New Technologies in Banking

NEW TECHNOLOGIES IN BANKING TABLE OF CONTENTS TABLE OF CONTENTS2 EXECUTIVE SUMMARY3 INTRODUCTION4 MOBILE PAYMENTS5 1. Premium SMS based transactional payments6 2. Direct Mobile Billing6 3. Mobile web payments (WAP)6 4. Contactless NFC (Near Field Communication)7 5. M-payments vs. Current payment methods7 FINGERPRINT8 1.

Recognition Process8 2. Fingerprints in banks8 2. 1 Benefits9 2. 2Problem9 IRIS SCAN10 1.

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Description10 2. Why or why not use Iris can10 3. Implementation for Banks12 CONCLUSION13 APPENDIX14 EXECUTIVE SUMMARYPayments are transfers of wealth from one party to another and those transfers usually occur in the case of an exchange of goods or services. In order for the exchange to be completed, payments are transferred using multiple channels such as in cash, by checks, electronically using debit or credit cards, bank transfers etc. However, all these channels have their cons and pros affecting both the merchants or institutions and consumers. Due to technological advancement, payments between two parties have been evolving from checks, taking days to be cleared, all the ways to instantaneous wireless payments.

Wireless payments are done using mobile devices to pay for purchases, transfer funds to banks…. After looking at wireless payments, it is consider as being the fast and most effective way to make payment. Usually people do not have time to go the bank institutions to make payments. In addition, most phone users have third generation phones enabling them to access internet. Even though this form of payment is not known in North America, people in other countries such as Africa, Asia and Europe have been using it to make their payments and do not have to render themselves to the stores or banks institutions.

Payment speed is not the only occurring problem. Nowadays, technological innovations also creates security problem. Institutions and businesses are facing more and more fraud issues. To be able to counter such matters, security protocols are being changed to not only pins but fingerprints and iris scans. Iris and retinal scan involve the scan of the iris or retina in order to obtain a unique identifier of the person.

Fingerprint is another form of biometrics using fingers to upgrade security measures.These two forms of biometric are considered as an advantage for both the bank and consumers since it is not time consuming and help the institutions keep their customers by reducing the frauds. When frauds are reduced, customers are more inclined the banks with their belongings since they can be assured that they patrimony will come back to them without any controversy. As a recommendation, merchants, banks and any other institutions should try to promote the use of mobiles in order to carry out some transactions.They can uphold the security measures by distributing digital apparels permitting fingerprints scans. Even this could be costly in the short term, in the long term the bank is sure to gain much more since they won’t have to be confronted with huge losses due to fraud.

INTRODUCTION Today, time is an important factor that people cannot afford to waste. How many times did you go in a hurry to a bank or a store to find long lines of clients waiting to be served? The answer might be: countless times. To bring a remedy for long waiting periods, self-served stations were then created in order to speed up transactions.However, this brought in new security issues: issues of passwords. Passwords, as suggested for security reasons, should have upper and lower case letters plus numbers. In addition to such complex passwords requirements, the individual should have different ones for each card.

No wonder, arriving in front of an ATM or interact machine, you cannot remember your password. To change such situation in accordance with technological innovations, new modes of payment and security measures have been under way.According to Techtarget, “in information technology, biometrics refers to technologies that measure and analyze human body characteristics, such as fingerprints, eye retinas and irises, voice patterns, facial patterns and hand measurements, for authentication purpose”?. Have you ever paid with your cell phone when making purchases? Or even used fingerprints or iris scan for security protocols at the bank or other institutions? Well if not, soon will it be a routine. Financial institutions are looking for transactional security, airports for highly reliable verification systems and corporations for data protection.The solution to all of these problems is embedded in technology; a technology involving biometrics and Information Systems. Looking in depth at biometrics and information systems, we will discuss the different forms used to counter long waiting periods and security deceptions. The question that would be answered will be how those measures will prevent fraud and make identification and banking transaction more secure.

