Giving The Thumb to Fraud at Credit Unions

Credit unions turn to biometrics to ID their members


Fingerprint scanning is a foolproof way to identify members here-that is, when members can successfully use the biometric devices.

"The good thing about biometrics is that we don't have any fraud," said Carlton Musmann, chief operating officer at First Financial CU (FFCU). "And with all the ID fraud right now, the biometrics concept has been very well received by members."

Biometrics is not new for the $600-million CU. For the past five years, First Financial has verified member ID with biometric fingerprint scanners at 10 self-service kiosks.

"But we've not had a tremendous amount of success with biometrics, because not everyone has a readable fingerprint," Musmann explained.

The fingerprint readers fail to read 30% of FFCU members, Musmann said. "Possibly the failure is in the actual device, or else our membership of educators for some reason has a fingerprint that's harder to read."

Kiosk transaction volume has fallen by nearly 40% since 2002, from a monthly average of about 1,200 transactions to a monthly average of about 750 in 2005, Musmann said. Kiosk transactions account for less than 1% of all transactions at FFCU, he added.

First Financial uses biometric kiosks provided by Real Time Kiosks at 10 of the credit union's 14 branches. Real Time is a division of Real Time Data Management Services, Inc. of Norfolk, Va.

"First Financial's biometric technology was delivered in 2000, and since then many advances have been made to the hardware and software to significantly increase the approval rates of the biometrics," said Rick Scali, national sales manager at

Real Time Kiosks. "Our newer units are reporting up to 98% approval rates."

"We have been working with First Financial to upgrade much of their application," he added.

Biometrics adoption is ostensibly on the rise, according to Boulder, Colo.-based Acuity Market Intelligence, which predicted the biometrics market will hit nearly $5 billion by 2012, up from $644 million this year.

And multi-factor and biometric authentication is a priority in this year's technology budgets at 95% of the credit unions that responded to a recent Callahan and Associates survey.

Real Time Kiosks has about 100 kiosks deployed at CUs nationwide and installs about 12 more every year, Scali said.

But Musmann said it could be another decade before biometrics gain wider acceptance at credit unions. "I don't think there's anything more viable than biometrics in the fight against fraud, but biometric prices are still too steep and the technology just doesn't meet member needs," he said.

In addition to feeling discouraged when the fingerprint reader fails, most First Financial members aren't looking for a high-tech encounter at the branch in the first place, Musmann explained. Members want personal service when they come into First Financial branches, not biometric kiosks.

Musmann said that a better strategy for biometric implementation at FFCU would be to design branches that don't give members the choice between the biometric kiosks and the tellers. "At two of our locations we don't have teller lines, and we only offer the biometric kiosks and new accounts desks," he said. "That way, members are forced to use the kiosks and they're actually very happy with them."

And the "skyrocketing" use of debit cards and Internet banking has had an impact on the use of biometric kiosks as well, he added. "Members don't need to use the kiosks as much for cash or other transactions."

Still, biometrics is the answer to the ever present risk of identification fraud, Musmann said.

"We get identification fraud all the time with new accounts by phone, in person, or mail and transactions," he said. "But biometric authentication is foolproof against fraud."