How Biometrics Reshape Payments Worldwide

Biometric technology is becoming increasingly widespread around the world. The key driver of biometrics large-scale adoption is its integration into mobile devices. Today, many of us interact with some form of biometric authentication every day—this is how we unlock our phones, log into mobile banking apps, or authorise payments. The technology relies on biometric data to establish or verify a person’s identity. This involves scanning and mapping one’s physical traits, such as facial features, fingerprints, the retina, or the capillary pattern. All these biometric characteristics are generally unique to individuals, and therefore, are a reliable method of identification.

The applications for biometric recognition are numerous, but in this article, I’ll specifically look into one—bio-acquiring, or biometrics-enabled payments.

In this case, an individual’s bank account is linked to biometric data which is used to approve transactions, for example, paying for purchases. Both businesses and consumers worldwide have embraced the technology for it provides a secure and speedy way to verify identity, resulting in a seamless payment experience.

Why Biometrics?

One primary benefit of the technology is the fact that biometric data is always "with the consumer" and cannot be lost or forgotten. Yet, the value of biometric-authenticated transactions extends far beyond that. These are the three main reasons why more and more consumers rely on biometric data when making payments:

1. Ease of use: Biometrics eliminate the need to memorise multiple unique PIN codes and passwords.

2. Security: Short four-digit PINs or even more complex passwords don’t guarantee absolute security since they can be stolen or otherwise compromised. Biometric verification relies on a person’s unique physical features, which are extremely hard to replicate.

3. Speed: Although the difference might at first seem barely noticeable, biometric authentication is faster and more straightforward than entering a PIN or a password. This benefits both consumers and businesses, as the frictionless payment experience helps to increase conversion.

   
   

China

Currently, China is a clear leader when it comes to biometric payment adoption. The two main promoters of the technology are Alipay, owned by Alibaba Group, and its rival WeChat Pay, operated by Tencent Holdings. Alipay pioneered fingerprint scanning for payments way back in 2014, with WeChat Pay catching up merely a year later. In 2017, Chinese consumers saw the rollout of facial recognition payment technology.

As of today, Alipay has facial recognition payment systems installed in over 100 cities across China. According to iiMedia Research Group estimates, in 2021 more than 495 million Chinese citizens used  face biometrics for payments, which roughly amounts to one third of the country’s population.

Chinese banks have also been quick to pick up on the trend. ATM users at China’s four major banks can perform transactions by having their faces scanned. One example is China Construction Bank, which has equipped half of its ATM fleet with facial recognition technology.

The key driver for biometric payment development in China is the national biometric ID.

India

In India, biometric identity schemes are helping to bring the unbanked into the financial system. One such initiative is the Aadhaar register, which contains the biometric data of more than one billion Indian citizens. Launched in 2009 as a way to streamline government welfare schemes and combat poverty, the Aadhaar program has since outgrown its original idea: in today’s India, even some of the most basic services, such as opening a bank account or purchasing a cellphone plan, require providing an Aadhaar number.

The biometric data that Aadhaar holders submit includes fingerprints and iris scans. The majority of Aadhaar-mediated transactions are authenticated with fingerprint biometrics, which makes it the most commonly used payment method in India.

The USA

Amazon One, a contactless palm-print based payment service, was introduced by Amazon in its Amazon Go stores back in 2020, amidst the COVID-19 crisis. The device requires a user to hover their hand over a scanner and verifies identity based on such characteristics as vein patterns as well as lines and ridges on the palm surface. It then creates a unique palm signature for each user and associates it with their bank card number.

In 2021, the technology made its way to third-party facilities as Whole Foods introduced the palm-print checkout system in its retail stores and AXS, a leading digital ticketing company, integrated Amazon One into its contactless ticketing panels at Red Rocks Amphitheatre in Denver and four Climate Pledge Arena venues in Seattle. To date, Amazon One is available in more than 70 Amazon retail stores, Whole Foods grocery stores, and a number of other partner stores.

Embedded Biometrics

Smart bank cards with a built-in fingerprint scanner date back as far as 2017, when Mastercard trialed the technology in South Africa.

The card can verify its holder’s identity for in-store purchases through a combination of sensor and chip technologies. Once the sensor captures the fingerprint, this data is then matched to the digital template stored in the chip. To make a payment, one simply needs to hold their finger over a sensor instead of typing in a PIN code.

In fact, fingerprint authentication is expected to fully replace PINs since sensor-enabled biometric cards can provide proof of life, which can be leveraged to help mitigate and combat social, welfare, and Card-Present (CP) fraud. Whether this claim actually holds true, only time will tell, yet the fact that  biometric sensor cards work with traditional payment terminals and require no investment into new Point of Sale (POS) infrastructure, can definitely stimulate their wider adoption.

And the Rest of the World?

Bio-acquiring is developing rapidly in other countries as well, prompted by COVID-19, which fast-tracked the global adoption of low-contact or contactless payment methods. One example is PopID, a Los Angeles-based company that promotes facial recognition for restaurant ordering and entry passes. In Europe, the Spanish CaixaBank and BBVA banks are the most active drivers of biometric payment technologies with proprietary solutions for restaurants and cafes. A face recognition-based payment system is also being tested in the Seoul metro, and the Israeli startup Preciate is implementing biometric retail payments in catering networks and stores.