Money: As far as the eye can see

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The Independent Online
Security at cash machines could improve dramatically if a new trial by the Nationwide building society is a success. The secret is in the eyes. The new machine automatically scans the iris pattern of anyone who attempts to take out cash. A computer compares the image with a databank of customers' "eye prints". In seconds, the Nationwide claims, the cashpoint will know if the withdrawal is legitimate.

The Nationwide will install one iris-scanning cash machine at its Swindon headquarters shortly. If it works, and, just as vitally, if staff and customers use it, the idea will be expanded to branches across the country. Eye recognition is just the latest attempt by banks, building societies, and plastic card issuers to cut down on fraud and theft.

The Nationwide's new cash point was developed using a science known as biometrics, which encompasses techniques from fingerprint recognition to measuring vein patterns to confirm that individuals are who they claim to be. It might sound like the stuff of science fiction, but fraud is a real headache for plastic card issuers.

Barclaycard, currently the UK's largest card issuer, lost pounds 13.4m last year through fraud. Overall, the industry lost pounds 100m. Card issuers say the ultimate cost is to consumers, through higher interest rates and charges; and banks are keen to find new ways to clamp down.

Unfortunately for the banks, not all solutions are socially acceptable, even if they are technically possible. Past biometrics systems have been plagued by problems, in particular that of rejecting genuine customers who tried to withdraw cash or buy goods. Nor are the public too keen on hi-tech security measures: reservations have been expressed about fingerprint recognition because of the close association between fingerprinting and criminals.

Even proven security measures can run into difficulties. Photos on credit cards are favoured by some, but there have been concerns about civil liberties, as well as the burden that checking a photo puts on shop workers.

Some banks and card issuers have pressed ahead, and produced impressive results. The Royal Bank of Scotland has about 400,000 photo-backed credit cards in circulation, and claims a 99 per cent reduction in fraud. According to Ian Simpson, manager of card fraud at RBS, this is as much due to the cards carrying an etched version of the holder's signature as the photograph. This eliminates one important source of fraud: new cards stolen in the post by criminals who add a signature in their own hand. "With this, the primary checking requirement - the signature - is on the card before it is sent out," Mr Simpson says. A thief would then have to forge the signature. The cards cost RBS around pounds 1 more to make, but the bank claims it saves far more on fraud.

Card issuers have also considered asking customers to type in a PIN number when they buy goods. This is common in France, Spain and Belgium, but UK banks have reservations. "I want to know that it is you, not just somebody who knows your pin," says Mr Simpson. He points out that using a PIN in a shop is not the same as in the relatively secure environment of a cashpoint.

Banks are worried about the small but growing number of people who are forced to reveal their PINs to robbers or muggers. Cameras have been installed near cashpoints in some towns since they cut down on arguments about "phantom withdrawals", where customers claim money taken out was not withdrawn by them.

An iris-scanning system could replace PINs altogether, according to Nationwide, but it will be some time before the systems are in widespread use.