related to forgotten passwords or other access issues.

Fingerprint Systems Still Hold Clear Advantage

The hospital and its 18 clinics, which are affiliated with Texas A&M; University, decided to fix all the big problems at once. It became one of the first to adopt a fingerprint-access system that recognizes each user and stores all passwords, automatically giving each person access to the appropriate applications.

Scott & White Hospital has spent $1.5 million on the project and installed fingerprint readers from Identix Inc. of Los Gatos, Calif., on 4,000 desktop computers. The hospital is planning to roll out 1,000 laptops soon. The system is fast and provides clear evidence of who looked at what. And technical support calls have dropped by half, saving about $140,000 a month.

For now, fingerprint systems have a clear advantage over eye-, face-and voice-based systems, buyers and analysts say. Though not technologically superior to iris scanning, they have been around longer, are trusted by the government and are generally less expensive.

Law enforcement aside, various forms of fingerprint technology account for half the remaining market, according to International Biometric. Face scanning, hand scanning and iris scanning rank after that.

The biggest maker of electronic fingerprint gear is Identix, with about half the market. Founded in 1982, the company introduced a large electronic imaging system in 1989. Ten years later, it brought out a fist-size reader that attaches to personal computers.

Compaq Computer Corp., Dell Computer Corp. and Toshiba Corp. then started offering the gadgets and more recently began incorporating fingerprint sensors into the body of their more-expensive laptops.

Early sales weren’t stellar. But since Sept. 11, all three computer makers have doubled their orders from Identix to make fingerprint-enabled laptops, said Sunday Lewis, chief marketing officer at Identix.

Acer Corp. began marketing fingerprint-reading laptops--which sell for $2,000 or more--eight months ago. In the last few weeks, the Taiwan-based company has been inundated with requests to demonstrate them, especially by federal agencies and vendors in the Washington area, said David Lee, Acer’s U.S. director of product management.

Microsoft Corp. has helped move things along by including biometric interfaces in its Windows 2000 operating system.

Identix has about 60 pilot projects each at health-care companies and financial institutions, up from fewer than 10 combined a year ago, company officials said.

The company could use the business. Though Identix is one of the most-established firms in the market, it has lost money in each of the last three years, on about $80million in annual revenue. Since Sept. 11, its stock price has doubled, closing Friday at $7.60 on Nasdaq.

Most of the major biometric systems have made dramatic improvements in accuracy, early users say. At the American Hospital Assn., which has been experimenting with five types of fingerprint sensors, “It used to be one of 10 times you tried it, it would work. Now it’s nine out of 10,” said association research analyst Paul Janacek.

There still are problems with reading the fingers of construction workers and others whose hands take a beating on the job, and those of some older people whose skin is softer. And in areas where everyone wears gloves, Scott & White Hospital is leaning toward using iris scanning.

The price of fingerprint readers has fallen by more than half to about $100 for a stand-alone device or about $200 for a keyboard. Iris scanners have fallen much further, from many hundreds of dollars to about $200.

Iris scanning is dominated by one company with many patents, Iridian Technologies Inc. of Moorestown, N.J. Funded in part by General Electric Co., Iridian is planning to sell stock to the public soon. Its cameras can take a picture from 10 inches away and are being used to grant employees access to work areas at airports and to desktop computers in other industries.

“Iris is showing a lot of promise,” Compaq security technology expert Mann Nova said. “And the cameras can double as videoconferencing cameras.”

Smart cards that incorporate fingerprint data also are booming, helped by Defense Department contracts. Precise Biometrics AB of Sweden, which last week sold a license to cover 10,000 fingerprint readers, is one of the companies making multipurpose cards for both doorways and computer keyboards.

Bundling Capabilities in a Slim Package

At last week’s Comdex computer convention in Las Vegas, more than two dozen biometrics companies spent a lot of time courting one another, computer makers and the consulting firms that install systems for big companies. The firms were striking deals to bundle software and hardware, resell one another’s products or combine forces in other ways.

Among the issues being debated was how to smooth the way for fingerprint recognition in cellular phones and hand-held computers, especially Compaq’s popular iPaq.

Identix makes a fingerprint-reading card that can be slid into laptops, similar to cards used for networking or wireless connections. But to use those cards with an iPaq, a company must buy a separate jacket that holds the iPaq and has a slot for such cards. And to simultaneously use that iPaq for wireless transmission, it must have a bigger jacket with slots for the fingerprint card and a wireless card.

That’s too much bulk for Scott & White Hospital, which is waiting for Compaq to condense everything into one or two pieces of gadgetry before buying the system.

But others aren’t willing to wait. At Comdex, a company that allows doctors to send prescriptions from their wireless hand-helds was taking a close look at the card-based biometric sensors.

“It’s quick,” said Mike Bell of PocketScript Inc. of Mason, Ohio. “And it would be nice to know who the doctor is that’s prescribing something.”