<the last line of this is a funny double entendre> HERE'S LOOKING AT YOU, SENSAR By Peter D. Henig <mailto:peteh@redherring.com> Red Herring Online November 3, 1998 You walk out the door and down the street to find the closest ATM machine, but reaching into your wallet -- "oops" -- you forgot your cash card. Don't you hate that? Well, if Sensar, a biometrics manufacturer of iris identification products has anything to say about it, you'll soon be tossing that ATM card in the can. Sensar has announced the world's largest ever combined equity investment in the field of personal electronic identification -- which is actually a bigger deal than you might think. Moving a step closer, as the company puts it, "toward making PINs and passwords obsolete," Citibank, NCR, J.P. Morgan, Lehman Brothers, Merrill Lynch's wholly-owned subsidiary, KECALP Inc., and others have invested an aggregate of $28 million in Sensar as the company attempts to further roll out its iris identification pilot programs around the world in the hopes of owning this futuristic segment of the biometrics market targeted at the financial services and banking industries. Who cares? Who cares about equity stakes in biometrics companies? Good question, and the same one we asked when the company came a-pitching us their story. It turns out, however, that biometrics is -- as Sensar likes to remind us -- an emerging technology that could soon turn into a hot, if not huge, market around the globe. With the initial results of their European pilot program (set up in a small city outside London), it's "going very, very well, and I do mean very well." According to Per-Olof Loof, Senior Vice President of NCR's Financial Solutions Group, Sensar is pumped to push forward with its iris recognition products, shooting for commercial roll out in 1999, and a real ramp up of shipping product by 2000 and 2001. The Sensar Secure Iris Identification System is currently being used in NCR ATMs and at teller stations at Nationwide Building Society, the United Kingdom's largest savings and loan. Sensar's Iris Identification product was also used by professional athletes for access control and security at the 1998 Winter Olympics in Nagano, Japan. Citibank, an equity investor, has also launched an in-house pilot program using its employees to test iris scan technology. And just how big is this market? While company officials wouldn't be pinned down on specific forecasts, Mr. Olof noted that there are 20 billion customer transactions annually on NCR ATM machines alone, and that NCR has 37 percent market share. That's not a bad partner for a private company like Sensar to have. Moreover, Tom Drury, president and CEO of Sensar noted that there are currently 900,000 ATMs worldwide and 160,000 new machines shipping each year. Smile! The unique aspect of Sensar's products is that you may not even be aware you're being watched. Sensar's iris identification products use standard video cameras and real-time image processing to acquire a picture of a person's iris (the colored portion of the eye), digitally encode it, and compare it with one on file -- all in the space of a few seconds. It allows for highly accurate identification (comparing features across a whole database) and verification (comparing features with a single template) in a user friendly environment; second in accuracy only to retina identification using sans-laser beams. In layman's terms, this might mean opening up an account at your local bank by simply sitting down, having them take a snapshot of your eyeballs, and then hitting the ATMs or tellers for some cash. According to the company, iris recognition uses digitally encoded images of the iris to provide a highly accurate, easy-to-use and virtually fraud-proof means to verify a customer's identity. With 266 identification characteristics, the iris is the human body's most unique physical structure. And unlike other measurable human features in the face, hand, voice or fingerprint, the patterns in the iris do not change over time; receeding hairlines be damned. They're not alone "This landmark agreement puts iris identification light years ahead of any other personal electronic identification technology," said Mr. Drury. "Clearly, this agreement validates Sensar's product as the most accurate, customer-friendly, cost effective personal electronic identification product ever developed." That's not bad cheerleading, but Sensar is clearly not the only biometric firm in the identification market's field of vision. According to the Gartner Group (IT <http://www2.nordby.com/herring/returnquote.asp?SYMBOL=IT>), Miros and Visionics were the first companies to enter the facial recognition market, although facial recognition tends to be a less accurate means of identification. These two companies offer far cheaper products than Sensar, and are targeting applications to such markets as PC and network access and online transactions. Sensar, however, will also be designing for and marketing to the online environment, as it envisions iris technology hitting the desktop environment. While the Gartner Group forecasts that the more widely accepted fingerprint recognition techniques will be the remote access standard of choice through 2001, it also predicts that "aggressive financial organizations will begin full-scale rollouts of iris recognition for tellers and ATMs by 2000." Hence, the $28 million equity stake in Sensar by this highbrow club of financial institutions. By 2002, Gartner analysts predict iris recognition will be the biometric of choice, an area where IrisScan Inc. holds an exclusive patent. (Sensar uses the iris recognition process developed and licensed from IriScan, Inc., and has the exclusive use of that technology for all financial services transactions.) And as far as exit strategy goes, everybody, including Sensar, still has dreams of Silicon Valley dollars dancing in their heads. "We have a classic Silicon Valley entrepreneurial team," said Mr. Drury, who is located in New Jersey, "and we consider an IPO as a definite exit strategy." We'll be watching.