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Grocery Stores Checking Out Fingerprints

Small shops are using biometric technology that retrieves customers' data to cut losses from fraud.

November 25, 2002|Melinda Fulmer | Times Staff Writer

You might not peg La Playa Market, a cramped Inglewood bodega with a single checkout lane, as an early adopter of technology.

But the store was among the first in the nation to install a groundbreaking and controversial personal-identification system that uses unique physical characteristics such as an individual's fingerprint to identify customers and crack down on check-cashing fraud.

Although large supermarket chains and major discount retailers have been slow to introduce the system, mom-and-pop food markets and small urban grocery chains are rushing to biometric technology.

The reason? La Playa and other markets in low-income neighborhoods have more at stake than the big supermarket chains. As much as 70% of their food sales come from customers who don't have bank accounts and rely on local markets to cash their checks.

"Most of the things here they could probably get at bigger stores," said Ray Hernandez, a clerk at La Playa's meat counter where several customers were lining up to cash checks recently. "They come here for this service."

Cardenas Supermarkets, a nine-store chain based in Ontario, said that since it installed a fingerprint-scanning system two weeks ago more than 5,000 customers have signed up.

"It makes it easier for them when they come in," said Cardenas general manager Steve Vallance. "They don't have to carry ID."

But it's really more of a benefit to the chain. The system, Vallance said, has helped stem the company's losses from check fraud, which in recent years had soared as high as $500,000.

"We cash about $3.5 [million] to $4 million in checks a week," Vallance said.

With the company planning to open more stores in the coming years, the stakes were getting too high to become complacent, he said. "We had to make sure those checks were clean."

Cardenas is using a fingerprint scanner made by Herndon, Va.-based BioPay Inc., whose system is in about 30 locations across Southern California and 300 outlets around the nation, many of them check-cashing businesses. Two rival biometric technology firms also are marketing similar supermarket systems.

For the BioPay system, a customer must register by scanning his or her driver's license or other identification card and a fingerprint. Thereafter, when the customer comes in to cash a check, the data are retrieved by a touch of an index finger to an electronic pad, or "reader." A cashier then swipes the check to detect its magnetic ink, takes a picture of the check, verifies the bank information and matches it against a database of other checks cashed by that customer.

The system does not cross-reference the information with law enforcement or government databases, BioPay President Tim Robinson said. But when a bogus check is detected, the system flags it and shares the information with other stores if necessary, so the individual is prevented from passing counterfeit checks at other locations.

BioPay charges store locations about $75 a month for the system, plus $10,000 for each fingerprint machine. Many stores charge a 1% to 2% fee to cover the cost of the service. Cardenas charges 5% of an individual's check, but gives the customer a voucher for the amount to be used in a Cardenas store as an incentive to start spending immediately.

But as handy as the technology may seem, larger grocers -- which do less check cashing -- have been slow to embrace the system for credit and debit cards. Many fear their customers will consider it an intrusion.

Kroger Co., the nation's largest supermarket operator, is testing the electronic identification system in only a few Texas stores. Thriftway market chain is running a pilot program in some of its Seattle stores.

Albertson's Inc. officials said they haven't been convinced. "As it becomes more cost-effective and as customers tell us this is a service they will use," the chain might consider it, spokeswoman Stacia Levenfeld said.

Privacy experts say customers probably don't have a lot to fear from such shops as Cardenas and La Playa storing images of their fingerprints, but the system is yet another way that consumers are allowing merchants and institutions to acquire their personal information.

And although giving up such information might not be a concern now, said Lee Tien, senior staff attorney for the Electronic Frontier Foundation in San Francisco, it could become one as the technology is used by more businesses, which could begin sharing consumers' personal data.

Indeed, the makers of biometric technology, which also can scan retinas and faces, are predicting that sales of their equipment will grow to $2 billion in 2006 from $200 million this year. There are no federal laws that deal with sales of fingerprint data and related personal information.

However, Robinson points out that many consumers routinely give away more personal information than BioPay requires when dealing with such businesses as car rental firms.

"You have already given away all your privacy," he said, adding that his company does not share data with marketers, and shares information about bad-check writers only with other businesses.

That shouldn't alleviate consumers' concerns, Tien says.

"You point your finger at one company and say we're not as bad as them. But everyone is pooling and sharing this kind of personal information promiscuously," he said.

Yet, small grocers say, few of their customers inquire about what is done with their personal information.

"Should I be worried?" asked shopper Patricia Luna, as she joked around with clerks at La Playa Market last week. "I don't think about it. All I want is my money. I'll do whatever they ask."

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