Will biometric technologies finally replace passwords?
In the famous film "Back to the Future-2", the main characters are transferred from 1989 to 2015. Here you can not only fly skateboards and wear self-lacing sneakers, but also use your fingerprints to confirm payments.
Almost 30 years have passed since the release of the film. During these years, various biometric identification initiatives did appear on the market. They were sold by banks, payment systems, POS terminal manufacturers, technology companies, and alternative payment providers. However, biometric solutions are still inferior to PINs, passwords and signatures in terms of importance and frequency of use. What is the role of biometric authentication in the future of payments? The analytical company EY tried to answer this question in its research.
One of the main differences between biometric authentication technologies and other methods is the likelihood of error occurring. Unlike the only correct way to enter a PIN or password, in the case of biometrics there is a possibility that the authentication just matched. And this already creates problems, especially in the process of making payment transactions, when authentication errors lead to financial losses or chargebacks.
Hypothesis 1: In traditional markets with a developed payment infrastructure, biometrics will play a minor role in user authentication when making transactions through POS terminals.
According to EY experts, in such countries there is simply not a high demand for the use of biometric authentication. Both users and providers in the market are accustomed to card payments using a PIN or signature to confirm the transaction. And the transition to biometric systems will require investments in infrastructure - both in updating POS terminals at merchants (for example, it is necessary to install a camera for recognizing faces or retinas), and in reissuing payment cards (for example, it is necessary to issue cards with a built-in fingerprint scanner) ... Most likely, there will be little desire on the part of merchants or issuers, or on the part of consumers to invest additional money. After all, the level of fraud in these countries is relatively low.
Hypothesis 2: The growing popularity of devices that support biometric identification (for example, smartphones) and the desire to provide convenience for customers making purchases through different channels will drive more active use of biometric authentication when making payment transactions in the coming years.
Here we must distinguish between POS transactions and remote payments. In the first case, payments via mobile devices are becoming more and more popular among users. Many smartphones on the market are capable of analyzing biometric factors, for example through a camera, fingerprint reader or microphone for voice recognition. Solutions such as Apple Pay or Samsung Pay, which use a fingerprint reader to identify users, replace the traditional PIN entry process at the checkout and provide a better user experience.
In the case of remote payments, there is also a tendency to use devices (smartphones, tablets, laptops) with support for biometric technologies. In order to improve the consumer experience when shopping online, many payment providers are trying to integrate biometrics into their solutions. For example, Mastercard introduced Identity Check Mobile, Apple allowed Apple Pay to be used in its new MacBooks, and a number of startups (for example, Irish Touchtech) are implementing similar solutions. In the future, experts predict convergence of settlement methods used at the checkout and remotely. This will allow the use of devices with biometric identification in both cases.
Hypothesis 3: In the medium term, biometric solutions as a direct link to the account will be relevant for some markets with underdeveloped payment infrastructure.
Biometric solutions can be used not only as an authentication factor. They can also provide a direct link to a payment account and thereby replace the card as a payment instrument. This usually requires the installation of special equipment from the merchant. For example, American payment service Keyo uses fingerprint scanners, while Smile To Pay from Ant Financial (Alipay) uses cameras to recognize faces.
Due to the need for significant investment, many markets do not see the potential for themselves in the development of such solutions. However, some developing countries may switch to the use of payment systems based on biometric authentication methods in the coming years. This is currently happening in India. The government is interested in using a central biometric identification register (called Aadhaar) to make payments.
In addition, experts predict the emergence of an increasing number of options for using solutions for biometric identification in closed systems, for example, at festivals, various events. Basically, these use cases require a separate hardware infrastructure, and biometric authentication will be a means of improving the customer experience. One example of such a scenario is Liquid Pay in Japan, a solution designed specifically for tourists. After registering fingerprints, passport and bank card information, travelers can visit attractions, restaurants and other places by paying with only fingerprints.
However, solutions are already emerging. For example, in the MOSST Payments instant money transfer application, for the first time in Ukraine, biometric selfie authentication was implemented. Company representatives note that it is much faster and more convenient than even using TouchID. We turned to the CIO of MOSST Payments for comment.
Convenience and a positive customer experience are key success factors for biometric solutions, both in-store and online. Therefore, most likely, users will choose the most preferred biometric identification methods from a wide range of solutions, depending on the channel of the transaction.
In the famous film "Back to the Future-2", the main characters are transferred from 1989 to 2015. Here you can not only fly skateboards and wear self-lacing sneakers, but also use your fingerprints to confirm payments.
Almost 30 years have passed since the release of the film. During these years, various biometric identification initiatives did appear on the market. They were sold by banks, payment systems, POS terminal manufacturers, technology companies, and alternative payment providers. However, biometric solutions are still inferior to PINs, passwords and signatures in terms of importance and frequency of use. What is the role of biometric authentication in the future of payments? The analytical company EY tried to answer this question in its research.
