When it comes to payment transactions, the rapid digitizing of the financial sector is making payments faster and more convenient than ever. However, security is always on the top of people’s minds – especially in the digital payments space.
Financial services companies have always implemented various security measures to prevent fraudulent activities. For example, banks offering over-the-counter or even ATM services require customers confirm their identity with signatures and PINs. Other digital payment channels have security measures such as passcodes, security questions and others.
With technologies in the digital payment space evolving so rapidly as well as the growth of merchants and transactions, the security aspect is still making many people nervous about the risk of fraud.
In this space, biometric authentication technology – the ability to use one’s unique physical features as an identification tool – is becoming a potential solution that can transform the digital payments landscape.
Biometric technology is actually over 100 years old. In 1892, Sir Francis Galton created the first fingerprint classification system, which was revolutionary back in the day. Fingerprint identification has been been adopted by institutions all over the world and recent technologies have been adapted to recognise fingerprints digitally.
Today, there are four main methods for identifying a person’s biometric features: fingerprint, voice, face, and cornea. These methods are having a profound effect on modern financial services. This trend is being driven by three major factors
1. The demand for ‘cashless’ transactions
According to Finaria.it, the global digital payments value is expected to hit USD6.6 trillion in 2021, compared to USD 5.4 trillion value in 2020. Leading up to 2025, experts expect the digital payments market to reach USD 10.5 trillion in value.
In tandem with this tremendous growth is the rise in the demand for digital payment methods which are more secure and reliable. The players in the global digital payments ecosystem, such as fintech companies, banks, payment firms and others, are trying to quickly evolve to adapt to rapid changes in consumer behaviour and technological advancements.
2. Demand for convenience plus security
Consumers generally see biometric identification as more secure, faster, and easier than traditional identification methods. According to a research commissioned by Visa covering 39 markets around the world, credit cardholders in those markets showed growing interest in making payments with fingerprints, facial recognition and eye scan than other types of biometrics. Some consumers also preferred multiple types of biometric payments.
Another 2018 survey showed that over half of consumers say they would prefer to use biometric cards for payment if they were available. With biometric technology, individual customer only needs to be physically present to make a purchase – no more need to remember PIN numbers, especially if users have multiple PINs for different accounts.
The uniqueness of each person’s biometric features also offers greater security to both customers and banks using biometric payment methods. If a card or device is lost or stolen, it cannot be used even for low-value contactless payments without the account holder’s physical identification.
3. COVID-19
Digital payment transactions around the world were already growing rapidly in the last few years, but the COVID-19 pandemic has made people all over the world become more focused on hygiene and touchless payments. This has really motivated a global shift towards cashless and contactless payments, further accelerating the existing trends.
Before COVID 19, the global digital payments industry was growing at a pace of 16% year-on-year. When the pandemic hit, the rate rose to 22%. Cards are still dominating the retail sector, but mobile wallets are seeing a rapid rise in usage. A big part of this is due to the rise in pandemic-driven e-commerce, as users go digital shopping with smartphones and pay through connected apps.
While shopping by smartphone is very convenient, security remains a major concern. The advantage of a biometric payment system would ensure that if a device is stolen or hacked, it cannot be used for any digital transactions without the owner’s physical presence.
Consumers today are increasingly becoming more used to being identified with their biometric data such as fingerprints and facial recognition. It’s easy to imagine a time when this would become a normal part of shopping, both in person and online. While biometric payment is becoming a rising trend, time will tell whether the backend technologies will be able to catch up with consumer expectations quickly enough.
Apigate is on the cutting-edge when it comes to enabling our partners to take advantage of payment trends in emerging markets. Call us and allow our experts to show you how we can help you create long-term monetization opportunities.
