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Transforming Point of Sale into Point of Service

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October 01, 2005
Next Generation | Technology
Michael Kasavana, Ph.D., CHTP - kasavana@pilot.msu.edu

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© 2005 Hospitality Upgrade. No reproduction without written permission.

The movement from physical currency to cashless payments is becoming more prevalent as advancements in automated banking, account management and methods of reconciliation gain in popularity. As the hospitality industry continues to adopt innovative transaction processing technology (TPT), it is important to recognize new payment formats are evolving rapidly. Credit, debit and smart cards are becoming much more advanced, RFID tags are becoming more flexible, cellular phones more adaptable, and biometric characteristics more acceptable. While TPT can help reduce charge-back losses, fraud and audit processing it also has the potential of providing competitive advantage as POS devices become more self-service oriented. In fact, so many POS activities are moving toward self service that the definition of POS is being transformed from point of sale to point of service.

Basically, a cashless payment system is dependent upon specific instructions governing the transference of funds from one account to another. The instructions can be paper-based (e.g. personal check or voucher), electronic (e.g. magnetic stripe or RFID) or stored value (e.g. prepaid or embedded chip). It is important to note that these media categories are not mutually exclusive. For example, the MasterCard PayPass™ card features a contactless RFID payment option while also supporting a magnetic stripe for traditional swipe settlement. Similarly, payment via cell phone can involve a combination of media categories. From a technology perspective, the future isn’t what it used to be as biometric technology, hybrid cards, RFID chips and mobile phones are beginning to significantly impact payment processing.

Biometric Settlement
Most security systems rely primarily on passwords, personal identification numbers, authentication tokens or smart cards to ensure validation of an authorized user. There is a common vulnerability associated with these non-biometric techniques: verification can be lost, stolen, duplicated or guessed. Whenever a biometric technology is used, the basic concept of verification remains the same; a personal characteristic is measured and evaluated. Comparisons against stored mathematical algorithms or image patterns can be performed automatically using high-speed specialty software. Two biometric transaction authorization techniques gaining hold in the industry are fingerprint metrics and signature metrics. The rationale behind biometric settlement systems, such as fingerprint and signature metrics, is that they cannot be forged. Proponents have never had trouble explaining the benefits of fingerprints since each person has a unique set, and validity has been established in the legal system as an authoritative means of proving identification. However, the apprehension of registering fingerprints, normally associated with criminal activity, coupled with the thought that a print might link to proprietary personal information, renders fingerprinting a less appealing technique.

Practitioners who have tried fingerprint and signature metrics claim it is much easier to capture a user’s signature for quantification than fingerprints for calibration. Dynamic signature technology is a relatively recent phenomenon that works by evaluating the behavior associated with the act of writing. The cadence and pattern of the characters in a signature, along with speed, pressure and stroke order are used to produce a mathematical representation of the signature. In other words, the signature image is not stored, only its mathematical value. As biometric technology has advanced, hardware and IT costs have dropped, providing the hospitality industry with an incentive to adopt this technology.

Fingerprint Metrics — Biometric payment systems, initially implemented in supermarkets, are currently being tested in hotels and restaurants.

The enrollment process is quick (usually less than 60 seconds) as users place a finger on the reader, enter a personal code and swipe a payment card and enter account data or loyalty program identification to link. Biometric settlement scanning does not store actual fingerprints; instead a set of geometric data is derived by measurement of important areas on the fingerprint image. At the point of purchase the user invokes the fingerprint reader for authentication and transaction completion. Such a scan is deemed secure as it eliminates the need to carry payment cards, cash, loyalty cards or a personal check. In essence, the corresponding geometry links an individual to an electronic wallet (e-wallet) containing financial and affinity reward information. Users can create an account with multiple settlement options and select a preferred payment format with each transaction. Some vendor systems allow users to withdraw money from a linked checking account similar to an ATM.

Pay By Touch is a popular supplier of fingerprint settlement applications. With Pay By Touch, the user scans a finger four to five times in order to create a highly reliable fingerprint image for mathematical translation. The next time the user is at the point of purchase, he/she merely touches the reader, enters a code number and selects from a list of payment options. Pay by Touch, a free service for users, charges retailers 5 to 10 cents per transaction and claims the system can speed settlement time by 30 percent. Similar to Pay by Touch, a system from BioPay also involves comparison of a fingerprint scan to a data point algorithm and a 10-digit code password (e.g. telephone number) to authorize secure linkage to a registered payment account. Most fingerprint readers are sophisticated enough to detect the presence of a pulse thereby eliminating the potential to use an amputated appendage.

Signature Metrics – Unlike signature capture systems that compare a signature to a stored signature image (static comparison), signature metrics focus on the cadence and pattern (dynamic comparison) of the user’s writing style to verify identity. A dynamic signature system using biometric authentication measures is able to capture data from the movement of a writing instrument (pen or stylus) over a flat surface (digitizer tablet) in the form of stress waves or acoustic emissions. Acoustic emissions are generated from the sequence in the signing process and constitute a pattern unique to an individual’s writing style. This pattern contains extensive information about the way in which the signature was executed.

