FSS | Are Biometric Cards the Next Normal in Payments?

Contactless (tap and pay) transactions, over the last year, have become synonymous with safe instore payments. Everyone — from large retail chains to mom-and-pop neighbourhood stores — is adopting contactless transactions, as customers are reluctant to handle cash or type in their PINs on devices for hygienic reasons.

Multiple industry surveys have highlighted the impact of the pandemic on cardholders transacting behaviours. A forecast on contactless payments by analyst firm Juniper Research estimates that global contactless transaction value will triple from US$2 Trillion in 2020 to US$6 Trillion in 2024. A survey from Mastercard indicates 79% of surveyed consumers worldwide are now using tap-and-go payments, citing safety and cleanliness as the key drivers. As per the Visa Back to Business Study, 48% of the surveyed consumers have changed the way they pay, shifting to contactless payments whenever possible. 26% of the surveyed consumers have used ‘tap to pay’ technology during the COVID-19 for in-store purchase for the first time.

The pandemic-driven rise of contactless payments has contributed to increased activity in the biometric card space. With contactless payments set to grow further, the use of biometric cards will follow along the same trajectory. In fact, UBS analysts project that biometric payment cards could capture a 15% share of the global card market within the next five years. For issuers biometric cards offer a first-mover advantage, help them to differentiate card programs and improve card fee revenues. For instance, French bank BNP Paribas is offering its Visa Premier cardholders the chance to upgrade to a contactless fingerprint option – for a €24 annual fee.

For merchants, biometric cards are designed to be compatible with existing payment terminals that accept contactless- or chip-based payments around the world. As all the information processing takes place within the card, there are no additional support requirements for merchants or acquirers during transaction processing.

Around the world, governments and regulators have raised the limits on contactless card transactions, enabling more transactions to take place without the need to touch a PIN pad. South Africa’s ABSA Bank for instance has raised the contactless transaction limit to a maximum US$38 (R500). The UK likewise increased the per-transaction limit from US$40 (GBP30) to US$141 (GBP100), while leading retailers in Australia increased their contactless limit to US$154 (A$200). In India transaction ranges have been relaxed from US$28 (INR 2,000) to US$68 (INR 5,000).

As contactless becomes a preferred payment mode for an increasing number of consumers, concerns around security of contactless transactions have intensified. With raised limits it becomes possible for fraudsters to spend significant sums of money on unprotected contactless cards, even if the theft is reported quickly. As customers do not need a PIN, a lost credit card or a stolen device potentially gives fraudsters easy access to cardholders’ associated account. Several incidents have also been reported where hackers have been successful in making fake scanners or using card skimmers designed to steal data transmitted via RFID. If a hacker gets the information from the card or wallet, they can create cloned cards.

This is a real concern, and issuers must act now to ensure contactless transactions remain safe and bolster consumer confidence. Combining biometric authentication with contactless cards has emerged as a particularly effective solution, since it uses characteristics that cannot be forged and are unique to everyone. Using an embedded fingerprint sensor on-card, banks can add strong customer authentication to contactless, removing the hassle of PINs and the need for contactless payment caps. The sensor that is powered by the chip, authenticates identity through a fingerprint and can be used at EMV terminals worldwide.

Biometric payment cards are poised to become a mainstream payment product and will power a range of use cases.

High-Value Transactions – Biometric authentication provides an added layer of security enables the use of contactless for any value payments. FSS recently teamed up with Zwipe for contactless biometric cards and they have successfully demonstrated high-value transactions of up to GBP 100,000. Major banks such as BNP Paribas are among the first few banks to introduce contactless cards for high value transactions.

Balance Convenience and Security – Card fraud has been on the rise throughout the last few years, costing global issuers a projected US$28.65 Billion in 2019, according to The Nilson Report. And the coronavirus pandemic has only worsened the dilemma Fingerprint authentication is a mature and also a preferred technology, having rapidly overtaken PIN authentication to secure payments.

Future-proof Retail – Touchless payment methods are an essential part of the high street’s future. With evolving formats such kerbside pickup, order online and pick up in store, the use of biometric contactless cards would grow. Merchants can enjoy greater certainty of genuine cardholder identity during transactions. As a result, merchants may see increased revenue from reduced false declines or forgotten PIN transactions.

Tap and Pay is now embedded in the daily transactional life of cardholders, as they want to get their shopping done safely, quickly, and painlessly. Biometrics contactless cards, adding a much-needed element of security to these transactions, would have a multiplier impact on value and volume of transactions.

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