Biometric payment – An evolution in payment technology

The evolving of payment technologies is fueling the rise of biometrics. Biometrics is becoming more important for payments due to the ability to enhance the security of transactions. Biometric payment is a point of sale technology which uses biometric modalities to authenticate a user and authorize the online payment. Many banks around the world have already implemented biometrics for customer authentication. Different biometric modalities has been applied and developed in biometric payment technology such as fingerprint, iris scanning, and vein and voice recognition.

As a matter of fact, the conventional authentication systems at ATMs, transactions at the point of sale, telephone banking and online banking as well as many other banking applications are vulnerable to frauds and identity theft. Based on the “Fraud the Facts 2014” report of Financial Fraud Action UK, fraud losses on UK cards were £450.4 million in 2013, 16% increase from £388.3 million in 2012. Specifically, in terms of card ID thefts, the losses were £36.7 million, increased by 14% in 2013. Biometric payment provides more advantages in terms of security in these banking transactions. Biometric payment enhances the security and speed of transaction for the end user. The fees and charges of biometric transactions are also lower than the standard debit and card charge fee. According to the “Biometrics for payments” report of New Science, the financial services industry is driving a high commercial demand and is expected to account for more $8 billion, approximately 34% of the global market by 2020. By using biometrics, the financial institutions believe that they can provide a better level of security in order to reduce the risk of Internet fraud, money laundering and identity theft while also reduces the operational risks through more efficient and faster transaction processes.

In the “Biometrics and Banking” report, Biometrics Research Group, Inc. indicates that revenue streams or biometrics utilization in the global banking sector will increase from US$900 million in 2012 to US$1.8 billion by the end of 2015. This means that biometric revenue from banking sector accounted for approximately 12% of the entire US$7 billion marketplace in 2012 and is expected to continue to constitute 12% of the market in 2015. Biometrics Research Group, Inc. also provides fact situations for this revenue stream. Revenue will primarily be driven by the adoption in emerging economies. The North American consumers are evaluated to continue to demonstrate reluctance towards the implementation of these technologies, while emerging economies, especially Asian countries, will continue to adopt and develop them. Surprising growth areas are supported by governments that use their biometric identity programs to extend banking to their citizens and biometric payment processors, who will leverage biometrics to enable mobile commerce. On the other hand, A WorldPay survey states that 49% of European consumers would most like to see biometric payments emerge as a payment technology alternative. In a new effort of replacing the use of passwords, many banks in Europe have introduced voice recognition for users of its telephone banking service, as well as fingerprint, iris, vein biometric scanners for the other types of banking transaction.

As biometric technology advances, there is a potential for it to be rapidly incorporated into the payment industry.  Mobile banking applications have the ability to replace wallets with smartphones and biometric sensors could make passwords and PINs as things of the past. ATMs are also continuing adopt biometrics authentication to replace their online password systems with biometric technology. Industry projections suggest that biometric security can reduce a financial institution’s operational risk by 20% over the next 10 years. The further factor increases the appeal of biometrics because, on average, 1-2% of daily payments are subject to some forms of inquiry or investigation, which accounts for a significant portion of operational costs. These evolving trends are quickly propelling continuous development and innovation of biometrics in payment.