Biometric ATMs in Japan: Fighting Fraud with Vein Pattern Authentication

March 29, 2006

Abstract

Tokyo, Japan March 29, 2006

Japan's banking industry is placing its bets on biometrics as a solution to the growing problem of counterfeit ATM cards and ID theft. First introduced in October 2004, biometric bank cards have been announced by 15 financial institutions (two megabanks, five regional banks, and eight credit unions) as of December 2005. More than 50 other institutions have announced plans to introduce the cards over the next several years.

Recent years have seen financial institutions worldwide turn to biometric technology in order to deal with the pressing issue of security, usually in the internal, corporate, and high net worth sectors. The mass retail segment, however, has been slower than other segments to embrace biometrics. Barriers to adoption have included cost, a lack of application standards and interoperability, and customer resistance to adoption of the new technology.

Against this background, the Japanese banking industry's implementation of a new biometric technology based on vein patterns to authenticate ATM transactions is attracting attention. The Japanese banking industry, which since late 2003 has come under pressure to strengthen security in order to combat the growing problem of counterfeit bank cards and ID theft, has turned to vein pattern authentication technology as one solution. In October 2004, the Bank of Tokyo-Mitsubishi UFJ began to offer ATM cards that authenticate the customer by vein patterns in the palm of the hand. Other major banks in Japan have followed by announcing their own plans to adopt biometric bank cards utilizing either palm vein authentication or a rival technology based on vein patterns in the finger.

"Japanese banks' pioneering use of vein pattern authentication technology in the mass retail banking sector is a first," comments Junko Nose, author of Celent's new report, . "If these banks get significant consumer adoption of the new technology, it will be a valuable case study for banks around the world on how to successfully implement a biometric strategy in retail banking."

The report assesses the prospects for vein pattern authentication in the mass retail banking sector, which has historically been resistant to biometric technology. The report examines the security issues facing ATM systems at retail banks in recent years and presents an in-depth overview of vein pattern authentication and other biometric technologies offered by Japanese vendors. The report also features exclusive case studies detailing the adoption of vein pattern authentication technology at Japan's four largest banks, The Bank of Tokyo-Mitsubishi UFJ, Japan Post, Mizuho Bank, and Sumitomo Mitsui Banking Corporation (SMBC).

The 59-page report contains 8 figures and 10 tables. A table of contents is available here.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Tokyo, Japan March 29, 2006

 

Executive Summary 4
Introduction 6
The Setting: Japan's Banking Industry Moves To Strengthen Security 8
  Development of ATM Services 8
  The Increasing Prominence of Security Issues 9
Current Status of IC Card Adoption 14
  Structure, Functions, Characteristics, and Usage of IC Cards 14
  Current Status of IC Card Penetration 16
Biometric Authentication System Today 18
  Biometric Authentication Systems 18
  Adoption of Biometric Authentication Systems 22
  Biometric Bank Card Adoption Issues 30
Biometric Authentication Solutions 32
  Finger Vein Authentication System (Hitachi) 33
  Palm Vein Authentication System (Fujitsu) 36
  IRIS Recognition System (Oki Electric Industry) 40
  Biometric-Enabled ATMs 42
Biometric ATM Case Studies 43
  The Bank of Tokyo-Mitsubishi UFJ 43
  Sumitomo Mitsui Banking Corporation (SMBC) 45
  Japan Post 48
  Mizuho Bank 52
Conclusion 55
Celent Methodology 58

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