Finally, we will provide recommendations about which biometric measure best suits the banking industry and how it can improve the current system in place. MOBILE PAYMENTSOne new technology entering the market, especially in Asia and Europe, is mobile payments. Mobile payments, otherwise called M-payments, are made using mobile handsets or other devices, either to directly purchase or authorize payments for goods and services. The dynamic behind it is that suppliers of an array of products have made it possible for consumers to pay through their phones all their purchases. Although beneficent to consumers, it also allows merchants, banks and any other institutions to use mobiles to increase their sales and make payment process more efficient and effective.Even though this new invention brings a lot of advantages, it was not embraced as much as expected by the North American markets in the early 2000s.

However, due to a much better understanding, mobile payment found its way and has been gaining its market share due to consumers’ dependence to new technological innovations.? M-payments have four primary models of payment. 1. Premium SMS based transactional payments The consumer sends a payment request via SMS (short message service) or USSD (unstructured supplemental service data).

This leads to a premium being charged to his phone bill or mobile account.When the merchant knows of the successful payment, he authorizes the shipment of goods. The goods usually purchased are music, ringtones etc.

However, this method has high costs, low payout rates, poor reliability, no security in transactions and no efficiency. It happens that a message never gets to the receiver. This situation also occurs with SMS used in transactional payments: the message gets lost in the network. This adds up to the cost associated with such a method. Even though the merchant has a payout rate as low as 30% because of setup and maintenance costs, the consumers also pays for the messages that got lost in the system.In addition to high costs, suppliers can wait hours before receiving the bank confirmation to send out the shipment.

Such a situation can generate huge losses since consumers nowadays are eager to get their purchases within the next five to ten minutes?. 2. Direct Mobile Billing The buyer uses the mobile billing option during checkout on a website in order to make a payment. The tools used are a PIN and a one-time-password. After a purchase, the mobile account is then charged. This method prevents fraud and there is no need for pre-registration or software required.In addition to that, the checkout process is easy and fast since all transactions are completed in 10 minutes or less.

Due to its efficiency, 70% of digital content purchases in Asia use this method?. 3. Mobile web payments (WAP) Due to advanced technology, some phones are equipped with applications such as wireless application protocols (WAP) permitting phone holders to see web pages through their phones. The only tools needed are either a mobile network operator or online payment solutions such as PayPal.

When an operator is involved, the merchants can be at ease since operators lready built relationships with their customers and have a confidentiality protection. It gives customers a greater satisfaction and reduces costs for merchants. On the customer’s side all purchases can be made at the click of a button. No details have to be entered since they are already saved in the system.

However, if this sounds too complicated credit cards can be used by entering all your details in once and have it saved by the vendor. This then leads to a higher conversion rate. In addition, online companies such as Amazon Payments and Google Checkout enable consumers to register and have a personal PIN.This allows them to use the PIN every time a purchase is made. Using WAP gives benefits such as follow-on-sales, a higher customer satisfaction and ease of use.

The customer is able to see the web pages and even bookmark them. Knowing how to go back give the consumer the flexibility to go back and buy more products. Such easiness represents an advantage for both the merchant and the consumer?. 4.

Contactless NFC (Near Field Communication) This technique occurs in stores or transportation services. The customer has to place the phone equipped with a smartcard transmitting waves near a reader module.There is no need for authentication except in some cases. The payment can be deducted from prepaid accounts (i. e. mobile) or bank accounts. This method has become the standard payment process in Japan?. 5.

M-payments vs. Current payment methods M-payments can be considered as advantageous in every aspect. In operation management, it is known that waiting times are better reduced than prolonged. Customers are usually unsatisfied when it comes to waiting being served. The merchant or institution also suffers since it loses profit for every passing minute.

Today, the object most widely used in the world is cell phones. Each one more sophisticated than the other. This enables every person from developed countries to under-developed to be able to process transactions. Mobile web payments are already known in Asia, Europe and in some parts of Africa. The problems that could be encountered would be international sales and transactions since countries have different appreciating and depreciating currencies. However, this could be resolved the same way the credit cards do. There would a fixed exchange rate charge so that transactions will not have borders.Customers will have the flexibility to use their phones anywhere in the world and not worry about contacting their banks and having transfers made.

