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Case Study: Improving Point-Of-Sale Security With Biometrics

We know that the pandemic shifted consumer behavior in major ways. But what seems to be less discussed is its impact on retailer risks. As many parts of the world have emerged from lockdowns, retailers are grappling with a new normal, facing several challenges in the post-pandemic landscape. This includes point-of-sale fraud.

In a 2021 survey and report by the National Retail Federation (NRF), two-thirds of U.S.-based retailers reported that the pandemic increased risks for their organization. Internal threats, such as point-of-sale employee theft, ranked fourth among those listed as high priorities. Although apprehensions and prosecutions of dishonest employees appeared to be decreasing, the average cost to retailers was over $1500 per incident, the highest cost reported over the previous five years. And in 2020, 50 percent of respondents indicated an average loss of $1000 per incident compared with 29 percent in 2019. Clearly, the stakes are high.

Point-Of-Sale Employee Theft Is a Growing Problem

Fraud is a common problem in the retail sector, particularly within large chains with hundreds of locations and tens of thousands of employees. Employee theft is a particularly complex challenge with often extreme consequences to retailers.

But point-of-sale employee theft is also difficult to combat. Employees must be trusted to do their jobs and that means access to cash registers, credit card information and valuable products. But employees are much less likely to commit fraud when every transaction can be unquestionably tracked back to them. This all but eliminates false voids and returns and provides accountability to prevent misuse of discount codes. This makes point-of-sale security more important than ever.

Point-Of-Sale Employee Theft at BMA International

Dubai-based BMA International was established in 1997 and operates fashion retail in the Middle East and Asia across the Kingdom of Saudi Arabia (KSA), United Arab Emirates (UAE), Bahrain, Oman, Kuwait and Qatar with more than 250 stores offering two major brands — Redtag and twenty4. BMA’s steady growth is a testament to its focus on building trust with its shoppers, employees, suppliers and stakeholders to create a company that is people-centric, ambitious and results-oriented.

Following the completion of an internal audit, point-of-sale security in its outlets was identified as a serious concern. The audit findings showed misuse of floor supervisors’ credentials to access terminals to modify or cancel transactions, a problem that persisted even after BMA switched from passwords to a smart card-based authentication system.

Auditors identified the following issues:

  • Supervisors left smart cards with cashiers to use in their absence 
  • Employees failed to return the cards when a separation from BMA occurred
  • Cashiers used the smart cards fraudulently to void transactions and pocket the refund

In fact, BMA’s internal auditors were so concerned with the lack of control over the cards and the potential for fraudulent transactions recommendations to tighten the authentication process went directly to the BMA Board of Directors.

BMA International Increases Point-Of-Sale Security With Biometrics

Biometric technologies use a person’s unique physical traits — such as their iris, voice, face or fingerprints — to authenticate, verify and identify them with a high level of accuracy. Any transaction requiring a proven, trusted identity can benefit from biometrics, including fraud and loss prevention. Biometric solutions are transforming retail — from accurate time and attendance to security at the register — making retail management more efficient and secure. Face and fingerprint biometrics are proven to create a positive shopping environment while reducing shrink, such as internal theft.

BMA International made the decision to implement a biometric-based system for authentication to provide the required security. The system also needed to be compatible with the Oracle Retail Xstore Office Cloud Service, which BMA International adopted across its brands. BMA International and its technology partner, Technowave International LLC, determined that the HID DigitalPersona® 4500 Fingerprint Reader met all their requirements. The USB peripheral reader’s compact, modern design and reliable optical scanning technology was easy to use, and deployment caused no disruptions, leading BMA International to deploy more than 1,100 readers across outlets.

The Result: BMA International Reduces Point-Of-Sale Fraud

Deploying the DigitalPersona 4500 Fingerprint Readers resulted in a significant reduction in point-of-sale employee theft. In fact, BMA reported that nearly all fraud and abuse were eliminated. The system has also driven tangible improvements in the attendance and punctuality of floor supervisors, who must now be physically present in the store for authentication to take place. The HID authentication system is also capable of multiple types of authentications — providing flexibility that is appreciated by users who work at multiple locations.

Because the HID DigitalPersona® 4500 Fingerprint Reader requires proof of presence for authentication, there is greater accountability among supervisors which resulted in immediate cessation of POS fraud and stopped both revenue and inventory leakage. — Nainan M. Kurian, CEO, Technowave International LLC

Biometrics: Point-Of-Sale Security That Works

Retailers make difficult decisions every day, including how to create less friction in the customer experience while still maintaining the highest levels of security in retail stores. Leading these point-of-sale security solutions is biometrics — the strongest proof of presence available. Biometrics solve the problem of employee theft while empowering employees to better serve customers. Want to learn more about how BMA International reduced fraud with biometrics? Download your copy of the case study and see what learnings you can apply to your own retail organization.