In order to create an identity standard, signature analysis software prompts the user to sign his or her name three times in succession. Matches lead to the formation of a wave graph that can be encrypted and compressed into a template. It is important to note that comparative analysis of a user signature to a recorded template occurs in fractions of a second. While it is possible for a skilled forger to produce a good visual copy or facsimile of a signature, it is nearly impossible to accurately reproduce the dynamics of a genuine signer. In addition, a signature metric system protects the privacy of its user since no personal information can be recreated from a stored template — only an acoustic emissions map. In essence, a signature metric application transforms a series of movements into a unique collection of biometric data (e.g. rhythm, acceleration, pressure and flow). One provider of dynamic signature analysis is Cyber-Sign. The Cyber-Sign system authenticates a person, not an image by focusing on the shape, speed, stroke order, off-tablet motion, pen pressure and timing information captured during the act of signing.

Hybrid Cards
In general, there are two types of hybrid cards gaining popularity: the RFID card and the biometric card. A contactless radio-frequency identification (RFID) card features an embedded microprocessor and antenna for rapid settlement transactions. Despite being contactless, however, most RFID cards also feature a magnetic stripe for swipe processing at terminals not yet equipped for contactless operation. Overall, an RFID card can function as a credit card, debit card, smart card or prepaid card. A biometric hybrid card, on the other hand, relies on an embedded scanner to identify the cardholder’s fingerprint to validate the user as well as activate the card’s magnetic stripe for authorized transaction processing.

RFID Hybrid CardThe chip within the card contains the same information as the magnetic stripe plus some additional content. can also be embedded into other devices (e.g. key fob, flexible tag, wrist watch or cell phone) and may soon replace industry standard contact cards. An RFID contactless card, which eliminates settlement swiping, has been shown to speed transactions by 13 percent or more. The cardholder simply taps or waves the card near a Touch n Go reader and blinking lights and an audible tone indicate the transaction media signal has been captured. A customer feature of most RFID cards is that no signature or PIN is required for purchases below a predetermined dollar threshold, less than $25 for example. Additional security is also provided because the card never leaves the cardholder’s hand or sight during the transaction. RFID cards that carry e-cash on the chip may be reloaded manually via cash or credit/debit account entry at a reload station, or programmed with an automatic reload feature, triggered when the balance stored on the card drops below a specified level. Experts predict the RFID card has a seven-year life. MasterCard’s PayPass, Visa Contactless, American Express’ ExpressPay and Blink from JPMorgan Chase & Co. are examples of popular provider contactless card products.

Biometric Hybrid Card — An innovative hybrid card features an embedded fingerprint scanner, microchip, and magnetic stripe built right into the body of the card. In order to initiate a transaction, the cardholder swipes two fingers across the card’s embedded scanner. Two fingers are required since requiring only one finger could make the card unusable if that finger was injured (e.g. cut, scared or burned). The card is capable of storing images of six scans – three for each finger – in an embedded microchip. Once the image is gained, it is locked into the fingerprint scanner and cannot be changed. The fact that images are stored on the card provides tight security and more rapid access than otherwise provided through verification and authorization interaction with a remote database. Transaction scans that prove a match activate the on-board microchip or magnetic stripe to complete the transaction. A successful biometric match authorizes the card for a limited, predetermined time, such as two or three minutes, for the transaction to occur. If a transaction is not completed in the allotted time, a fresh match must be performed. Unless activated, the card is just a piece of plastic. The appeal of this card is that it operates autonomously as the recognition of the fingerprint is performed on the card itself. Hence, no external database is accessed and the scanned fingerprint never leaves the card. Challenges facing this experimental settlement card include enhancing control over the activation and deactivation of the magnetic stripe (i.e. improving the time-out function), extending the life of the scanner beyond two years, and developing a contactless payment option. One company working on these challenges is the Danish manufacturer Scanecotech AS.

RFID Chips
Radio waves are being used to automatically identify warehouse products, manufactured parts, individual objects, pets and people. When RFID first emerged, it was used primarily in tracking and access applications. Since then it has developed into a robust technology with increasing processing speeds, wider recognition ranges and larger memory capacities. RFID has many advantages over competing technologies such as bar coding and infrared. The primary advantage of RFID technology is that it is a non-contact and non-line-of-sight technique. RFID tags can be read at great speeds (less than 100 milliseconds in most cases) and its transponders can also be modified through read/write capabilities which are beneficial to asset tracking. An RFID reader generates an electromagnetic field through its antenna. Once the device enters a detection area, it becomes activated and capable of receiving a signal through its antenna. This signal is used to turn on the device’s transmitter and thereby allow communication exchange between the device and reader. The reader can then transmit the data to an external data processing system or file server for later use.