Internet and WAP have made it so easy for consumers to meet all their needs with very small costs. Some would argue that this can affect the people’s social skills since they will not interact with people anymore. Everything could be done through computers.

On the other hand, it could be argued that a faster service is preferred to customer’s dissatisfaction if they have to wait for thirty minutes to clear a check.Those thirty minutes could be reduced to five minutes if using a phone. FINGERPRINT One common biometric measure used to recognize a person based on his physiological characteristic is fingerprints? (Appendix I, Figure 1, 2). Fingerprints are very important and account for 78% of the total sales of biometric technologies in 1998?. Fingerprint is an identification scheme quite accurate since it does not require passwords, pin numbers or human judgment.

It is basically a biometric security method that, integrated with software applications and technology, provides a way to identify a person using his fingerprints.Each individual has its own fingerprints which are made up of ridges and valleys on the surface of the finger. The parts on the upper skin layer are the ridges and the ones on the lower skin layers are the valleys. Minutia points are either formed by the ridges or occur at a ridge bifurcation or a ridge ending (Appendix I, Figure 3). Each fingerprint is unique by its ridges and its minutiae points. There are two methods used to recognize fingerprints: the first being the minutia matching and the second one being the pattern matching.

1.Recognition Process The minutiae matching compares the extracted minutia points to the registered template whereas the pattern matching compares all of the finger’s characteristics such as the ridge thickness, curves and density 4. The data collected is very unique; there are on average seventy unique minutiae points in each finger and each point has seven unique characteristics, which allows further security to identify an individual5.

In the fingerprint identification method, the fingerprint is captured using a fingerprint scanner (see appendix 1).After the fingerprint is captured, it is converted into a mathematical representation used to identify the actual fingerprint 6. The process of capturing the fingerprint, processing the data and comparing it to the stored template takes 5-10 seconds. 2. Fingerprints in banks Although fingerprints have not taken off in North America or Europe, a few U. S. banks are using this method for cashing checks for non-clients.

It has been proven that using the fingerprint method has reduced fraud by a half7. It often occurs that individuals forget their pin number or type the wrong ones several times when withdrawing money at the ATM.It is a hassle to go through the process of resetting pin numbers and passwords.

However, having a fingerprint terminal would make everything user friendly. In order to implement this new technology, banks would have to be very consistent in the capturing process. In other words, always using the same index finger at the ATM would be a key factor. In order to do online banking safely, clients would be provided with a pocket-sized gadget (Appendix II) which would read the client’s fingerprint as identification8. Financial institutions have been using a multifactor authentication system for a while now.Banks use systems such as an ATM card plus a pin number.

These authentication methods use what you have (the ATM card) and what you know (the pin number). In order to increase privacy, financial institutions should also implement fingerprints since it would add a third method using what you are: the fingerprint9. 2. 1 Benefits There are several advantages for a financial institution to implement fingerprint recognition.

Because financial institutions have to increase customer privacy and reduce fraudulent activities, the use of fingerprint should be implemented.By adding fingerprint authentication on a smart card, banks will be increasing the degree of security since fingerprints are unique to each customer10; the chances of one fingerprint to match another are one in 65 billion11. Furthermore, there are very few instances where non-users get access to systems because of failure in the biometric devices. Fingerprint biometric is not used alone it would be accompanied by a pin number and a smart card. It is an added security feature. It is also quite easy to use and would not be problematic for customers.Fingerprint recognition is already in use by the FBI, therefore criminals will be very reluctant in using this technology for fraudulent transactions12.

It is quite easy for users to change their pin number or their password; however it is very difficult for one to change its fingerprint. 3. 2 Problem One major problem following this new technology is the use of fake fingerprints.

The fingerprints could be captured on sticky tapes and then recopied using gelatin tape13. One way to forego this issue would be to add a security feature that would recognize duplicated data on the fingerprint scanner.Another problem that could arise while implementing this new technology is the degradation of the fingerprints14. A lot of people have fingerprints that have degraded with time because of the nature of their job or because of unintentional events such as cutting a finger. To forego this issue, customers would need to present themselves at the bank to recapture their fingerprint or even change the finger being captured, assuming that banks have a database of at least two or three fingers per client.

