Using Biometrics To Help Identify Check-Cashing Fraud
Integrated Solutions For Retailers, March 2007 Written by: Lisa Kerner
While grocery stores are not necessarily in the banking business, many offer their customers the convenience of payroll check cashing, which in turn encourages customers to stay and shop. However, these same stores lose when customers use false IDs and pass worthless checks.
The BI-LO/Bruno’s chain of 310 grocery stores operating throughout the southeastern United States discovered check cashing to be an expensive problem back in 2003. “The chain was experiencing frequent losses due to bogus or counterfeit payroll checks being passed in our stores,” according to its Manager of Loss Prevention Services, Ray Kessler. “One of the major obstacles for us in preventing these incidents was our inability to prevent identity fraud.”
Typically, to cash a check, a customer presented a valid government-issued form of ID, such as a driver’s license, to a store clerk at the service desk. The clerk could cash the check, ask for additional ID if needed, or seek manager approval for the transaction. A manual system such as this made it easy for customers to use different IDs at different stores. In addition, BI-LO/Bruno’s lacked the ability to look up a customer’s check-cashing history or to easily flag bad checks.
Measuring Customer Acceptance
BI-LO/Bruno’s worked with Pay By Touch to pilot a biometric check-cashing verification system, including Paycheck Secure, at 12 of its stores in Charlotte, NC.
“Our intent was to measure the reduction or prevention value of the technology, as well as measuring the customers’ acceptance of the use of the technology in the stores,” Kessler said.
Pay By Touch installed Paycheck Secure — which consists of a PC, software, cameras, an ID scanner, and biometric and check readers — at the Charlotte stores, using telephone lines for connectivity with the new system.
Check-cashing customers were photographed and their IDs scanned, as were their left and right index fingers. All this information was used to enroll the customers and create a historical database of check-cashing customers. Once enrolled, these customers simply place their fingers in a biometric reader to confirm their identity prior to presenting a payroll check for cashing.
The check reader verifies standard MICR (magnetic ink character recognition) information and formatting of information on each check, according to Pay By Touch Product Market Manager Leslie Connelly. Because the system can populate and store a “bad check list,” fraudulent checks are caught before they are cashed. Store clerks can add notes on customers and look up past check-cashing information, while managers have the flexibility of manual overrides. Connelly said the system pays for itself by stopping one or two bad checks.
“After the test pilot, we installed the system through our existing network,” Kessler noted. The chain rolled out an additional 177 units to its stores two weeks before the Thanksgiving holiday. Today, BI-LO/Bruno’s boasts a total of 226 Paycheck Secure systems and noticeably shorter check-cashing transaction times.
Information stored in the Pay By Touch system, such as photos and driver’s license information, is given to law enforcement to investigate bad checks. “We’ve been very successful in seeing arrests made on the local, state, and federal levels based on information provided by the technology,” Kessler explained.
“The customers supported our efforts to protect them from identity theft, but more so from the convenience of not having to show ID after their initial enrollment,” offered Kessler. “The fact that a customer can be recognized in any of our retail locations using the technology has proven to be a huge benefit.”