Credit Unions Can Use Biometrics to Maintain that Trusted Relationship With Members

Momentum towards stronger financial privacy for consumers in the United States has picked up a lot of momentum in recent months. While most welcome the change, some financial institutions are still tentative about the new direction, others are actively resisting it, and a few are not sure how to respond. Credit unions are no exception, but continue to lead other financial institutions in adopting use of biometrics. The most common application is fingerprint identification. If credit unions really want to secure a competitive advantage, now is the time to act – to get out in front of the financial privacy issue, leverage their reputations for service and to provide better and more secure services for their members. Security today is built around trust and identity verification. The roots of today’s security framework are grounded in the ability to provide authorized individuals with the appropriate access rights based on those individuals authenticating or verifying their trusted identity. Biometrics are a way to establish a unique and trusted identity for each individual that cannot be lost, stolen or misused, which can be an issue with traditional methods of authentication such as passwords, keys and cards. Biometrics is the measurement of an individual’s unique physical or behavioral characteristic(s) to recognize his identity and/or verify his claimed identity. A number of traits and behaviors can underlie biometrics including fingerprints, face, iris, retina, voice and others. In case you don’t know what’s been going on, the recent seeds for strengthened financial privacy started in 1999 when the U.S. Congress passed the Gramm-Leach-Bliley (GLB) Act. The Act relaxed the artificial walls between the banking, insurance, and security industries-effectively allowing a single entity to offer financial products from all three categories to customers. While not central to the act, significant financial privacy rules were also enacted, effective in 2001, that required that any financial institution that wanted to share non-public customer information with third parties to give customers an opportunity to opt-out, or block, their information from being shared. Why is “business as usual” in the financial services industry suddenly under assault on both the legislative and regulatory fronts? The bottom line is that people are a lot more sensitive to privacy issues and abuses than they were just a year or two ago. This was quite evident in an April 2003 Harris Interactive survey of U.S. adults: * 10% of those surveyed were “privacy unconcerned” * 64% of those surveyed were “privacy pragmatists or people who are concerned about their privacy and want to protect themselves from abuse or misuse of their personal information by a government organization or a company” * 26% of those surveyed were “privacy fundamentalist who believe their privacy is eroding and are trying their best to halt the process” When nine out of 10 bank customers and credit union members say they are concerned about privacy, something very important is changing the marketplace. When one out of four identify themselves as “privacy fundamentalist”, the genie is out of the bottle. We suspect that what’s really behind this dramatic shift in attitude-especially as it relates to financial services-is the dramatic increase in identity theft. Gartner reports that seven million U.S. adults, or 3.4% of U.S. consumers, were victims of identity theft during the 12 months ending June 2003. The identity theft problem has become wide enough that many people, if not victims themselves, know someone else who has already been victimized. Unlike marketing costs, it’s hard to place a direct monetary value on trust. Participants in other industries would love to have the same level of consumer trust as credit unions. But they don’t and they’re not likely to ever earn it. Holding on to this trust will be especially critical as credit unions move forward in the coming years to leverage new technologies and introduce new services. In the area of biometrics, for example, early deployments show significant cost savings for financial institutions-but achieving those benefits will require convincing consumers their personal biometric data is private, secure, and never available for sale or misuse. Consumers are saying loud and clear they want and value strong financial privacy. Credit unions should give it to them and take credit for it. Don’t offer consumers financial products-offer them “privacy enhanced” financial products. Don’t just give members the minimum privacy required by law-protect them in ways they wouldn’t even dream about. Today, more than 50 credit unions across the country use biometric identification at hundreds of terminals and kiosks on a daily basis. Widespread use of biometrics does not happen overnight. It’s a technology that’s changing the world. In the next five years, biometrics will become a big part of our lives. And credit unions have the opportunity to get out in front to lead the way in the financial industry.