IRIS SCAN 1. DescriptionWhen we talk about eye scan there are two main biometric techniques used: iris scan and retinal scan. Retinal scan is a technique that used to map the different patterns of a person’s retina. The way that the scan is performed is that there is a beam of infrared unperceived light that is sent in the person’s eye and because the blood vessels of the retina absorb light more than the tissues that surrounds it, the beam traces a standardized path on the retina in order to identify the person(4). On the other hand, there is iris scan that is more widely used as an identification technique.According to experts, the most effective human identifier is the iris scan. The iris is “the area of the eye where the pigmented or colored circle, usually brown or blue, rings the dark pupil of the eye” (3).

The iris remains the same from a person’s first anniversary until the end of his life. That area is very particular to each individual due to the fact that a person can have two different irises. The process of iris recognition works by having detailed characteristics of the client’s iris photographed with a specialized high-resolution camera.These features are then stored into the financial institution’s database for future matching-identification purposes. Once this first step is accomplished, the client will stand at no more than three feet of the camera installed in ATMs and the machine will automatically try to find its match in the database. If the matching step is successful, access to the account is then granted within three seconds (1).

2. Why or why not use Iris can First of all, the iris-scan is a very accurate method of recognition. The high-tech recognition method is virtually 100% precise.The iris is so particular to each individual that it is even different for twins. In fact, its accuracy is more reliable and superior to DNA because this latter is not unique for 0. 2% of the population, which represents the proportion of twins (5).

Statistics have shown that iris-scan identification is one of the most accurate technologies with the probability of 1 in 1. 2 million for mismatching eye features with a client’s account(1). This advantage would be highly helpful for financial institutions to fight fraud. Security issues put aside, the iris-scan identification is also convenient for the user.This is due to the fact that there is no need to input a personal identification number (PIN). With countless passwords to remember and different security components those passwords should have for security reasons, it would be convenient for a client to access her account without the need to think about security measures (3). The iris-scan method of identification is not only accurate, but it is also fast.

Indeed, the client can access her account quickly because it takes no more than three seconds for the technology to match the iris features with those stored in the company’s database.The new technology can also be convenient for the company using it because it considerably reduces the time spent on identifying a customer. Moreover, the scanning process represents no danger for the client’s health because the iris is an internal organ which is well protected. Therefore, the scan will not have a negative impact on the eye nor will it deteriorate it with usage over time. In addition, no physical contact is needed because the iris scan is performed from a distance of 10 centimeters to a few meters away from the device and in retinal scanning that distance is reduced to only a few centimeters.That feature can be accommodating for clients in whose culture touching a surface with the finger is not well seen. To sum up, iris-scan is a great technology due to its accuracy, its convenience for the users, and the safety of its use. Despite these advantages, this technology can encounter some difficulties for its implementation due to problems such as user’s resistance to changes.

Acquiring general acceptance from the end-user would be a critical step for a successful implementation. Since the customer has to stand still during the recognition process that last only three seconds, some may find it uncomfortable.Because the iris is a very small organ, it can often be obscured by eyelids and eyelashes. Another disadvantage consists of the failure to accomplish the matching process in some cases.

In fact, the technology sometimes tends to reject very brown dark eyes, eyes in tears, or contact lenses (3). It also consists of a problem for blind people because they might have difficulty getting aligned with the camera. Furthermore, according to the US national eye institute, 1. 8 out of 100. 000 lacks an iris. Such a condition is known as aniridia and this condition affects both eyes making the scan impossible (6).Perhaps the major difficulty is that iris scan is a relatively new technology not yet widely used and requires major investments from the institutions planning to implement it (4). 3.

