Retail giants Costco, Walmart looking into biometric payment

According to Sanford Bernstein analyst Emme Kozloff, Costco, Walmart and other retail giants are looking into fingerprint devices to accelerate transactions and reduce costs. In a recently released report, Kozloff says purchases done through fingerprint scanners would be up to 70% faster and cost 20% less than traditional credit/debit card purchases. High volume retail stores work on thin margins and would appreciate anything that can cut costs, but some people are concerned about privacy issues.

Before being able to buy with their fingers, customers have to provide their phone number and payment information (credit, debit or checking account number) to the store. In addition, they must obviously slide their fingertip through a sensor to "enroll" in the system. The sensor reads prominent points on the fingerprint and then creates a mathematical jumble of numbers called a "hash" value. After enrollment, customers purchase goods by sliding their finger on a sensor at the checkout counter. They also enter in the same phone number used at enrollment and choose a form a payment.

It's easy to see how this would speed up transactions at the checkout line. First, there is no fumbling for your store buyer's card or your checkbook. Your phone number is pretty hard to forget and you probably always have your finger with you. Store clerks can now process more customers in less amount of time, which could also let the store hire fewer people.

But faster transactions and fewer personnel don't tell the whole story. Stores work on high-volume, low-margin - sometimes less than one percent profit. Large stores like Costco and Walmart have negotiated cheaper credit card transaction costs because of their huge number of transactions and standardized terminals, but these costs still add up. During the enrollment process stores can now "suggest" a cheaper form of payment (from the store's perspective) such as direct debit or checking account.

Some people are concerned about privacy and may be reluctant to give their fingerprints and financial information. In addition the accuracy of fingerprint scanners has been questioned and just last month Stephanie Schuckers, an associate professor at Clarkson University, demonstrated that up to 90% of fingerprint scanners can be fooled by Play-Doh. One could assume, however, that a watchful clerk would stop you from using the brightly colored dough on the scanner.

Others are squeamish about touching a sensor that has been touched by other shoppers, but these sensors may not be any less hygienic than paper money or traditional card payment. Dollar bills and coins are handled by countless numbers of people. In addition, the keypads used to type in pin numbers are also frequently touched.

Even though many sensors require fingertip contact to read the pattern, there are newer ones that don't require any contact. Back in October, we reported about Hitachi's new fingertip vein sensor, which looks at the veins under the skin. Using a CCD camera and shining a powerful light at and through the skin, the veins can be read from a few millimeters away.

Stores probably already have your financial information from previous purchases. Membership warehouses like Costco have even more detailed information as the company must keep track of purchases to calculate a yearly rebate, available to certain higher level members. New members also have their picture taken, which is entered into a database and printed on your member card.

Alternative forms of checkout have been available for a few years. Home Depot has self-checkout lanes where customers scan, bag and pay for the items themselves. This has been a big hit for the store as one clerk can now watch four checkout stations. Other stores are experimenting with near-field devices similar to Mobil Gas' SpeedPass keychain stick.

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Hitachi introduces finger-vein scanner