Biometric Authentication
Authentication can be defined as the process of verifying an identity in the course of a transaction, such as a payment transaction. Authentication can be performed using one of the following tools:- knowledge: what the user knows (like a PIN or password)
- property: what the user has (e.g. card, token, mobile phone)
- entity: that which is an integral part of the user (for example, a biometric characteristic).
One of the main differences between biometric authentication technologies and other methods is the likelihood of error occurring. Unlike the only correct way to enter a PIN or password, in the case of biometrics there is a possibility that the authentication just matched. And this already creates problems, especially in the process of making payment transactions, when authentication errors lead to financial losses or chargebacks.
The Role of Biometric Authentication in the Future of Payments
To assess the role of biometric authentication in the future of payments, consider various hypotheses. They take into account different payment channels (POS, remote), payment instruments (card and others), market characteristics (traditional, using mainly cards, and developing).Hypothesis 1: In traditional markets with a developed payment infrastructure, biometrics will play a minor role in user authentication when making transactions through POS terminals.
According to EY experts, in such countries there is simply not a high demand for the use of biometric authentication. Both users and providers in the market are accustomed to card payments using a PIN or signature to confirm the transaction. And the transition to biometric systems will require investments in infrastructure - both in updating POS terminals at merchants (for example, it is necessary to install a camera for recognizing faces or retinas), and in reissuing payment cards (for example, it is necessary to issue cards with a built-in fingerprint scanner) ... Most likely, there will be little desire on the part of merchants or issuers, or on the part of consumers to invest additional money. After all, the level of fraud in these countries is relatively low.
Hypothesis 2: The growing popularity of devices that support biometric identification (for example, smartphones) and the desire to provide convenience for customers making purchases through different channels will drive more active use of biometric authentication when making payment transactions in the coming years.
Here we must distinguish between POS transactions and remote payments. In the first case, payments via mobile devices are becoming more and more popular among users. Many smartphones on the market are capable of analyzing biometric factors, for example through a camera, fingerprint reader or microphone for voice recognition. Solutions such as Apple Pay or Samsung Pay, which use a fingerprint reader to identify users, replace the traditional PIN entry process at the checkout and provide a better user experience.
In the case of remote payments, there is also a tendency to use devices (smartphones, tablets, laptops) with support for biometric technologies. In order to improve the consumer experience when shopping online, many payment providers are trying to integrate biometrics into their solutions. For example, Mastercard introduced Identity Check Mobile, Apple allowed Apple Pay to be used in its new MacBooks, and a number of startups (for example, Irish Touchtech) are implementing similar solutions. In the future, experts predict convergence of settlement methods used at the checkout and remotely. This will allow the use of devices with biometric identification in both cases.
Hypothesis 3: In the medium term, biometric solutions as a direct link to the account will be relevant for some markets with underdeveloped payment infrastructure.
Biometric solutions can be used not only as an authentication factor. They can also provide a direct link to a payment account and thereby replace the card as a payment instrument. This usually requires the installation of special equipment from the merchant. For example, American payment service Keyo uses fingerprint scanners, while Smile To Pay from Ant Financial (Alipay) uses cameras to recognize faces.
Due to the need for significant investment, many markets do not see the potential for themselves in the development of such solutions. However, some developing countries may switch to the use of payment systems based on biometric authentication methods in the coming years. This is currently happening in India. The government is interested in using a central biometric identification register (called Aadhaar) to make payments.
In addition, experts predict the emergence of an increasing number of options for using solutions for biometric identification in closed systems, for example, at festivals, various events. Basically, these use cases require a separate hardware infrastructure, and biometric authentication will be a means of improving the customer experience. One example of such a scenario is Liquid Pay in Japan, a solution designed specifically for tourists. After registering fingerprints, passport and bank card information, travelers can visit attractions, restaurants and other places by paying with only fingerprints.
Expert opinion
In Ukraine, biometric technologies in the field of payments are still in their infancy. Payment systems and providers plan the widespread introduction of such services, but their entry into the Ukrainian market is possible if there is a sufficient number of devices that support such identification methods. It is also very important to have an appropriate legal framework.However, solutions are already emerging. For example, in the MOSST Payments instant money transfer application, for the first time in Ukraine, biometric selfie authentication was implemented. Company representatives note that it is much faster and more convenient than even using TouchID. We turned to the CIO of MOSST Payments for comment.
Output
As seen in the EY study, biometric authentication will play an important role in the near future in the world of payments. However, traditional card-based markets simply do not need to use these technologies. Therefore, new authentication methods will emerge in these markets associated with modern payment instruments (for example, a smartphone). Legal and regulatory initiatives will further expand the use of biometric authentication as an additional means of enhancing the security of payment systems.Convenience and a positive customer experience are key success factors for biometric solutions, both in-store and online. Therefore, most likely, users will choose the most preferred biometric identification methods from a wide range of solutions, depending on the channel of the transaction.
