Biometric smart cards have been a hot topic in FinTech for over a year now, and at the center of that conversation is IDEX, a Norway-based biometric solutions provider focused exclusively in the smart cards vertical. FindBiometrics Managing Editor Peter Counter had the opportunity to speak with IDEX’s new CEO, Stan Swearingen, who was appointed to the position in April of this year. The interview begins with a review of IDEX’s activity in the first half of 2018, and the major drivers in biometric smart cards. The conversation turns to the market insight IDEX has gained through its many biometric smart card pilot projects and the benefits of having a market-making partner like Mastercard. Wrapping up, Swearingen looks ahead, speaking about opportunities in financial inclusion, government ID, and what to expect from IDEX in the near future as the company helps reinvent the credit card.
Read our full interview with Stan Swearingen, CEO, IDEX:
Peter Counter, Managing Editor, FindBiometrics: How would you characterize the first half for 2018 for IDEX?
Stan Swearingen, CEO, IDEX: In the first half of 2018 we’ve purely been focused on completing our deliverables for certification, which we did earlier in the quarter. We’ve also been supporting pilot activity, not only with payment cards but also ID cards, as well as other smart card protocols. Momentum for the company, as well as the biometric market, is clearly starting to build as we’re seeing a lot of R&D investment in the supply chain and we’ve also spent a lot of energy on our supply chain to make sure we’re prepared. In my experience, it’s important enough to be at the front end of new markets like touch [interface/display], Bluetooth, WiFi. The supply chain and customers notoriously tend to be quite conservative on the front end. However, once the right dominos fall, the upside can be quite significant, so we’re trying to build as much flexibility as we can into our supply chain in a proactive way. We see the shift happening now from design and certification activity, as well as pilots and sampling customers to encourage commercial rollout in the back half of this year.
FindBiometrics: In January, IDEX made a big pivot into focusing primarily on the biometrics smart card market. What are the big drivers in that area, and what’s driving interests in biometric payment cards?
Stan Swearingen, CEO, IDEX: The interest is twofold. One is convenience and the other, security. Biometric capability in a smart card application is certainly compelling. Important factors include application value, composition and the ability to hit cost structures where it becomes feasible to put this technology in a smart card for mass market deployment. That goes hand in hand with the costs we can have with levels of integration and so forth. Then, in moving from a model of what you know, versus who you are, is quite compelling.
Another important move for IDEX is biometric enrollment. About a year ago, we highlighted self-enrollment as a potential enabler to mass deployment, because it just isn’t feasible to require customers to go into their local bank to enroll. The old paradigm was that you would go into a branch, they would use an optical reader to capture your fingerprint, which would be stored in a central database and then be transferred onto the card. The paradigm we shifted to was one which we felt was feasible for security, convenience and for mass deployment. It comes within a low-cost plastic sleeve that can be shipped in the post, the whole process happens in an individual’s home and the fingerprint never leaves the card. The whole concept of your fingerprint being stored in a central database caused some people concern and had the potential to be targeted by malicious cybercriminals. With the new approach, it’s all done in somebody’s home and the fingerprint never leaves the card. There’s no requirement for wireless connectivity to transfer the fingerprint anywhere other than into the secure element on the card itself.
FindBiometrics: We at FindBiometrics just had our On-Device Authentication Month and we’re seeing a trend moving towards on-device secure element authentication. So that makes a lot of sense. IDEX is involved in many biometric smart card trials. You were involved in the first one Mastercard ever announced and most recently you’re involved in a trial in the Middle East. What is IDEX learning from these trials? Any fascinating insights?
Stan Swearingen, CEO, IDEX: One of the fascinating insights we gained led to the remote enroll. One of the things we’re quite proud of is that we have a privileged view. What I mean by that is by being Mastercard’s partner we’re getting to see how people use the cards and how people interact with the cards first hand. One of the things we saw was that a quality and simple enrollment process was very important to enable the biometric performance and encourage convenience. If you look at the remote enroll, it not only includes the plastic sleeve and battery, but you also receive a step-by-step enrollment guide. This is because one of the things we saw in the smartphone enrollment is that you get visual feedback. This means that if you create your template on an iPhone, you may touch it 10-15 times and there’s visual feedback capturing your fingerprint at all the different angles that you would need to give a good biometric level of performance. What we saw was the need for something to guide the finger through that process. We discovered that the quality of the enrollment really sets the foundation for the experience. We also got to understand how people hold the cards and present the solution to the reader.
It’s a virtuous cycle because as we get these insights we can create solutions that actively address market needs. The remote enroll was a byproduct of that virtuous cycle – there are more to come in the pipeline too, which we’re really excited about. Whether it be power, cost or ease of use, there are a lot of different vectors that we can differentiate our solution on.
FindBiometrics: It’s fascinating what you mentioned about quality of enrollment. It seems like a major educational opportunity for the mass market because while the mobile fingerprint sensor market is prolific in terms of smartphones, the possibility of sending and receiving fingerprint sensors in the mail presents an educational challenge.
