Unlocking the future: Exploring biometric payments

Biometric payment options have surged into the mainstream thanks to hardware sensors integrated into mobile devices, such as fingerprint detectors and facial recognition cameras. The implementation of PSD2 Strong Customer Authentication (SCA), mandating two-factor authentication for online transactions, has further geared their popularity. However, amidst these advancements, a question lingers: Are consumers truly embracing these new payment technologies?

In this blog post, we delve into the realm of biometric payments, delving into their global adoption while exploring their advantages and potential risks.

What are biometric payments?

In the payments landscape, biometric authentication encompasses a breadth of solutions that use individuals' biological traits (i.e., face, fingerprint, iris, voice, among others) or behavioural traits (e.g., typing patterns) to authorise transactions, both in-store and online. These methods can either replace or complement traditional identification measures, including passwords or PINs, thereby enhancing payment security. It should be noted that biometric technology is becoming increasingly familiar to consumers, with many already using it to unlock their smartphones through fingerprint recognition or facial scanning.

The innovation of biometric payments serves two key purposes. Firstly, it significantly enhances online payment security and transparency. Since biometric identifiers are unique to each individual, they present a barrier against fraudsters, potentially reducing the likelihood of cyberattacks compared to conventional password-based security systems. Secondly, biometric authentication streamlines the payment process, both in physical and digital stores, by eliminating friction across touchpoints. Customers no longer need to manually enter their card information at a point of sale (POS) terminal or type them out during online checkout, thereby ensuring convenience.

As we navigate the landscape of biometric payments, it's essential to understand the implications, both positive and negative, of this evolving technology. By exploring its adoption trends, benefits, and associated risks, we can gain valuable insights into the future trajectory of payment authentication methods.

How prevalent are biometric payments becoming?

Interest in biometric payment methods is surging, with the global market expected to soar to $68.6 billion by 2025, a significant rise from $36.6 billion in 2020. This upward trajectory represents a growing consumer demand for smoother and safer authentication methods in contactless transactions. Projections from Goode Intelligence suggest that by 2023, there will be 579 million biometric payment cards in use, with 2.6 billion individuals leveraging biometrics for payments.

Here's a breakdown of some popular biometric authentication techniques:

Facial recognition

In the dynamic landscape of artificial intelligence, companies such as Mastercard are pioneering the use of facial recognition for shopping and payment authentication. A joint report by Mastercard and Oxford University reveals that the majority (93%) of consumers prefer biometrics over traditional passwords for transaction authorisation, with 77% expressing confidence in the security of facial recognition technology. According to a study by Juniper Research, the majority of facial recognition transactions are conducted through smartphones, with an estimated 1.3 billion devices expected to support this capability by 2024.

With biometric payments steadily gaining market traction, businesses have a promising opportunity to invest in biometric technologies and adapt to evolving consumer preferences.

Voice recognition

Voice technology enables users to perform tasks through spoken commands on portable devices featuring virtual assistants like Amazon's Alexa or Apple's Siri.

The voice recognition market is forecasted to expand from $10.7 billion in 2020 to $27.16 billion by 2026, with an anticipated compound annual growth rate (CAGR) of 16.8% from 2021 to 2026. The automotive sector is expected to see significant impact, with voice-controlled assistants likely to be integrated into approximately 90% of vehicles worldwide by 2028. Cerence, an automotive assistant, will facilitate in-vehicle payments, allowing drivers to handle transactions such as purchasing fuel or parking and making restaurant reservations through services like OpenTable—all effortlessly using voice commands without lifting a finger.

Benefits of biometric payments

Evidently, biometrics provide a seamless solution for identity verification and payment authorisation, yielding numerous advantages, such as:

Simplicity and sustained privacy

Biometric-enabled payment cards are not only easy to set up, but they also offer a unique level of privacy. Namely, setup can be completed from the comfort of one's home. Furthermore, with biometric card payment technology, replicating another individual's fingerprint is nearly impossible. Furthermore, biometric credentials remain securely stored within the card, safeguarding the privacy of sensitive card data.

Increased convenience

Biometric payment technology streamlines customer identification, making it incredibly effortless. For example, with fingerprint-scanning biometric cards, cardholders simply need to be physically present to verify their identity, eliminating the need for additional information. According to research from Statista, more than a third (44%) consumers prefer biometric authentication for its speed and ease, particularly for online payments.

Heightened payment security

In response to the pressing need for fraud prevention, biometric card payments offer more than just quick 'tap and go' contactless transactions. They add an extra layer of security to purchases without introducing any additional time-consuming steps.

Drawbacks of biometric payments

As the payments landscape undergoes an evolutionary shift with the integration of biometric technology, businesses offering this solution must also consider the associated challenges.

Privacy concerns

Despite the reduced risk of data breaches with biometric cards, as of June 2021, 65% of consumers remained hesitant to fully embrace this technology due to concerns about privacy infringement, as reported by Statista.

Higher cost for biometric cardholders

In order for biometric cards to achieve widespread adoption, consumers need to be incentivised to switch from their current cards. However, due to the sensor technology embedded in biometric cards, users are typically charged a fee to obtain one. Unless consumers are convinced that the added security of biometrics justifies the investment, the adoption rate of biometric cards is likely to remain low.

Conclusion

In conclusion, biometric payments offer enhanced security and convenience, driven by technological advancements and regulatory mandates. Despite their potential, consumer acceptance remains a key challenge due to privacy concerns and higher costs. However, with increasing adoption and market growth projected, businesses must address these issues to ensure widespread acceptance.

Ultimately, the success of biometric payments lies in delivering seamless and secure transactions that align with consumer expectations.