TechTarget.com defines biometrics in the payments context as "a point-of-sale technology that uses biometric authentication to identify the user and authorize the deduction of funds from a bank account."
Biometric payments today are typically generated through a mobile or wearable device and use two-factor authentication methods, such as personal identification numbers (PINs) and fingerprints, to qualify transactions. Most such devices are also equipped with contactless payment technology, which is designed to safely pass data from one device to another without the friction of entering numbers, swiping mag-stripe cards or inserting (sometimes called dipping) smart cards.
Consumer adoption of biometric payment methods has been relatively slow. This is particularly true in the United States and other countries where card-based payments are still preferred. However, adoption of devices that employ biometrics is on the rise, and experts are predicting the widespread adoption of biometric payments will soon follow.
So many biometric advancements are afoot today that multiple technologies are converging. A recent ABI Research Inc. report, Biometrics Applications in the Financial and Banking Sectors, analyzed the increasing use of biometrics in banking and payments and discussed the latest pairings between startup biometrics firms and top-tier payment card players. According to the report, these partnerships are being formed to boost mobile biometrics in payments and banking.
"This market shift is occurring faster than initially anticipated, with global revenues for biometric banking technology expected to top $4 billion by 2021," Dimitrios Pavlakis, an Industry Analyst at ABI Research told news portal Planet Biometrics.
Another key metric that suggests biometric payments are on the rise is alternative payment usage. "The rise of alternative payments can help bring biometric payments further into the mainstream," said Joe Kleinwaechter, Vice President, Innovation and Design at Worldpay, quoting key findings from the Worldpay's 2015 Global Payment Report. "Consider that mobile wallets are expected to eclipse plastic as the most popular payment method by 2019."
Kleinwaechter also believes the barriers to biometric payment adoption fall into two categories: the limited number of POS devices equipped to accept such payments and the hesitancy of consumers to convert from payment options they've grown accustomed to. "The more opportunities consumers have to use this technology and see others using it, the more likely they will be to trust this form of authentication and use it more moving forward," he said.
Now that embedded wallets and contactless payment capabilities are being built into biometric wearables, consumer curiosity for biometric payments is likely to turn into market demand. However, the average merchant's inability to accept payments made from biometric devices is a significant barrier. Even if today's consumers were ready to adopt biometric payments more readily, they would still have to carry credit and debit cards, since so few merchants are ready to accept these payments.
According to Kleinwaechter, the price of biometric devices is more of a burden for merchants than consumers. "Consider the sluggish start to EMV adoption as a comparison," he stated. Nevertheless, Juniper Research Ltd. recently predicted 770 million biometric authentication apps will be downloaded annually by the year 2019. And as the Internet of Things, biometrics and wearable markets mature, making these transactions convenient and friendly for consumers, contactless payment acceptance is predicted to gravitate into the mainstream across all retail channels.
"Retailers need to demonstrate the value that biometric authentication adds to the shopping experience beyond speed," Kleinwaechter noted. For example, he feels that since biometric authentication eliminates the need to remember the various PINs that are associated with most traditional payment methods, the retail community can help speed adoption by offering biometric authentication at checkout as a convenience. "By using unique features that cannot be lost, forgotten or changed, biometric sensors could make forgetting passwords a thing of the past," he said.
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