Following a rise in fraud and public pressure, many of Japan’s financial institutions are turning to technology to make it harder to steal money from their customer’s accounts.
In 2004, losses incurred through the use of fake cash cards at automatic teller machines (ATM) totaled ¥273 million ($2.6 million) during the three months from July to September, according to the Japanese Bankers Association. By comparison, the total losses for all of 2003 was 260 million and for all of 2002 was 32 million.
Increasingly typical is the case of Yumie Nakabayashi, a housewife who awoke one morning to find someone had broken in overnight and stolen her cash cards. Later, she discovered ¥1.8 million missing from her bank account. Her bank, Mizuho Bank, a major high-street bank, refused to compensate her for the stolen money.
Banks are fighting back by adopting integrated circuit (IC) chip-embedded cards and biometric authentication systems as a replacement for the ubiquitous magnetic stripe. This year, many of Japan’s largest banks will have replaced the old cards with chip-embedded versions.
Mizuho Bank expects to finish the process this September, said Yasushi Miyama, a spokesman for the bank.
UFJ Bank, another major high-street bank, has just adopted an IC-chip card for small business users. IC cards are seen as an important way to bolster security, said Koichi Ogawa, deputy general manager of UFJ Bank’s Corporate Banking Planning and Administration Department.
Part of the push for better security comes from regulatory pressure. Japan’s banking regulator, the Financial Services Agency (FSA), in February urged banks to introduce biometric identification systems and chip-based smart cards. The agency also established a network of legal and IT experts to come up with a set minimum security standards for financial institutions, said FSA spokesman Koh Sato.
In an effort to improve security, banks have started introducing vein-pattern recognition technology. Such systems use sensors mounted on ATMs to verify a person’s identity by recognizing the pattern of veins in the palm. Authentication is completed if the pattern matches the information stored on a database, according to Fujitsu, a major vendor of the technology .
In total, four local Japanese banks plan to start using Fujitsu’s system during the next six months, Fujitsu said.
The Bank of Tokyo-Mitsubishi, Japan’s third-largest retail bank, introduced the system last October, issuing cards that could be used with ATMs in 267 of the bank’s branches. About 1,400 of its 3,000 ATMs will be compatible with the system by the end of this September, said Masahiro Okuda, a bank spokesman.
From next April, Mizuho and Sumitomo Mitsui Banking will start introducing vein-pattern recognition technology, Mizuho’s Miyama said.
Besides Fujitsu, other vendors are also moving to offer systems that meet demand for higher security. Oki Electric Industry this July introduce an ATM equipped with either a built-in fingerprint sensor or a palm vein sensor, letting the buyer choose, said Naomi Takeuchi, a spokeswoman for the company. Oki is Japan’s No. 1 ATM vendor with a 40% market share of all bank ATM sales in 2003, she said.
But for Nakabayashi, technology provides only a partial solution. “Criminals will always find a way to break it. I don’t see technology as an answer, just another hurdle,” she said.
Martyn Williams, in Tokyo, contributed to this report.