Stan Swearingen, CEO, IDEX: When we look at ourselves we really don’t see ourselves as a fingerprint sensor company exclusively. We’re much more. We see ourselves as a biometrics solutions provider. When we partnered with Mastercard, we felt we had the capability to tackle meaty challenges like remote enroll, and Mastercard has that trust in us as well. When we look at the capabilities we bring, we bring a holistic approach, meaning anything from tackling fingerprint remote enroll, to the entire contactless reference design. We’re doing all of it— energy harvesting, software matching… We’re very vertically integrated, which we think is what’s necessary to solve market challenges. An analogy I would draw – and by no means am I saying we’re comparable to Apple – is that when you look at Apple and how Apple operates, they’re vertically integrated, which can be seen in something like Face ID, where they do everything from the cameras, to the software and so forth. By contrast, Android infrastructure struggles to have that kind of level of innovation, and that polished collusion if you will, all because it’s disaggregated. We really believe that in a new solution such as a biometric payment smart card, you need to have the whole solution and all the elements of the solution so that you can make the appropriate trades and solve the problems in the appropriate technology domains.
FindBiometrics: That definitely makes sense. For something that is also so personal, it makes sense that customer experience is really helping to drive the development. Outside of the payment card space, what other markets is IDEX currently pursuing?
Stan Swearingen, CEO, IDEX: Right now, actually, we’re not pursuing anything outside the smart card space. In the smart card space, there are multiple verticals including payments, government ID and access control. When we look at just the opportunity in front of us with smart cards and the fact that our technology investment in contactless payment is synergistic with these other verticals, that’s where our focus is today. Also, as a company of our size, one of the last things you want to do is get distracted, particularly with the kind of opportunity that’s in front of us with just payment alone.
We are making investments in display integration from a context of payment cards and smart cards. The reason we’re doing that is that we think displays, things like dynamic CVV and other display-type approaches in smart cards is where the market will go. As we look at these investments in display integration, we think it’s not only applicable to cards, but we think it’s very applicable to other markets. When we look at a market, we want to come in to an existing market with a disruptive approach. When we look at mobile or IoT, those are markets that already exist, so we’re laying the groundwork to come into those markets in a very disruptive way. Contrasting that to biometric payments, since that market doesn’t exist yet, we’re at the forefront of doing all the work to create that market, which is a whole other set of efforts and a lot of heavy lifting. For example, there wasn’t a certification process that we had to follow; we had to help invent a certification process. From a competitive perspective, that’s a great place to be because you’re in the midst of creating a new process, and as you understand it intimately you can make sure the next time you go through it, you’ll go through it much more efficiently. That’s quite different than something like IoT, whether it be a smartwatch or something else. In that case, we’re looking at how we enter into those markets in a disruptive way. For IoT, there’s a lot of synergy from which you can imagine as a small, low-power, high-performance biometrics solution has a lot of applicability into IoT. The challenge with IoT is that the market is so fragmented, so the question is, how do we reach it in an efficient way?
The priorities here-and-now are to get the payment card off the ground, get that market to materialize, as well as the other smart card markets. In phase two, we will start to diversify.
FindBiometrics: It must help that you have such enthusiastic partners like Mastercard, who seem so ready to embrace biometrics and innovation.
Stan Swearingen, CEO, IDEX: Absolutely. The key to any market is a market-maker. Apple has proven to be the smartphone market-leader. Fingerprint sensors in mobile have been around for a long, long time before Apple launched Touch ID. It was really Apple thinking through the whole experience and introducing a simple solution that made the whole market explode. We see Mastercard in the same context for the smart payment card market. When we talk about payment cards, we think in a biometrics sense. We think about the death of the PIN and how people don’t have to remember their PINs or passwords. For most people, PINs and passwords are quite personal, because they’re usually somebody’s birthday or something of that nature, that’s how a lot of people end up guessing passwords and PINs. Biometrics is a physical connection, and validating that it’s really the owner holding this card and no one else, versus somebody else who could say, well I know your wife’s birthday, or just have enough information to guess.
One of the things that we’re really excited about, and it’s a bit altruistic, is financial inclusion. There are a billion people or more that don’t have access to credit, and biometrics holds promise to help solve that problem. One of the challenges, particularly in emerging markets, is that governments want to get money to people in need, but by the time the money gets from the government to the person in need, only a fraction gets to those who need it. Another problem is ensuring the money is being used in a way that is going to help the individual. Biometrics helps to ensure that the money can only flow to the person in need and that the person in need actually uses the funds in a way consistent with the government’s wishes, such as ensuring that money meant for food is spent that way and not for cigarettes, for example.
FindBiometrics: What can we expect from IDEX in the second half of 2018?
Stan Swearingen, CEO, IDEX: As I mentioned, we are prepped for rapid growth, and can expect to see banks rolling out millions of biometric smart cards to millions of customers by 2019, so there are multiple pilots going on to meet demand. Some of the customer opportunities this year could ramp up to a hundred thousand, so we really see the back half of this year as a seminal moment where we go from proving the technology to launching it to the masses.
FindBiometrics: Fantastic. I can’t wait to have one of these cards in my wallet, personally.
Stan Swearingen, CEO, IDEX: Same with me. It’s an exciting thing to have the opportunity to reinvent the credit card and help Mastercard to make that a reality.