KROGER ADDS BIOMETRIC TO CASH CHECK, CHECK FRAUD

KIM ANN ZIMMERMANN

CINCINNATI -- Kroger Co. here is rolling out biometric check-cashing machines to 50 stores in its Texas market in an effort to combat check fraud while providing a service to customers without bank accounts, according to a source familiar with the situation.

The check-cashing machine captures a digital image of the customer during the enrollment process and stores the photo. This stored digital image is then compared to the customer's image captured at the time of a transaction.

An initial installation of 50 check-cashing devices is taking place in the Houston and Dallas areas, and the rollout will likely continue to the majority of the 179 stores in the Southwest marketing area early next year, according to the source.

The technology aims to provide customers with the ability to cash checks at the supermarket without the retailer having to incur the risk of accepting a bad check, the source said. The retailer is typically paid a percentage of the check-cashing fees collected plus a fee for leasing the space in the store, the source said.

The retailer has been running a pilot program involving three machines in Dallas stores since December 1997.

"We've been delighted with the results of our pilot program over the past 18 months, and now look forward to being able to offer all our customers in our region a self-service cash-management solution that's available 24 hours a day, seven days a week," stated Russell Yates, risk manager for Kroger's Southwest marketing area, which includes Texas and Louisiana.

Other Kroger officials were not available for comment on the Texas rollout or whether this technology will be considered for additional markets.

While the source said there was not a high incidence of fraud in Kroger's Texas marketing area, check fraud is an issue for many retailers across the country. According to the National Check Fraud Center, Charleston, S.C., check fraud and counterfeiting are among the fastest-growing problems affecting retailers, resulting in estimated annual losses of $10 billion.

The initial enrollment process takes three to five minutes. On subsequent transactions, which average between a minute and a half and two and a half minutes, the user enters his or her Social Security number and the stored digital image is compared against the image taken from the video camera.

The amount of the check and the payor are also considered when evaluating the risk of a particular check.

"For example, if a check from the same payor for the same amount is being cashed each week, there is less risk involved," the source said.

If there is a problem with the photo identification, customer-service representatives are available. The representative can view the customer's stored image and an image of the back of the check that was captured when the customer placed the check into the machine. The representative can identify the individual using a password selected during the initial setup.

Customers are charged 1.75% for printed government or payroll checks, 3% for handwritten payroll checks and up to 6% for third-party or personal checks.

In addition to check-cashing services, the machine can handle ATM transactions, and will be able to provide electronic benefits transfers and bill-paying services in the future. There is also the opportunity to add screens with promotional messages on the machines from InnoVentry, San Francisco. InnoVentry is jointly owned by the wholesale bank of Wells Fargo & Co., San Francisco, and Cash America International, Fort Worth, Texas. Besides reducing the risk of accepting a fraudulent check, the retailer can benefit by providing customers with access to more money that can be spent in the store, the source noted. "The average ATM transaction is $60. The average check-cashing transaction is $250. That is a lot more money which the customer has in their pocket to spend at the store, and the retailer is providing this service without risk," the source noted.