The UK Borders Agency (UKBA) has re-negotiated a key biometrics contract with IBM required to build the Immigration and Asylum Biometric System, IABS, with a claimed saving of £50m.
The contract will cost £191m over seven years.
On announcing the deal, immigration minister Damian Green said the system, under threat when the Lib Con coalition government scrapped the ID cards programme, is needed to "strengthen our ability to control the entry of foreign nationals into the UK and identify those who pose a risk to our country."
The National Identity Assurance Service (NIAS) system, providing a database of fingerprints and facial images, will target "those who have previously been deported, committed a criminal offence or been turned down for a visa".
Green said: "UKBA has been able to save £50m from the contract price by removing components that stored data on UK nationals, and which are no longer needed."
It will be used to speed up the checking of biometric visas, registration cards for asylum seekers and biometric residence permits.
Green said there is room for the scheme to grow to cater for future immigration applications, including a streamlined border entry process.