Let Your Fingers Do the Talking

As many small businesses fail each year as succeed. But America depends enormously for its economic vitality on those that do make it, for small entrepreneurs have been the dominant producers of new technology. Take, for example, the case of Michael Schiller.

Schiller owns a small security-systems business in White Plains, 25 miles north of New York City. An electronics and optical engineer, he became interested in the '70s in a problem of the computer age: criminal use and counterfeiting of plastic credit cards.

Since Diners Club, Carte Blanche, and American Express adopted it in the mid-1950s, the plastic credit card has become a ubiquitous means of identification. Stamped with that small, black, magnetic strip on the back, the card now can communicate with computers. But modern-day, sophisticated criminals are quickly learning about plastic cards and their associated computer systems.

Credit card issuers do not like to publicize the fact, but plastic-card counterfeiting is a growing security problem. The plastic-forming machines and colored plastic granules used to manufacture cards are easily obtained and worked. And at the other end of the system, at the computer center, files can be manipulated and data stolen.

Most US bank customers using plastic teller-machine cards are protected by being asked to memorize a "personal identification code,'' usually four digits, which is fed directly into a heavily secured computer file. As long as that computer file is kept secure, a stolen or counterfeit card cannot be used to empty a bank account or otherwise operate the system. But how to protect the computer file of memorized codes? (At present there is talk among New York security businesses about a bank having lost a complete listing of all its customer codes. No publishable story, however, has yet surfaced.)

The plastic card itself has the inherent disadvantage that it only identifies a card, not the proper card holder. So big businesses and small—including people like Michael Schiller—have jumped into the search for alternatives, which has become a classic entrepreneurial adventure (even if it is referred to by a forbidding bit of jargon—"biometric access control").

By measuring and recording certain unique personal characteristics, biometric access-control systems solve the shortcomings of cards. People's voices, for example, each have unique characteristics, and the principal engineering efforts have gone into developing machines that recognize these. Other systems have tried to measure and identify signatures, hands, and fingers.

Over telephone lines, computerized voice-recognition systems will be essential for security. Banking by telephone is presently very time-demanding of a bank's staff: they must ask random questions in order to form a judgment about the legitimacy of the voice on the other end of the phone.

Throughout the '70s competitive innovation and development of various voice-recognition systems has been fierce, and considerable progress has been made. Some systems work in some applications. Others are too error-prone, cumbersome, and expensive. Three or four years back, however, it was the consensus of the security business that voice recognition would serve all purposes.

Michael Schiller was an odd man out. At a time when voice-recognition systems were considered the wave of the future and when other alternatives were being neglected, Schiller was skeptical that they could provide the whole answer. He was convinced that he could develop a computerized fingerprinting security system, which would be better than voice recognition for many applications. So in 1976 he pulled out of a more general computer-terminal business and with money from family and friends, Schiller formed Fingermatrix, Inc.

During the past five years, the company has at times been very strapped for money. In its development stage, the business lost some $4 million. There were across-the-board pay cuts for its 20 employees back in 1979, almost sinking the show. But in 1980, Schiller and his people came up with the goods: they have perfected an intelligent scanning system that can search out unique characteristics of fingers placed on a deformable plate. The machine digitizes the information for computer processing and compares its reading with filed information.

Chase Manhattan and the First National Bank of Chicago have bought trial machines, which are being used to control and record employee access to vault areas and computer files. The banks are quite enthusiastic. They say the machines are amazingly reliable and accurate. Some Fingermatrix machines are now being used to control and record who gets into a computer system.

Soon, Fingermatrix will be offering banks a system for use in their automatic teller machines. Marketing director Harold Buchanan waxes eloquent on the advantages of being able to throw away your plastic card and "take your fingers" to the bank machine. Meanwhile, the company is getting orders for identification systems from the US Air Force and the Defense Intelligence Agency. The prospects for Schiller's little enterprise now look good.

Schiller's Fingermatrix was one of the lucky small businesses that did succeed. And with their success come widespread benefits: businesses with 100 or fewer employees created four-fifths of the new jobs during the 1970s, according to a recent study by a group at the Massachusetts Institute of Technology. And a large part of America's export income derives from the ability of entrepreneurs like Schiller to meld technological, marketing, and production imagination to develop clever new machines.

For each success, however, there are others that fail. And increasing regulation and high taxes only add to the rate of failure. Free of these governmental weeds, the flowers of entrepreneurship—as evidenced in the blossoming of Michael Schiller's enterprise—could more fully grow in America's economic garden.

Peter Samuel is the US manager of Australian Consolidated Press. He writes a weekly column for ACP's news magazine, the Bulletin.