Improving transaction safety 

By Karen Herland

Dan Otchere has been studying the delicate balance between privacy and security in financial transactions. Magnifying glass

Dan Otchere has been studying the delicate balance between privacy and security in financial transactions.

In most bank transactions, people are forced to balance the amount of privacy they have against the amount of security.

Cold hard cash has the highest “anonymity premium” according to economics professor Dan Otchere. He added that any other financial exchange, transfer, deposit or transaction leaves some sort of paper or electronic trail. You can verify it, but hackers might use it as well.

Otchere has been teaching for 36 years and he wrote his first paper on credit cards and how their use affects the stability of lending 27 years ago. Banking privacy and security have been preoccupations ever since and he has seen credit cards, debit cards, online banking and eCommerce develop exponentially since then.

He is also aware that identity theft, counterfeiting, and bank fraud are currently growing at a rate of about 30 % a year.

A new type of banking technology replaces the familiar magnetic stripe on credit and debit cards with a chip that includes information about its holder. The chip will operate as a computer processor, with memory, and allow the leap from the identification based security of PINs to the authentication potential of biometric technology.

"The chip cards attempt to copy the anonymity premium through authentication."
This additional level of security has already been adapted in different forms in Germany, Finland, the UK, Hong Kong and Japan.

Much of the western adoption is being driven by EMV, a consortium of Europay, Mastercard and Visa. They developed the chip technology (also called the smart card) and are responsible for ensuring global acceptance as a payment instrument.

A trial is now being conducted in Kitchener, Ont. Otchere said that under the current timetable, banks will introduce the technology here by 2010. After 2015, magnetic strip technology will no longer be accepted in the country.

With fraud costing banks millions annually, this transition stands to be very attractive. In addition, since financial institutions have created the technology, they also will gain financially from its adoption since they will be providing the technology to produce, read and monitor transactions.

It is not clear what types of biometric markers will be used though iris and voice recognition are both possibilities. Whatever is used, will have to be adaptable to eCommerce networks. As with most banking innovations, its adoption will be easier if it is considered safe and convenient by consumers, according to Otchere.


Concordia University