The word biometrics is derived from two Greek words – bio meaning “life” and metrics meaning “to measure”. Biometrics are thus biological measurements, often used in automated methods, to recognize a person based on a physiological or a behavioural attribute. In this blogpost we explore the topic of biometric authentication in relation to payment systems and its promising role in transforming face-to-face payments in the future.
Recent research in the US unveiled that consumers’ awareness of biometric payments is, in fact, very high. Specifically, two thirds of respondents have already used fingerprint recognition, with one third using it on a regular basis. Similarly, a recently published forecast states that there will be over 2.6BN biometric payment users by 2023. According to a US focused research report, consumers particularly value speed, security and not having to remember passwords as primary reasons for adopting biometric authentication.
In-store mobile payments were the first instance where biometrics was introduced to the world of payments. Back in 2014, by introducing Apple Pay, the technology giant has enabled its smartphone customers to make payments simply by using fingerprints (and later facial recognition) on their smartphones. This technology is now widely accepted by most businesses in developed economies, while consumer adoption is steadily growing. According to the latest figures, 43% (383M out of 900M) of iPhone users worldwide use Apple Pay.
Biometrics is also increasingly trialled on physical payment cards. From a convenience standpoint, biometric payment cards offer an alternative to traditional chip and PIN cards and are designed to meet the needs of more tech savvy customers. Cardholders no longer have to remember complex PIN codes and are no longer hindered by contactless transactions limits, plus they gain an extra layer of security that biometrics adds to the transaction. In some ways, this could be seen as a step backwards – the industry appeared to have been moving away from payment cards to mobile, so why go back to cards? How likely are consumers to adopt this technology?
The above mentioned forecast also predicted that 579M biometric payment cards will be in use by 2023. On top of that, another research study has shown that 54% of UK consumers would be open to using biometric cards if they were available from their bank. At present, there are various FinTech initiatives that aim to transform the physical card as we know it. At the same time, incumbent financial service providers, especially leading card schemes, are increasingly forming partnerships with emerging technology companies, aiming to shift the authentication process from smartphones to cards.
Some financial institutions and technology companies are going one step further, with trials well underway in the area of deviceless biometric payments, enabling consumer to pay by ‘who they are’, authenticating the transaction through fingerprint, iris or face. As these types of payments require specifically designed biometric POS systems, their potential lies in specific markets and use cases.
Deviceless biometric payment solutions around the world
One obvious use case is that of developing countries with a lack of existing payments infrastructure. For instance, Aadhaar, India’s new identification system captures each citizen’s details, including their biometric information. On the back of this, the government launched a biometric payment system, supported by the Aadhaar Pay app which uses customers’ ID numbers and fingerprint to complete a transaction through in-store fingerprint scanners. Financial services providers are now also able to offer their customers access to banking services using only their Aadhaar numbers and biometric identifiers, such as the iris or fingerprints. For instance, building on the Aadhar infrastructure, Axis Bank has also launched an iris scan authentication feature for ATM transactions, replacing the need for using passwords, PINs and user IDs.
Another potential market for deviceless biometric payments is closed loop environments such as a company or school. For instance, finger vein payments are currently being trialled at the Copenhagen Business School, enabling students and teachers to authenticate their purchases via a fingerprint sensor at the till in the school’s café. Another trial was recently announced by OP, a leading Finnish bank, and Visa, which will enable its employees to use a facial recognition system for payments at the bank’s staff restaurant in Helsinki.
With cases of financial fraud and data breaches still hitting the headlines, biometric technology is being called out as a way to make transactions more secure. In order for it to gain traction and succeed, governments, financial institutions, merchants and the like will need to gain consumers trust in their ability to securely handle and responsibly use individual’s biometric data. And more importantly, they will have to demonstrate this.
The establishment of an international standard around on how biometrics should be stored, used and shared by all players involved in the payments space would help further facilitate this. This could also help position biometric based payments as a viable cross border payment solution.
Looking at the payments industry today, companies like Apple have shown that this is possible – Apple Pay customers trust the technology company with their biometric data which is used to authentic payments.
Utilising biometric authentication in payments could hold the key to countering fraud, boosting security for transactions and offering a more convenient way of paying. But one questions needs to be answered ‘Are people willing to give up some of their privacy for an improvement in convenience and a better payment experience?’