Cash is getting scarce. It wasn’t so long ago that most transactions done in stores involved hard currency, but over time, dollars and bills have been increasingly displaced by debit and credit cards. Convenience is a big part of the reason, especially in countries where NFC-enabled POS terminals allow consumers to pay just by tapping their cards, though in a sense that has brought back a security risk that used to be associated with cash – the threat of physical theft, since criminals don’t necessarily need to know your PIN with these cards.
That threat is about to be addressed with the next big wave in payments, the biometric, fingerprint-scanning payment card, as detailed in another recent Financial Biometrics Month feature. But there is another trend, further on the horizon, that almost runs counter to this one. Not to get too Hegelian about it, but even as biometric cards rise to replace traditional payment cards, new payment and financial services solutions are emerging that may bypass the need for payment cards entirely.
Money Goes Mobile
One of these solutions is already here: mobile payments, or mPayments. The most familiar of these to everyday consumers might be the Starbucks App, which lets users load money into a digital wallet, which can then be used to make payments in the coffee shop by holding up your smartphone’s QR code to a scanner operated by the barista. But more ambitious mPayment systems have arrived and are gaining traction.
Samsung Pay, for example, enables users load payment cards into a mobile wallet and to use it to make payments at just about any POS terminal, with Samsung’s special Magnetic Secure Transmission technology designed to fool traditional swipe-based card readers into accepting the mPayment system just like any other card. The app also adds a healthy dose of security to the payments process thanks to Samsung devices’ support for biometric authentication.
That’s also the case with Apple Pay, which is now supported by the Face ID authentication system built into all of Apple’s latest iPhones. Based on sophisticated laser imaging technology, Face ID enables three-dimensional facial mapping, meaning that Apple Pay users get to confirm their transactions with some of the most advanced biometric authentication technology on the market – and just by looking at their phones, to boot. And the same goes for the newly-launch Apple Card, which is itself a virtual credit card (or a physical one, if you prefer) that can operate in much the same way as Apple Pay.
These mPayment platforms and others such as Google Pay and LG Pay are now available in many countries around the world. And while only a small proportion of consumers are currently using them, a Goode Intelligence forecast from the start of this year projected mobile biometric payments would reach $1.67 trillion per year by 2023.
… Payments Get Naked?
If a growing number of users are asking, “Why pay with a card when I can just use my phone?” then many more may soon ask, “Why pay with my phone when I can pay with my finger?”
To many, this will sound like the stuff of science fiction, but the technology for biometric payments – or “naked payments”, as this approach has increasingly come to be known – is already here. There is no technological obstacle to linking a biometric template with a payment card; rather, the barriers to overcome are technological and infrastructural. But signs of progress are emerging.
Last autumn, KFC China expanded a payment system based on facial recognition (called ‘Smile to Pay’) to 300 locations across the country. The system was designed to link users’ faces to their orders with their Alipay accounts, a platform associated with China’s answer to Amazon, Alibaba. That means users can make a purchase just by interacting with a self-service kiosk, with no need for an intermediary device like a payment card or a phone. China offers a unique environment for this kind of experimentation, given the prominence and familiarity of facial recognition technology in everyday life, but it’s easy to imagine such systems gaining traction elsewhere.
In Europe, England-based Fingopay has been laying the groundwork for a naked payments system based on finger vein scanning, with a successful pilot project at the Copenhagen Business School in Denmark paving the way to the establishment of a partnership with Cardstream in late spring; and the company is now aiming for a global rollout of its platform.
This technology is even gaining ground in the US, thanks to the efforts of CLEAR. Originally focused on using biometrics to expedite the airport screening process, CLEAR has expanded its program to entertainment and sports venue access, and has lately found itself pioneering biometric payments that let fans make purchases at the concessions stand with a fingerprint scan. This naked payments system was debuted last year in Seattle, and has just been launched at New York’s Citi Field.
It’s early days, to be clear. But with Japanese authorities preparing an ambitious naked payments program for tourists visiting during the 2020 Tokyo Olympics, this kind of technology will soon get a lot more exposure.
ATMs Get In On the Action
If biometric authentication technology will enable consumers of the future to make purchases at the store without the need for bank-issued cards, it’s also likely to extend that concept to the world of banking itself. Indeed, biometric ATMs have been years in the making, and we’re just starting to see some of these technologies move from the prototype and proof-of-concept stage to actual deployments.
At the start of this year, for example, Japan’s Seven Bank announced it would was preparing to deploy face-scanning ATMs throughout the country. Soon after that, Spain’s CaixaBank launched its own such solution in Barcelona with the help of biometric authentication specialist FacePhi, and Taiwan’s E. Sun Commercial Bank launched ATMs featuring facial recognition technology from NEC. Perhaps most importantly, in late June, Diebold Nixdorf – a giant in the ATM field – launched a new line of ATMs featuring biometric technology, and revealed that it was currently piloting the ATMs with 18 financial institutions across 13 countries.
This isn’t to say that bank cards and payment cards are going to disappear anytime soon. It will take time for consumers to adjust to naked payments and to the idea of linking their biometrics directly to their bank accounts; indeed, at this point it isn’t at all clear that this technology can sufficiently overcome that psychological hurdle to the point where it becomes mainstream. Biometric payment cards are clearly the next wave in payments FinTech, as standard payment cards have already reached shore. But there’s going to be another wave after that, and it may already be coming into view.
October 25, 2019 – by Alex Perala