Frost: Strong Growth for Biometrics in Financial Institutions Expected Globally

June 9, 2008 // Published as a news service by IHS

In North America and Europe, regulatory compliance drives the increasing adoption of biometrics.

In the emerging regions of Asia-Pacific and Latin America, a key driver is the competitive advantage offered by self-service banking solutions.

Analysts said biometrically enabled ATMs have become immensely popular in Japan and have seen widespread adoption in India, Latin America and the Middle East.

Recent analysis from Frost & Sullivan of the world financial biometrics markets found earned revenues of $117.3 million in 2006, with estimates to reach $2.07 billion in 2013.

"With the Federal Financial Institutions Examination Council (FFIEC) and the Sarbanes-Oxley Act pushing for stronger guidelines in multi-factor authentication and access to customer data and employee audit trails, financial institutions look to adopt biometrics to maintain regulatory compliance," said Frost & Sullivan research analyst Imran F. Khan.

"These end-users are beginning to realize the advantages that biometrics offer which enhances security, time efficiency and convenience."

In the past, the financial services sector viewed biometrics as a novelty and implemented them sporadically. With the technology now mature, analysts said institutions now regard biometrics as a suitable solution to combat identity theft and bank fraud.

In the last two years, numerous financial organizations deployed non-Automated Fingerprint Identification System (AFIS) fingerprint recognition and voice verification to meet FFIEC guidelines.

However, financial institutions historically are slow adopters of new technology due to the complexity of integrating biometrics within the existing infrastructure. Analysts said low awareness of the return on investment (ROI) and low number of credible reference sites are major restraints.

"Lack of awareness has led people unfamiliar with biometrics to think of it [as] an intrusion of their privacy," said Khan. "Furthermore, even if financial institutions are convinced of the cost savings and adopt biometric solutions, they may face resistance from their employees or customers who do not want to submit biometric information."

Analysts said vendors must be more proactive about quantifying the cost-efficiencies that biometric solutions offer to offset the competition from alternate, non-biometric solutions.

Source: Frost & Sullivan.