Biometric recognition technologies made their mainstream splash due to the rollout of hardware sensors integrated in mobile devices, such as facial recognition cameras, fingerprint detectors, and many more. The recent implementation of PSD2 Strong Customer Authentication (SCA), which mandates the use of two-factor authentication for online transactions, has skyrocketed the popularity of biometrics. On top of that, the outbreak of Covid-19 has amplified the consumer demand for contactless payments, but are consumers receptive enough to new payment tech?
In this article, we explore biometric payments, their adoption worldwide as well as their benefits and risks.
What are biometric payments?
In the context of payments, biometric authentication is a set of solutions that determine an individual’s identity through their biological traits (face, fingerprint, iris, voice, etc.) or behavioural traits (e.g. typing identification – signature) to authorise in-store and online transactions. Such means of payment can replace or work in tandem with traditional identification methods, including passwords and PINs, for heightened security in payments. This suggests that biometric technology is no longer a stretch of corporate and consumer imaginations, as most smartphone users are already immersed in it to unlock their phones via fingerprint identification or face scanning (certain Android users can also use palm vein mapping).
Broadly speaking, this innovation can be useful for two reasons. Firstly, to increase online payment security and transparency. Since physical traits are unique, fraudsters cannot easily hack biometric identifiers, which should help reduce the amount of cyberattacks compared to password-driven security. Secondly, it helps ensure convenience by minimising the friction layers during the payment process both in physical and digital stores, as customers won't need to input their card details on a point of sale (POS) terminal or type them out in an online checkout page.
How popular are biometric payments?
Biometric payment tools are rising in interest. The biometric system market worldwide is on an upward spiral expected to hit $68.6 billion by 2025 – an uptick from $36.6 billion in 2020. The prevalence of biometric payments in the years ahead reflects a consumer demand for more seamless and safer authentication in contactless transactions. Research by Goode Intelligence predicts there will be 579 million biometric payment cards by 2023 with 2.6 billion payers utilising biometrics.Here's a rundown of some popular biometric authentication methods:
Voice recognition
Voice tech allows consumers to conduct tasks by spoken command on portable devices which are powered by virtual assistants (Apple's Siri or Amazon's Alexa). The voice recognition market size is projected to grow from $10.7 billion in 2020 to $27.16 billion by 2026, with a forecasted compound annual growth rate (CAGR 2021-2026) of 16.8%. The automotive industry will be affected to the greatest extent, as voice-controlled assistants will most likely be built in a whopping 90% of cars across the globe by 2028. In-vehicle payments made via Cerence, an automotive assistant, will thrive. Drivers will enjoy a range of applications such as paying for petrol or parking through Cerence Pay as well as making restaurant reservations via a service called OpenTable that supports Cerence Pay – all from the comfort of their own car and voice recognition without lifting a finger.
Facial recognition
In the booming context of AI, companies like Mastercard enable cardholders to shop and pay using facial recognition authentication. A report by Mastercard and Oxford University indicates that 93% of consumers favour biometrics over passwords for authorising transactions, with 77% of them testifying for the security of facial recognition. Another study from Juniper Research shows that facial recognition functions are mainly carried out via smartphones with an estimate of 1.3 billion devices supporting such capability by 2024.
As biometric payments account for an ever-increasing market share, the ground is fertile for businesses to invest in biometric technologies and meet shifting consumer needs.
Is biometric technology the future of payments?
The more familiar consumers are with using biometric data to identify themselves and confirm payments, the more likely for such payment methods to become the norm for future purchases both in person and online. A report from Research Nester anticipates the biometric payments market worldwide will record a CAGR of 49% by 2027.
Currently, biometric cards and other biometric methods are being trialed across sectors. NatWest was the first UK-based bank to issue a biometric credit card in partnership with Mastercard and Gemalto using an integrated fingerprint sensor to verify the cardholder’s identity for in-person and online purchases. Security is non-negotiable with this next-generation functionality, as the cardholder's fingerprint is safely stored on the card and cannot be changed or simulated. Royal Bank of Scotland (RBS) also works on the first biometric fingerprint fob for contactless payments up to £100, a rise on the current £30 limit. It's worth noting that no hardware updates are required to accept this boundary-pushing technology at POS terminals, keeping costs low for businesses looking to implement this feature.
On a commercial level, the footprint of biometrics stretches as far as Asia. Alipay is negotiating the launch of a biometric transaction authentication system via facial recognition for a KFC concept restaurant in China. The initiative, quipped as “Smile to Pay”, will leverage the cutting-edge technology of 3D cameras to scan the facial features of the payee and enable speedier, smoother, and safer payments.
Advantages of biometric payments
Evidently, biometrics are a solution for seamless identity authentication and payment authorisation. Therefore, they present a slew of advantages, some of which are:
More convenience – Customer identification couldn’t get any more effortless with biometric payments technology. In instances where a biometric card with fingerprint scanning is used, the cardholder will only need to be physically present to verify their identity – no other information is needed. Research from Statista shows that 44% of consumers favour biometric technologies for authentication processes, such as online payments, for the speed and ease they offer.
Simple to set up and uniquely private – Apart from smoother transaction processing, biometric-enabled payment cards are also simple to set up – it can be done from your own home. At the same time, with biometric card payment technology, it's nearly impossible for another individual to replicate your fingerprint. The biometric credentials never leave the card, which ensures the privacy of your sensitive card data.
Increased payment security and assurance – In view of how significant fraud prevention solutions are, biometric card payments have progressed from the fast ‘tap and go’ contactless transactions by adding another layer of security to purchases without any additional time-consuming steps.
Disadvantages of biometric payments
While the payments landscape is going through an evolutionary phase with biometric technology, businesses offering this solution should also be wary of the stakes associated with it.
Privacy concerns – While the risk of data breaches is reduced to a minimum with biometric cards, Statista reveals that, as of June 2021, 65% of consumers were still reluctant to fully embrace this facility in fear of their privacy being compromised.
Higher cost for biometric card owners – For biometric cards to be adopted across the board, consumers need to be given an incentive to switch from their current cards. Because of the sensor technology built in biometric cards, users will be charged a fee to receive one. Unless consumers are convinced that biometric security is a function worth investing in, the usage of biometric cards is likely to remain low.
Takeaway
Since payments are the lifeline of today’s global economy, businesses need to capitalise on sweeping technology-led changes to modernise their operations and better align with consumer demand.
Consumers are slowly veering from traditional models of authentication, so businesses are expected to offer solutions that are both friction-free and secure. Thankfully, the latest developments in voice biometrics around payments are poised to overtake conventional authentication methods while tipping the scale toward customer convenience and fraud prevention. emerchantpay is equipped with risk analysts that can help add a data-driven edge to your decision-making and safeguard your business against fraud. With our host of anti-fraud capabilities that detect and curb fraudulent activity, you can rest assured that your payments are protected, and your acceptance rates are more likely to reach new heights.
Get in touch with our payment specialists and learn how you can prevent fraud, streamline your checkout experience and improve your bottom line.