Why Your Bank Needs To Hear Your Voice

Voice ID or Speaker Recognition represents an extraordinary opportunity to reinvent, not just reengineer, remote banking, electronic commerce and transaction processing. Voice ID will soon become the customer identification method of choice because it solves a key problem for financial institutions - meeting customer need for increased, non-intrusive security and greater convenience.

Thus it is far easier to make the business case to support Voice ID than other forms of biometrics. Progressive banks and brokerage firms already have pilot programs underway. Glenview State Bank, for example, now requires that customers voice verify before they transfer money between accounts by phone.

When financial institutions conduct transactions (e.g. trades, check cashing, wire transfers) they must be certain that the individual requesting the transaction is the account holder. Today customer identification is usually accomplished by entering PIN numbers, asking for personal information such as mothers' maiden name and verifying signatures when transactions are conducted in person.

PIN numbers are considered the most secure of these approaches. Yet, speaker recognition is far more secure. PINs have substantial flaws, including the fact that they are transferable and readily deciphered by criminals. Ultimately, when a customer uses a PIN, the financial institution is assured only that the individual knows the PIN and holds the card. The institution does not actually know the identity of the person using the PIN. With speaker recognition, this major security issue is solved.

In addition to reducing losses, Voice ID creates tremendous opportunities for:

  • Productivity increases
  • Increased ability to serve more customers (more often) through lower cost distribution channels
  • Improvements in customer satisfaction.


    The check cashing pilot at Chase Manhattan Bank demonstrates the potential reengineering benefits of Voice ID. Current procedures require the teller to verify the customers signature and that their ATM card has not been lost or stolen. In addition, when the check amount exceeds $3,000, the approval of a bank officer is required.

    With Voice ID, customers verify their identity while waiting in line to see a teller, saving approximately 25% of the transaction time. This reengineered identification process can simultaneously retrieve customer data from the host and store it on the branch server. By doing this, another 25% of transaction processing time can be saved because host response time is eliminated.

    Two applications which will be among the first adopted by many of the larger financial institutions are wire transfers and international consumer phone-based services. These applications involve a smaller number of customers and provide significant financial returns.

    In the case of wire transfers, banks today often permit customers to fax wire transfer requests to the bank. The bank then calls the customer back at a predetermined number to verify that they originated the transfer. Often wires are delayed because the authorized individual is not available at the time the bank calls back, an experience which often leads to customer dissatisfaction. A Voice ID system renders the call back process totally unnecessary, by confirming the identity of the caller on the first incoming call. If a bank feels it needs to maintain the call back system, voice verification could ensure that the person reached for a call-back is the individual authorized to approve wires.

    As financial institutions expand global operations, the need for identification systems which do not rely on entering pin numbers utilizing DTMF tones will increase. Today if a client in Europe calls a service center, their call must be handled by a human operator who asks for personal information to verify identity and to conduct the transaction. A Voice ID system eliminates the need for a human operator to verify identity.

    There are also possibilities for integrating speech recognition into this application. A speech recognition based menu system front-ended by voice verification would deliver enormous financial benefits due to substantial improvements in transaction throughput, which in turn would increase customer satisfaction. We can also expect to see financial institutions using Voice ID for internal applications protecting intra- and extra-nets, providing single sign-on capabilities and protecting vault access.

    Customer Acceptance

    Research suggests that acceptance of biometrics and Voice ID in particular is high.

    Customer acceptance is driven first by security concerns, with convenience a close second. Essentially, if a transaction can be made faster and more secure, customers are all for it.

    When we conducted demonstrations at Chase Manhattan Bank with a wide variety of customers, the acceptance of Voice ID was initially over 90%. The acceptance rate increased to over 95% during the bank's pilot testing as customers became more familiar with Voice ID in day-to-day use.

    Quality applications which accommodate the customers' learning curve will be crucial to the broad market success of Voice ID systems. In our experience, as customers become more familiar with how Voice ID systems work, false rejects decline substantially and verification time also decreases. If customers encounter systems which are difficult to use or which prevent them from accessing their accounts, the adoption of Voice ID will be set back years.


    By now, many of you are thinking about how Voice ID can improve the processes you manage and are seeing the dollar signs these systems will deliver. There are four parts to the benefits equation:

  • Decreases in Fraud Related Losses
  • Decreases in Fraud Prevention Costs
  • Productivity Savings
  • Increased Revenue due to Customer Satisfaction Improvements

    Pricing for Voice ID systems is in flux, with many vendors continuing to make modifications. The industry is settling on a pricing scheme based on a cost per user per year (ranging between .50 cents and $1.00). Of course the amount charged per user depends on the number of enrollments.

    At Chase, system payback for a branch implementation was estimated to occur in less than two years with recurring annual savings in the millions.

    Voice ID applications will create substantial value for the financial services industry in the years to come. Voice ID is beginning to realize its substantial promise in the financial services arena and should be a very exciting industry to watch. Stay tuned.

    Sidebar: Are There Other Possibilities?

    Can other biometric devices be used for these applications? The short answer is yes. However, it is hard to believe any biometric technology will ever supersede voice, which has two major advantages. First, all customers have access to telephones. Using any other biometric would entail the purchase of hardware by the customer. (To date, we have found no evidence of a customer being willing to incur additional expenses in order to avert a loss to their bank.)

    Second, voiceprints can be gathered by phone. In contrast, other biometrics require the customer to be physically present to enroll in the system. The case is clear for Voice ID as the biometric of choice for financial institutions. When you think of the time and effort required to enroll large numbers of customers (millions in the case of the larger financial institutions) in a fingerprint or hand geometry system, as compared to enrolling those same customers over the phone.

    Elizabeth Boyle has worked for Chase Manhattan Bank, where she was responsible for testing speaker verification in comparison with other biometric security measures. She now heads her own firm, I.D. International, and can be reached at (212) 366 4104.

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