Biometrics for payments: how did we get here? Let’s start with some fundamentals. Before any transaction can take place, there has to be certainty about the party requesting the transaction. Are you who you say you are, and are you real?
Any method to do this must be secure – the risk of fraud never goes away, but we have to minimise it as best as we can. Additionally, it should not be too hard to use: an overly complicated method won’t get used or won’t get used correctly. Think of the ubiquitous usernames and passwords; we all know that longer and more complicated passwords are better, but how many of us actually use them? Securing transactions is a balancing act of finding a method that provides strong security but will also be widely adopted.
In comes biometrics: using inherent features like your iris, fingerprint, or face to authenticate you. There’s nothing to remember, nothing to create. No one-time password to look for, no additional device to carry. There’s just the uniqueness of you.
And that uniqueness translates into enhanced security. Traditional authentication methods, such as PINs and passwords, have proven susceptible to breaches, phishing, and hacking attempts. In contrast, biometric data is highly individualised and nearly impossible to replicate, making it a robust defence against fraud. By utilising biometric markers like fingerprints or facial recognition, payment systems can ensure that only authorised individuals can access their accounts and make transactions.
Biometrics provides an elegant solution to the complexity question. You don’t need passwords or new devices (other than a mobile phone, which you already have), and a simple gesture – like a glance or a swipe of your hand over a sensor – is all it takes for authentication. Perfect simplicity and convenience.
Combine this with contactless payments, and you have something very powerful with a multitude of use cases.
A primary use case is enhancing the security of online transactions. In an era when online shopping and digital banking have become the norm, the need for secure authentication methods has never been greater. Biometric payments offer a seamless and secure way for consumers to verify their identity, reducing the risk of unauthorised access and identity theft.
Another burgeoning use case is in-store payments at brick-and-mortar retailers. For example, Amazon Go stores use computer vision, sensors, and deep learning to enable a checkout-free experience. Customers simply walk in, scan their Amazon app, and are authenticated via their face or palm. Their items are automatically detected and charged to their Amazon account when they walk out – and Amazon recently announced that paying by palm is coming to all their Whole Foods grocery stores in the US. This provides a frictionless in-store payment experience.
Payment cards, too, are getting into the game, with embedded biometric sensors that eliminate the need for PIN codes. These cards enhance security by incorporating fingerprint scanning for authentication. This improves security over chip and PIN cards, all while delivering a seamless and convenient experience for users. Companies like Mastercard have solutions of this kind in the market today.
ATM transactions: Iris scan technology is being incorporated into ATMs to enable cardless withdrawals. The iris scanner provides a more reliable way to identify the customer than PIN codes or signatures. This improves ATM security and enables faster cardless transactions.
Cross-border remittances: Biometric authentication could help enable faster, cheaper cross-border money transfers. Imagine biometric remittance solutions that allow immigrants to securely send money home using iris authentication instead of cards or bank accounts.
In the cryptocurrency world, currency exchanges and wallets could integrate biometrics like fingerprint or face scanning as part of the onboarding and transaction process for higher security. This improves protection against fraudulent transfers or hacking of crypto assets.
Access control: Biometric payment technologies facilitate access control applications like paying for transportation. Imagine an iris scan seamlessly linked to a prepaid transit account, granting you effortless, cardless access to subways and buses: you wouldn’t even need to pull out your phone. Similar solutions can be used for managing access to buildings and stadiums.
Financial inclusion: Traditional banking systems often require individuals to provide extensive documentation and maintain a physical presence, which can be challenging for those in remote or underserved regions. Biometric payments, coupled with verifiable credentials, can help bridge this gap by enabling individuals to access financial services using their unique biometric markers.
P2P payments: Person-to-person (P2P) payment apps like Venmo could adopt biometric logins rather than usernames and passwords. This would allow users to quickly authenticate and securely send money to friends or split bills.
Micropayments: Biometric authentication could revolutionise the way we handle micropayments. This technology allows consumers to quickly pay small amounts (less than USD 1) for digital services or content, eliminating the need for lengthy authorisation processes.
Vending machines: Machine manufacturers are exploring incorporating biometric scanners to allow consumers to make cashless purchases from vending machines with a simple fingerprint or iris scan, bypassing the need for physical currency or cards. This aligns with the demands of modern consumers.
Charitable donations: Nonprofits are increasingly considering the adoption of biometric enrolment at events as a means to streamline the donation process. Donors could use biometric enrolment at events to quickly make touchless donations using their fingerprint or face scan.
Indeed, the potential of biometric payments is vast, offering a trifecta of security, convenience, and versatile applications. Does this rose have thorns? Of course. The privacy concerns, which are pervasive in the digital realm, are similarly relevant in this context, and over time, we will come to generally accepted means of addressing them. This ongoing dialogue is crucial in shaping a future where biometrics can flourish as a trusted payment method.
As the saying goes, ‘Seeing is believing’ – and while a recent study found that most Americans are still not comfortable with biometric payments, once people experience the convenience of such payments, they become converts. And, at least in this writer’s opinion, it’s that very convenience that will drive widespread adoption of biometric payment methods, revolutionising the way we transact and enhancing the overall payment experience.
This editorial piece was first published in the Payment Methods Report 2023, which provides an in-depth overview of the latest worldwide developments in how people pay, the payment methods space, the innovative technologies that these methods work upon, and the best strategies on how to win at conversion and retention.
David boasts over 30 years in consumer payments, covering strategy, marketing, products, loyalty, operations, and finance. He leads NYPAY.org, is a partner at PayGility Advisors, and participates in the US Payments Forum and Faster Payments Council. David advises fintech startups specialising in core banking, compliance, and payments for high-risk businesses.
Payments Consulting Network provides advisory and market research services to the financial services and payments sectors and has a presence in Asia-Pacific, North America, Europe, Africa, and Latin America. The firm also supports organisations in the retail, hospitality, tourism, and not-for-profit sectors lower the cost of payments acceptance and optimise customer experience.
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