The use of biometrics in financial institutions is set to grow as banks throughout the world strive to offer a combination of enhances security and convenience to their customers, according to new research from Frost and Sullivan.

It says in North America and Europe, regulatory compliance is driving 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. Biometrically-enabled ATMs have become immensely popular in Japan and have seen widespread adoption in India, Latin America and the Middle East.

 ‘World Financial Biometrics Markets’, a new analysis from Frost and Sullivan, finds the markets earned revenues of US$117.3 million in 2006 and estimates this could reach US$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,” says Imran F Khan, research analyst at Frost. “These end users are beginning to realise the advantages that biometrics offer which enhances security, time efficiency and convenience.”

According to Frost: “In the past, the financial services sector viewed biometrics as a novelty and implemented them sporadically. With the technology now mature, institutions now regard biometrics as a suitable solution to combat identity theft and bank fraud. In the last two years, numerous financial organisations deployed non-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. Moreover, 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 it is an intrusion of their privacy,” says 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.”

He adds: “Vendors must be more proactive about quantifying the cost efficiencies that biometric solutions offer to offset the competition from alternate, non-biometric solutions.”