In Japan, Wrestling over How to Add Security to Financial Transactions

Technology has put the ability to identify customers at the banking industry's fingertips, or is it in the palm of their hand?

The Financial Services Agency has proposed the standardization of biometric identification systems to confirm account holders' identities when they use automated teller machines.

The envisioned authentication method used by major banks and Japan Post in their fight against the proliferation of counterfeit bank cards are currently split into two types: one using the veins in the finger and the other using the veins in the palm of the hand to identify individual account holders.

The increase in security has raised concerns people would be unable to use any but their own bank's ATMs to transfer or withdraw money. It is believed these worries may hasten the agency's search for a standardized biometrics system.

Through the formation of a committee to study the problem of ATM card forgeries, the agency has begun discussing ways to standardize the biometric authentication system. The committee is expected to issue a conclusion by the end of April.

Bank of Tokyo-Mitsubishi has adopted the palm system for use on its ATMs, while Japan Post, Mizuho Bank,. and Sumitomo Mitsui Banking Corp. have announced their adoption of a biometrics system that reads the pattern of veins in the index finger, to identify customers.

On a numerical basis, the finger vein ID method seems to have the edge thanks to Japan Post's approximately 26,500 ATMs nationwide--the largest number in the country.

ATM cards containing IC chips, which every bank is now issuing, can be used with the biometrics system.

Many banks have expressed reservations about the palm method as it requires more information than the finger method and is therefore more expensive to operate.

On the other hand, the finger method is sometimes linked in the minds of customers to the practice of fingerprinting criminals, leading some to conclude the palm method is more appealing to customers.

The issue at hand is the incompatibility of the two systems. If the debate over the two systems continues as it has, the systems to protect consumers against cash card fraud and theft will become reminiscent of the early days of the home video recorder, when VHS and Beta formats slugged it out with consumers left out of the equation.

Besides concerns that the number of ATMs bank users could access would decline, industry insiders worry that financial institutions waiting to see which system wins out in the end are actually slowing the introduction process down, an official from one major bank said.

UFJ Holdings, for example, is holding off on its decision until after its planned merger with BTM in October, while Resona Group, Bank of Yokohama and many regional financial institutions are waiting to see how the situation develops.

The agency has been consulting with experts on biometric systems, comparing the two systems on the basis of ease of use, cost of adoption, speed and accuracy.

"First, we must look at this as if we will definitely adopt a system," a source said.

But it is unclear how long it will take to choose between the two systems.

Even if the committee were to choose a system and the agency were to suggest its adoption, it is ultimately in the industry's hands to make the move to standardize the methods.