Will Internet Commerce Stir Sales Of Biometric Technology?

[Note: This article is reproduced with the permission of SCAN: The Data Capture Report. For more information, please visit http://www.scandcr.com

One of the major drawbacks to continued growth in the Internet sales and/or e-commerce markets is the lack of security. Consumers have heard horror stories about Internet fraud. And, every time they make a purchase, they have to wonder if their credit card number or other personal information will end up in the wrong hands… or the wrong computer database. So, how do we instill a sense of security in consumers?

Biometric identification (ID) seems to be a likely answer to the problem. For years, people viewed biometrics as science fiction or something you might see in a James Bond movie. But, little by little, most of the general public has come to accept the fact that the technology really does work. So why hasn't the technology caught on?

There are several reasons that seem to surface, time and again. First, the general public has associated biometric ID with government control. Fingerprints are still associated with law enforcement and "catching criminals." Taking it a step further, there are the "Big Brother" issues. Stories of J. Edgar Hoover's days in the FBI—when U.S. citizens' personal lives were monitored by the government—continue to haunt some Americans.

Another reason for slow growth in the biometric industry has been the cost factor associated with the technology. Equipping every automated teller (ATM/MAC) machine worldwide with a form of biometric ID would be expensive, to say the least. The same holds true for PCs used for Internet sales.

The third drawback has been that consumers have viewed the technology as intrusive. People do not want to have a laser beam shining in their eyes; they don't like sticking a part of their body (finger, hand, etc.) into a machine. Basically, there is a lack of trust.

So, how do biometric vendors overcome these obstacles? The answer lies in "perceived value." Users must perceive a value in the technology that overcomes all other issues. When users believe that the problems solved by the technology outweigh the total drawbacks, biometric sales will increase.

While riding in the back seat of his father's car, Bart Simpson, of the television show "The Simpsons," says, "Are we there yet? Are we there yet? Are we there yet?" With respect to biometrics, the answer is, "Almost." Internet sales are rapidly increasing in popularity. Business-to-business transactions through e-commerce are a part of our everyday lives. And the peace of mind that biometric technology can offer users is starting to outweigh the drawbacks.

SCAN/DCR recently spoke with three members of the biometric community for their thoughts on the state of the industry: John Siedlarz, president/CEO of IriScan, Inc.; Michael Kuperstein, CEO/founder of Miros, Inc.; and Ivan Perez-Mendez, CEO of SyVox™ Corporation. Their comments paint a clear picture of where biometric technology stands.

IriScan produces iris recognition technology. The technology achieved notoriety in 1998, when it was featured in "technology updates" on cable television. A company called SENSAR was promoting the technology for use in ATMs [see SCAN/DCR, 2/27/98]. But, SENSAR ran into some obstacles. Siedlarz commented, "SENSAR was victimized to some extent by the industry it targeted. ATMs offer direct-to-consumer services. To gain acceptance of a technology, it is best to prove the technology in business-to-business applications."

Siedlarz equated the biometric industry to the PC and cellular phone industries. Technology approval comes in cycles. He told us, "It took the PC industry 30 years to gain worldwide acceptance. It was 28 to 32 years before cellular telephones became widely used. The biometric industry is at the 24 to 26 year point. It is not giant, but it is about to boom."

Miros' Kuperstein said that two years ago, facial recognition—the core technology of Miros—was a good idea, but it was too expensive and too obtrusive. Today, the technology has been modified to make it more user-friendly and less obtrusive. And, it is cheaper [under $100 for the basic package, ed.].

"The big issue for us now is how we can integrate the technology," said Kuperstein. "We are working on an interface that will ease the integration procedure. Biometrix, FaceLink, and American Biometrics Corporation are three of the major companies involved in interface technology for the biometric industry."

SyVox is a leading vendor for speech recognition technology. Company CEO Perez-Mendez echoes Kuperstein's thoughts on biometric technology. "Our concern right now is how to use speech recognition technology with existing systems or software," said Perez-Mendez. "We need to make it effective, not a hindrance. The technology has proven itself in real-world applications, and the general fear of the technology is fading."

Continuing, Perez-Mendez told SCAN/DCR, "E-commerce is the big driver for sales of our products. We offer technology that streamlines order picking and inventory procedures. Companies involved in e-commerce or Internet sales must have faster delivery times and more efficient operations in their warehouse environments. We offer solutions to both problems. But, we must not simply attach our product to their existing systems. We must find a way to fit it into their systems in a manner that will achieve the best possible results."

Siedlarz defined another way that e-commerce drives sales. "We have many licensees for our technology. But this is mainly for use within businesses. The process of purchasing products on the Internet has not been painful enough to give consumers a reason to embrace the technology. When they feel the pain, they will open their arms to biometric ID. Many consumers had problems with Internet purchases during recent Christmas seasons. Internet sales have not been perfected. There is still a need for user identification technology to ensure security. Businesses have already accepted the technology, and consumers will accept it soon."

Access control for buildings and restricted areas and computer access are the two big markets for biometric ID, according to Kuperstein. "We've seen great movement in both areas," said Kuperstein. "Access control is probably the bigger of the two markets, judging by current sales. However, the computer access market offers more potential because there are more security issues with computers than there are with buildings."

Kuperstein estimates the total biometric market for 2000 to reach $200 million in sales. He said overall industry growth should be in the 50% to 80% range. Sales of facial recognition technology should grow 300%, according to Kuperstein's estimation. "All of a sudden, we are having requests for pilot programs," he told SCAN/DCR. "We have had 30 requests in the past three months. The financial and medical industries have shown tremendous interest in facial recognition products."

Speech recognition vendor Perez-Mendez predicts a whopping 400% growth in SyVox sales. However, he noted that the starting numbers are still relatively small. He would not tell us exactly how small.

SyVox now has ROI (return on investment) figures available for its potential customers, and that should help boost sales. Perez-Mendez said the average ROI is six to 12 months. The maximum ROI is 18 months. "Speech recognition is not perfect," he told us. "It is designed around state-of-the-art technologies. We must overcome its limitations and make it pleasant for users."

SCAN/DCR has featured recently articles on smart cards and their use in computer security. We asked IriScan's Siedlarz if biometrics is a threat to smart cards. "Not in the least," Siedlarz replied. "Smart cards store information. Biometric devices do not.

"Encryption secures data. Biometrics secures the identity of the user. Biometrics, encryption, and smart cards come together nicely. We have a saying that goes like this, ‘We make dumb cards smart and smart cards brilliant.'"

Finally, Siedlarz stated, "2002 to 2004 will be the heavy growth years for the biometric industry. We have a four-step plan for promoting our biometric technology. Get it out there, prove it, push it, and have the rest of the AIDC industry build complementary platforms."

Comment: It should be clear to most players in our industry that biometric ID will play an important part in e-commerce systems. To do business online, we must be sure who we are doing business with. We are unsure if any particular form of biometric ID will become the dominant technology. RFID has many variations and frequencies for multiple applications. Perhaps biometric technologies will do likewise. Watch for major sales in the next two to five years.

Rick Morgan