Implementation for Banks After discussing the benefits of iris-scan in general in the previous section, we will now analyze how financial institutions can take advantage of the new technology by implementing it. The first advantage mentioned above is the accuracy of identification. In fact, debit and credit cards cloning is considered as a serious worry for banks nowadays. In 2008, banks nd other financial institutions in Canada lost $104 million due to debit card fraud (2). Even though implementing such a technology can be very costly for banks, it would not only be cost-saving in the long run but it would also maintain customers’ trust in the system. Since the banking industry is highly competitive, a bank can gain a larger market share if it is able to ensure its clients that no intrusion in their account will be possible with the new recognition method. Although a client is reimbursed if money is fraudulently debited from her account, it always has a negative effective impact on the trust toward the bank involved.

Another advantage a bank can gain from the eye scan system is the efficiency of its transactions and the maintaining of its clients’ satisfaction. It is no secret that for a bank to be successful, it is important to maintain client’s satisfaction very high. Since it would take no longer than three seconds for a client to access its account, a customer service representative can focus on looking into a client’s profile and propose better solutions accordingly. For example, when a client goes to a National Bank of Canada branch, he needs to provide the teller with two piece of identification.

First, this situation can be very frustrating for customers and some even find it insulting. Next, the bank’s employee would have to spend some time comparing the identification cards information provided by the clients with those in the database. Thus, only the identification step can take one to two minutes depending on the teller. Because of the client’s frustration caused by that obsolete recognition method, the representative would miss out business opportunity to increase the bank’s revenue such as offering a higher-priced plan or a credit card.Financial institutions therefore have obvious reasons to consider to eye-scan recognition method. My references 1. Iris Recognition Biometric Authentication Information. Retrieved March 2010 on http://www.

ravirajtech. com/iris-recognition-biometric-authentication-information. html 2. Canada Safety Council.

Debit Card Fraud: Don’t become a victim. Retrieved on March 16th, 2010 on: http://safety-council. org/campaigns/debit-card-fraud–dont-become-a-victim–2009/ 3. Iris Scan.

Retrieved March 16th, 2010 on http://itotd. com/articles/212/iris-scans/ 4. Retinal Scan.

Wikipedia.Retrieved on March 20th, 2010 on: http://en. wikipedia. org/wiki/Retinal_scan 5. Iris recognition.

Wikipedia. Retrieved on March 20th,2010 on: http://en. wikipedia. org/wiki/Iris_recognition 6.

Iris recognition. Retrieved on March 21st, 2010 on: http://www. icdri. org/biometrics/iris_biometrics.

htm CONCLUSION Four different ways to make mobile payments, their usage and benefits to banks and consumers were looked at. Furthermore, an in-depth analysis of the eye scan and fingerprints was made. Mobile payments and biometrics have grown in popularity over the recent years.However due to the fact that these technologies require major investments and major changes in the way that current banking systems are operating, banks and other corporations are still reticent to adopt these technologies. In order to become fully operational in the banking industry, the current security systems have to faulty. Another option would be that a bank enters the market as a first mover prompting the other institutions to install biometrics security systems.

Mobile payment is a new technology that is very popular in Asia and Europe started to gain some ground in North America since 2000s.It is discovered that mobile payments can be an important factor facilitating the speed of transactions and allowing customers to go about one’s business without having to think about going to the banks or stores in order to carry out their errands. When it comes to the two biometrics methods of identification discussed, we recommend fingerprint over eye scan as identification system.

Considering that financial institutions do not like taking risk, fingerprint recognition method would be more suitable.Because it is more widely used and its effectiveness proven by important departments such as the United States Customs, fingerprint system would be a safer choice for implementation. Therefore, blind people and customers with very dark brown eyes, who may be rejected by the eye scan, can be accommodated.

Retaining those clients is important because losing them can be translated into considerable losses of revenue on a bank’s income statement. It would also be easier for clients to adopt the fingerprint system because it will just be a new feature added to the current debit or credit cards combined with a personal identification number.APPENDIX Figure 1 “A human thumbprint- a common type of biometric data used in authentication.

” Figure 2 “All of the ridges of fingerprints form patterns called loops, whorls or arches. ” Figure 3 “Typical fingerprint with types of minutiae within a whole fingerprint. ” Figure 4 The Siemens scanner is designed to cut online fraud by identifying bank customers by reading their fingerprints” “This fingerprint reader made by Microsoft is small in size and can be easily connected to your computer by a USB drive. ”



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