Death of the Wallet
The global expansion of mobile payments is staggering. They are expected to grow by 60.8% annually from 2011 to 2015, totalling more than 47 billion transactions, according to the World Payments Report. This unprecedented growth has, unfortunately, translated to increased cases of fraud, with the Financial Fraud Association saying that losses on cards as a result of fraud, just in the UK, totalled £247.6 million between January and June 2014. This illustrates the desperate need for more secure payment methods, particularly for the thousands of businesses and start-ups that may be relying on overseas invoice payments for their survival. Biometric payment technology has improved dramatically over the recent years and it not only addresses the problem of secure identification but can also speed up the time it takes to make transactions and reduce the security costs for financial institutions.
The most well-known types of biometric identification methods are fingerprinting and retina scanning; however there are many more that can be used, including voice pitch and frequency, face analysis, iris analysis, hand geometry, vein analysis and even the assessment of how people write their signature. Even though fingerprinting is the most widespread of methods, vein analysis and retina scanning are becoming increasingly popular due to their speed and accuracy.
Whilst many laptops and smartphones now have fingerprint scanning technology, it is encouraging to see that a number of traditional banks have recognised the business benefits of biometrics. RBS and NatWest have recently revealed that their customers will be able to use fingerprint identification with Touch ID (the same technology as on the latest iPhones) to log on to their internet banking accounts. However, the reliability of this security has long been debated – for example; it is possible, but not easy, to lift a fingerprint from the very device being used for secure payments.
A more sophisticated sensor is available that can actually scan veins within the finger (a unique vein pattern is formed while growing in the womb), called vein analysis. A new platform called FingoPay, that uses a system developed by tech start-up Sthaler and Hitachi, utilise this method of finger scanning to facilitate consumers to process transactions totally securely (as well as a number of other functions), in a third of the time it takes to complete a transaction using chip and pin. 80% of Japanese banks already use FingoPay but vein identification has been slow to catch on in Europe, perhaps due a lack of trust in the technology and suspicions that surround data ownership.
The reliability of biometrics is at its strongest when used in conjunction with other payment methods. A company called SmartMetric have integrated biometrics directly into their payment cards. The owner’s fingerprint has to be recognised by the card to allow the chip and pin function to even work. They claim that this results in 100% identity verification online or on the High Street so it could be a major step toward eliminating online theft.
As well as Apple’s iPhone, Samsung also includes a fingerprint sensor on the Galaxy S5 phone. This suggests that the integration of biometrics into mobiles is the future of secure payment solutions. Several companies are utilising the sensor function in mobile phones, including PayPal, who let consumers log in using their fingerprint so they can shop on their mobiles with confidence and ease.
As the use of biometrics is quite new, there are a couple of drawbacks. I have already noted the cynicism behind fingerprint technology but also there are many legislative barriers, primarily in more developed nations, specifically relating to privacy and logistics. Furthermore, biometric data, as is all data, is susceptible to fraud, but unlike other forms it cannot be changed (like a password). Some sceptics are wary of the cost of implementing the technology but ultimately the high cost of applying the new technology will outweigh the millions already being lost through fraud and transaction costs.
Whilst there may be some doubts behind fingerprinting technology, when combined with chip and pin, making a payment has never been so secure. Other benefits of biometric payment technologies are that they make the payment process incredibly convenient and fast. It is also much safer than chip and pin, it permits quicker transactions in store and online, it eliminates the need to carry cash or cards (which in turn can reduce card theft and fraud) and means there is no pin to remember – or forget!
What is especially exciting is that biometrics can be used across various business functions, for example, electronic signatures, improving customer service or to speed up how staff is paid. The use of biometrics in the future is inevitable and we should embrace it because it will increase the rapidity in which we operate business, particularly at a global level.
 Financial Fraud Association, http://www.financialfraudaction.org.uk/cms/assets/1/2014%20h1%20fraud%20figures%20-%20final.pdf