Are biometric cards the next standard in payments?
By N Satish, Deputy Product Manager, FSS
Over the past year, contactless (tap and pay) transactions have become synonymous with secure in-store payments. Everyone from large retail chains to family-friendly neighborhood stores are embracing contactless transactions because customers are reluctant to handle money or enter their PINs on devices for hygienic reasons.
Numerous industry surveys have highlighted the impact of the pandemic on the transaction behavior of cardholders. A forecast on contactless payments from analyst firm Juniper Research estimates that the value of global contactless transactions will triple from US $ 2 trillion in 2020 to US $ 6 trillion in 2024. A survey by Mastercard indicates that 79% of consumers surveyed worldwide now use tap-and -go payments, citing safety and cleanliness as the main drivers. According to the Visa Back to Business study, 48% of consumers surveyed have changed the way they pay, switching to contactless payments where possible. About 26% of consumers surveyed first used ‘tap to pay’ technology during COVID-19 for in-store purchase.
The surge in contactless payments brought on by the pandemic has contributed to increased activity in the biometric card space. While contactless payments are expected to grow further, the use of biometric cards will follow the same path. In fact, UBS analysts predict that biometric payment cards could capture a 15% share of the global card market over the next five years. For issuers, biometric cards provide a first-come advantage, help them differentiate card programs and improve card fee revenue. For example, the French bank BNP Paribas offers its Visa Premier cardholders the possibility of switching to a contactless fingerprint option – for an annual amount of € 24.
For merchants, biometric cards are designed to be compatible with existing payment terminals that accept contactless or chip payments worldwide. As all information processing takes place within the card, there is no additional support requirement for merchants or acquirers during transaction processing.
Governments and regulators around the world have increased limits on contactless card transactions, making it possible to complete more transactions without needing to touch a PIN pad. South African bank ABSA, for example, raised the limit for contactless transactions to a maximum of US $ 38 (Rand 500). The UK has also increased the limit per transaction from $ 40 (GBP 30) to $ 141 (GBP 100), while major Australian retailers have increased their contactless limit to $ 154 ($ 200). In India, the transaction ranges have been relaxed from USD 28 (INR 2,000) to USD 68 (INR 5,000).
As contactless becomes a preferred payment method for a growing number of consumers, concerns about the security of contactless transactions have intensified. With higher limits, it becomes possible for fraudsters to spend large sums on unprotected contactless cards, even if the theft is reported early. Since customers don’t need a PIN code, a lost credit card or stolen device potentially gives fraudsters easy access to the cardholder’s account. Several incidents have also been reported where hackers have successfully fabricated fake scanners or used card skimmers designed to steal data transmitted via RFID, allowing them to create cloned cards.
This is a real concern and issuers must act now to ensure the security of contactless transactions and build consumer confidence. The association of biometric authentication with contactless cards has emerged as a particularly effective solution, because it uses tamper-proof and specific characteristics. Using a fingerprint sensor built into the card, banks can add strong customer authentication to contactless, eliminating the hassle of PIN codes and the need for contactless payment caps. The chip-powered sensor authenticates identity with a fingerprint and can be used on EMV terminals around the world.
Biometric payment cards are on their way to becoming a mainstream payment product and will fuel a range of use cases
High value transactions – Biometric authentication provides an additional layer of security allowing the use of contactless for all value payments. Large banks such as BNP Paribas are among the first banks to introduce contactless cards for high value transactions.
Balance convenience and security – Card fraud has increased in recent years, costing global issuers an estimated US $ 28.65 billion in 2019, according to the Nilson report. And the coronavirus pandemic has only compounded the dilemma Fingerprint authentication is a mature and equally preferred technology, having quickly overtaken PIN authentication to secure payments.
Future-proof retail – Contactless payment methods are an essential part of the future of Main Street. With the evolution of formats such as curbside pick-up, online ordering and in-store pickup, the use of contactless biometric cards would develop. Merchants can benefit from greater certainty about the authentic identity of the cardholder during transactions. As a result, merchants can see their income increase through the reduction of false refusals or forgotten PIN transactions.
Tap and Pay is now integrated into the day-to-day transactional life of cardholders as they want to shop securely, quickly and painlessly. Contactless biometric cards, adding an essential security element to these transactions, would have a multiplying impact on the value and volume of transactions.
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