2022 has witnessed biometric payment card adoption reach new heights. Multiple recent launches in the Middle East highlight the technology’s global interest, but what external factors are accountable for this surge in global adoption?
The trends accelerating biometric payment cards
Payments Cards & Mobile discusses the trends with Michel Roig, President of Payment & Access at Fingerprint Cards.
How is regulation and the rise of mobile wallets effecting adoption?
Cash has been usurped by cards as the most popular payment method for in-store payments. According to Fingerprints’ research, cards account for 73% of in-store payments globally, with 50% of these being contactless. Yet that when assessing the security of in-store payments with the rise of contactless, a growing gap has formed between security and convenience.
This lack of security is in stark contrast with digital payments, where we’ve identified a global trend of evolving banking regulations that support innovation and security. Strong Customer Authentication (SCA), a requirement of the Second Payments Services Directive (PSD2), has come into play in Europe, for example.
We’ve noticed increased interest in biometric payment cards as a result of the evolving security of digital payments. SCA ensures that customers need two of the three forms of authentication to make an online purchase.
This includes something the customer ‘knows’ (such as a password), something a customer ‘has’ (a card or phone, for example), and something a customer ‘is’ (a fingerprint). It would make sense to require this level of security for in-store payments as well as online, and biometric payment cards conveniently encapsulate all three forms of authentication required.
Overs years of integration of biometrics into the smartphone, the role of the technology in mobiles has drastically evolved. Where traditionally, the fingerprint has been used to unlock the phone, now biometrics supports SCA-compliant payments and, increasingly, know-your-customer and ID verification.
As a result, we are witnessing a growing use of digital wallets for payments, with forecasts suggesting there will be around 4.4 billion digital wallet users by 2025. However, we are conscious that not everyone wants to, or can use, a mobile wallet and consumers will always use contactless cards as a backup in an increasingly cashless society.
The biometric payment card offers synergy for contactless in-store payments. The same high level of security should be expected for all our payment devices.
We believe the mobile industry has set the standard for payment security, ensuring SCA with every transaction. Banks must also demand the same level of security for cards, and card issuers should be implementing the feature as part of their standard offering.
Do you find consumers worried by the lack of contactless security?
In the current system, chip-and-PIN input is sufficient to meet SCA requirements for in-store contactless card transactions. Yet our research is showing that customer are concerned by this level, and lack of, security.
Whilst 77% of consumers use contactless regularly, half are worried about the lack of protection if their card is lost or stolen and around a quarter are confused about spending limits. Yet we are seeing a global trend of regulators increasing contactless limits, serving to exacerbate pre-existing concerns.
In order to help prevent contactless cards from becoming a ‘thief’s dream’, some banks allowed consumers to set their own limits. According to Lloyds Bank, more than 800,000 customers have set limits that are different to the imposed limits, with 60% opting for a cap of less than £50. Some have even deactivated contactless entirely.
It’s important to note that increasing limits, without considering appropriate security mechanisms, can run the risk of card technology regressing.
By integrating biometrics into the contactless experience, consumers can experience security and convenience for in-store transactions simultaneously, unlocking the full potential of the payment method.
Has the rise of FinTechs effected adoption?
Certainly, the digital revolution and increasing cashless opportunities catalysed by the pandemic have allowed the fintech industry to establish its position in the market. And this is a positive trend for the financial services industry, which has traditionally been dominated by banks.
The FinTech business model underpins customer attractiveness, relying heavily on differentiating from banks through offering value-added services, such as metal cards. This model enables the FinTech ecosystem to drive innovation.
The focus among FinTechs to offer next-gen customer experiences therefore presents a big opportunity for the future of biometric payment cards.
Our research has found that 51% of consumers are willing to switch banks to receive a biometric payment card, and 43% are willing to pay to receive one. This highlights the customer acquisition potential of the technology and this potential has already been identified and leveraged by some FinTechs.
The ability to offer a seamless and secure payment experience that is not yet widely available at traditional banks, is highly attractive for potential customers. We expect the fintech trend to continue growing and, with it, to announce further fintech partnerships in the coming year.
Do you see a use case for biometric in the cryptocurrency industry?
The cryptocurrency industry is another area that has experienced a huge spike in popularity in recent years. Typically, those who use cryptocurrencies do so for high volume and value transactions, with the average Bitcoin transaction value being $25,000 as of 2020.
Crypto transactions, much like any financial transaction, require high levels of security especially when considering the high volume and value transactions that are associated. The main way to store, access and manage crypto exchanges and hot and cold wallets, is with a private key.
But this approach again places the onus on the consumer to maintain their own security. What happens if a user forgets their key, or worse, if it becomes compromised, for example?
Introducing biometric authentication to help us store and access cryptocurrency seems a logical next step. It can provide an additional layer of security to cryptocurrency storage and authentication. Progress is already being made in this space and is being championed by some of the tech industry’s most recognisable names.
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