Big Brother Inc.

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PHOTO-ILLUSTRATION FOR TIME BY AARON GOODMAN

Guy Scott nips into his cubby-hole lab in a far corner of Cross Match Technologies' headquarters — a reclaimed ice-skating rink in Palm Beach Gardens, Fla.--and proudly displays a postage-stamp-size bit of translucent gray film that looks like debris from a darkroom floor. It is the heart of a new machine that he says will revolutionize the global financial system, bring the multibillion identity-theft racket to a halt and make teenagers behave in cars.

The New Zealand — born engineer isn't known as the Mad Kiwi for nothing. But his colleagues and financial backers believe in him. Cross Match, a privately held company, plans to put Scott's device, called the Authorizer, into production sometime this fall, charging $10 or so a copy. The gray film, a piece of plastic-coated acoustic ceramic one-ten-thousandth of an inch thick, is for Authorizer's touch pad, to be embedded in a cell phone. To make a credit-card transaction, say, a buyer presses his finger to the touch pad, triggering an imperceptible pulse of energy that makes the film oscillate. The resulting ultrasound image is captured as a digital image file called a biometric identifier, which is a physical feature that has been measured and converted into computer language so it can be compared against a database. If his print matches, the credit-card charge goes through.

The Authorizer is among the first consumer gadgets to evolve from the biometrics industry, which, after years of promise, is on the verge of rapid growth as government-mandated security plans become operational. With the threat of terrorism now a long-term concern, biometric-identification systems are blossoming around the world. To stop bad guys at the border, for instance, the U.S. is embarking on a program called U.S.-VISIT, for U.S. Visitor and Immigrant Status Indicator Technology, which was mandated by Congress in 2002. Biometric technologies are the linchpins of the new system, expected to cost $10 billion over the next decade. The technology is not just to keep track of foreign visitors either. If you're leaving the country, get ready to be face printed. The U.S. State Department is retooling its passport production process and by the end of next year will issue new passports with an embedded chip containing a facial biometric and biographical data. This will enable the government to boost security without resorting to passport fingerprinting, which could incite fears of Big Brother.

With more and more applications coming online, the biometrics industry's global revenues, $719 million in 2003, should hit $4.6 billion by 2008, according to the International Biometric Group in New York City. "The U.S.-VISIT program is by far the most important national-security program in the world right now," says security-technology analyst Prianka Chopra of Frost & Sullivan, a New York City market-consulting firm. "Every country is looking to the U.S. to see what the program is doing and what technologies will be used." Chopra expects the global biometrics industry to grow at a compounded annual rate of 35%.

Some of that will come from agencies such as U.S. Customs and Border Protection (CBP), which recently began fingerprinting all visitors arriving at airports and seaports and traveling on visas — essentially, citizens of developing countries. CBP chose Cross Match fingerprint scanners for deployment at its checkpoints in 115 U.S. airports and 14 seaports, in a contract initially worth just $1.8 million.

Much bigger deals are in the works, and the competition will be fierce. Among the leading contenders: Lockheed Martin, Accenture and Computer Sciences Corp. By Dec. 31, CBP is required by law to fingerprint all visitors with visas at the 50 busiest land crossings along the Canadian and Mexican borders. The remaining 100 or so land-crossing points must be covered by the end of 2005. This year the State Department's 211 consular offices must be able to fingerprint all visa applicants and embed all U.S. visas with a bar code containing the traveler's digitized print, photo and biographical information.

Facial-recognition biometric technology will also come into the mix this year. From Oct. 26, visitors from the 27 so-called visa-waiver nations — most of Europe, plus Australia, Japan, Singapore and Brunei — will be required to present passports embedded with machine-readable bar codes containing a facial biometric, which a computer will compare with a digital photo taken upon entry. Some foreign governments have already made the transition. Italy has rolled out an identity card with a fingerprint and facial biometric. A number of countries, notably Saudi Arabia, are looking at biometrics for national-identity cards and border control. Britain's passport service is testing a facial-recognition and fingerprint-biometric program.

As other federal and local agencies and private corporations scale up, the field will be forced to do the same. The industry, which currently consists of a couple of hundred biometrics companies, will eventually consolidate into a handful, says Brian Ruttenbur, an equity research analyst for Morgan Keegan & Co., an investment firm based in Memphis, Tenn. "There's been a gold-rush mentality for years in the biometric space. The problem is, nobody's really found the gold yet." Three biometrics companies merged to form Identix, based in Minneapolis, Minn., which with $92 million in revenues is considered the world's leading biometric-security company. It is Cross Match's only U.S. rival for sales of the high-resolution, forensic-quality live-scan machines, which capture fingerprints with inkless optical-scanning technology and transmit them to central databases. While Identix's scanners are bigger and pricier than most of the smaller company's comparable products, the two firms compete directly for deals that require machines for a desktop or larger. Earlier this month Identix further expanded, acquiring DeLean Vision Worldwide, a developer of skin-texture biometrics.

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