Tag Chip – RFID capabilities can be assigned to a flexible media tag that consists of two components: the tag material and a reader with an antenna. vary in shape and size and may be designed as active or passive. Active RFID tags are powered by an internal battery and are commonly read/write, allowing the tag’s data to be modified or rewritten. The memory size of an active tag varies depending on the application requirements. Passive RFID tags, on the other hand, are not battery powered, but rely on power generated by the tag’s reader.

The read range for active tags spans from several inches to more than 100 feet while the range for passive tags covers one to 10 feet. Examples of active tag applications include infant tags and asset tags, while an implanted chip is illustrative of a passive tag. MasterCard’s PayPass, Visa Contactless, American Express’ ExpressPay and Blink from JPMorgan Chase & Co. are available in tag format or will be in the near future.

Implanted Chip — An encapsulated microchip, injected subcutaneously and energized to transmit settlement information can be activated by a special RFID reader. The implanted chip is very small (about the size of a pen point), virtually undetectable and practically indestructible. Given the nature of implanting, the chip and injector must be sterile. The chip is usually placed into the upper arm, just beneath the skin. The process provides little discomfort and is described as equivalent to a flu vaccine shot. Since the chip does not have a battery, there is minimal risk of chemical harm to the wearer. The chip has an expected life of 20 years, and in addition to transaction processing technology, it may also be used for a variety of applications including financial and transportation security, restricting residential and commercial building access, medical record keeping and military and government security. The leading RFID implant chip vendor is VeriChip.

Cell Phone
Why carry credit/debit cards, loyalty cards, prepaid cards, hybrid cards or other settlement media when the cell phone can be used to settle a transaction? Cell phone manufacturers are experimenting with several options, including hardware modification (shell casement and fingerprint authentication) and software add-ons like custom shortcuts and voice authentication. Although in its infancy, cell phone settlement technology is expected to become quite popular as next generation consumers, already cell phone dependent, dominate the marketplace. A real fear associated with cell phone settlement is the threat of misplacing or losing the handset. Phone absence could also mean loss of transaction functionality. Security concerns point to a need for better authentication methodologies including voice authentication and fingerprint authentication, so that lost equipment is rendered unusable.

Shell Casement — Handset transaction processing can be accomplished through placement of an outer casement with an embedded chip over the phone. The outer shell uses near field communications (NFC) technology that allows for contactless payment by pointing the phone at a specially modified POS terminal. NFC technology evolved from a combination of contactless identification (RFID) and interconnection technologies.  Payment information, such as debit or credit card detail, stored in an integrated chip in the shell, complete the transaction. An example of an enabled phone is the

Fingerprint Authentication — An innovative cell phone with a fingerprint chip at its base, requires the user swipe a finger across its surface before the phone is operable. NTT DoCoMo, Inc. has developed such a phone that is being marketed in Japan for use as an electronic wallet and to activate withdrawals from cash machines. The DoCoMo F505i and F901iC feature fingerprint scanning panels to prevent unauthorized handset use.

The user can lock or unlock the cell phone simply by placing a pre-registered finger on the sensor. Up to 10 fingerprints can be registered for authentication on a single phone. Once activated the phone can be used to conduct transactions and exchange proprietary information.

Voice Authentication — Cell phone voice authentication is keyed to recognizing characteristics of the user’s voice and thereby activating the device. Although considered a low-to-medium-level identification technique, little modification is required as the necessary hardware is already in place and improved software is evolving. This approach allows speaker-verification based on stored data burned onto an existing microprocessor within the cell phone. A factor hindering application, however, is the questionable quality of cell phone microphones.

Microphones have not proved capable of supporting voice recognition nor reliable enough to sort out voice input within a noisy or busy environment. A provider of voice authentication software is Voice Security Systems. Its approach involves obtaining a voice template of the user captured through the microphone of the phone. The company cites its approach as low-cost since the recording of a voice template does not require extensive software or ongoing maintenance to keep it operational.

The advantages of innovative transaction payment technologies include consumer convenience, enhanced internal controls, improved marketing intelligence, and most importantly, an increase in revenue and security. For decades plastic swipes have dominated transaction settlement within the hospitality industry. Guests carrying a wallet replete with assorted payment cards, membership cards, loyalty cards and other cards have become the norm. As contactless payment technology options continue to emerge, innovations in biometric mapping, RFID tags, and cell phone settlements are expected to change the way the hospitality industry transacts business. As signature cadence, cell phone chips, implanted RFID tags and the like begin to govern financial transactions, perhaps those first to implement will be first to profit.

Michael Kasavana, Ph.D., CHTP, is NAMA Professor in Hospitality Business, School of Hospitality Business, Michigan State University. He can be reached at kasavana@pilot.msu.edu.

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