5 ways biometrics are going mainstream for payments

April 1, 2019 10:54 AM

While many Americans and Europeans are comfortable using biometric authentication to access their smartphones and bank accounts, the real leader in biometric adoption for payments is actually the government of India.

Today over 1 billion Indian consumers have established a digital identity with the government, backed with fingerprint and iris scan recognition, in addition to a photograph, as a means to collect social welfare payments. The biometric registration process of almost the entire country has taken less than 10 years and means that the Indian government now has the tools to not only uniquely identify every citizen, but also to drive financial inclusion and digital payments in rural areas.

While fingerprint recognition is becoming more commonplace, other biometric technologies are rapidly entering the market such as voice, facial and even vein pattern recognition. One area being heavily explored by banks and card issuers is the adoption of fingerprint recognition for contactless card payments in lieu of PIN numbers. Last year, Italian bank Intesa San Paolo and Mastercard announced a 16 week biometric card pilot encompassing users in Turin, Milan and Rome. The pilot features the FPC-1300 ultra-low power consumption fingerprint biometric sensor from Swedish-based Fingerprints AB.

As consumers increasingly use their smartphones for shopping and banking services, companies are rapidly leveraging biometrics for payment and money transfer authorizations.

According to a recent Juniper Research Study on biometrics, mobile biometrics will authenticate $2 trillion in remote and in-store payments in 2023, up from an estimated $124 billion in 2018. Juniper predicts that the fastest growth will come from biometrically-verified mobile commerce transactions which will represent 57 percent of all biometric transactions in 2023, up from 28 percent in 2018.

Juniper estimates that roughly 90 percent of smartphones currently in use can support software-based facial recognition, and 80 percent are capable of voice-authenticated payments. The research forecasts that over 1.5 billion smartphones will use software-based biometrics by 2023, out of a pool of 5 billion smartphones expected to be in active use.

About 35 percent of consumers regularly use fingerprint recognition with almost the entire remaining population having used it once or twice, or are aware of it.

According to a 2017 Visa Biometrics Study, which surveyed 1,000 Americans to explore their awareness and perceptions of biometric authentication, most are aware of several biometric technologies. While most consumers are aware of voice, facial and eye scan biometrics, behavioral and vein pattern biometrics are less well-known.

The rise of biometric authentication is an effort by many companies to meet two growing needs – better anti-fraud tools and improved customer experience. “Biometrics have a lower level of friction than passwords, and their adoption demonstrates that a company is achieving a level of innovation that drives improved security,” stated David Britton, vice president of industry solutions, global identity and fraud at Experian.

“The future is not going to be password authentication. It’s not dead, however the consumer attitude toward passwords is on the decline,” Britton said. “Consumers like visible signs of security, which biometrics offer, and want lower friction. That’s a difficult balance, but not an impossible task to achieve.”

Consumers generally recognize that most biometrics are more secure for payment authorization, save the two-step method of using a password and code, according to the 2017 Visa Biometrics Study. However, the friction of using a two-step authorization method goes against consumer demands for a better user experience when making purchases. Additionally, two-step authorization requires more time than biometric authentication.

Surprisingly voice recognition fares rather poorly in consumers’ view, coming in below standard passwords. A possible factor fueling this low score could be the rapid adoption of home speakers and virtual assistants and their seeming inability to differentiate between different voices.

Despite consumer cries for convenience and personalization in digital experiences, when it comes down to the single most important element, the vast majority of consumers state security is the key feature they want. According to Experian’s 2019 Global Identity and Fraud Report, 74 percent of consumers state that security is the single most important element in online experiences.

While this could be interpreted as desiring more intrusive and onerous authentication programs for online shopping, the reality is that security needs to be balanced with the overall user experience.

“Consumers are willing to spend more time upfront being vetted so that they can have a more elegant experience downstream. The more you can accurately identify a consumer, it makes the authentication process easier,” commented Britton.

India is currently engaged in the world’s largest biometric project as part of its national ID system, called Aadhaar, which is designed to deliver a unique, biometrically-verifiable identifier to each individual in India.

Aadhaar was launched in 2009 for purposes of aiding in the delivery of social welfare programs, reducing fraud and preventing identity theft. Unlike the U.S. Social Security identification system, Aadhaar does not require citizenship as the Indian government plans to enroll all residents of India.

While initially seen as an effective tool to clamp down on rampant corruption and fraud in social welfare programs, the public view of Aadhaar has shifted to one of big brother spying on its citizens. Many private companies have rapidly adopted the use of Aadhaar to meet with “know your customer” (KYC) requirements as well as to improve their customer service operations.

In 2017, Prime Minister Narendra Modi launched Aadhaar Pay as part of the government’s financial inclusion and digital payments drive for those without credit and debit cards. Part of its mission is to promote digital payments to the rural countryside.

Time magazine reports that over 99 percent of Indian adults are covered by the Aadhaar program. According to the Unique Identification Authority of India’s dashboard, over 1.235 billion Indians are currently registered with Aadhaar out of a population of 1.365 billion.