The banking world at your fingertips: A guide to biometric payments
The world of banking and financial technology has come a long way in recent years, with card payments fast replacing cash as Australia’s prefered payment method, and emerging payment technologies such as mobile wallets and paywear becoming increasingly popular alternatives.
But as the pace of technological change continues to tick along briskly, one of the most likely innovations Australians can expect to be using on a day to day basis in the near future are biometric payments.
Just what are biometric payments?
It may sound like a fancy term, and one that conjures up images of something out of The Terminator, but in reality ‘biometrics’ are quite straightforward - the term simply refers to the calculations and measurements of the human body. In the world of technology, biometric authentication relates to the parts of the body which can be used for identification - fingerprints, retinas, your voice and your face, for instance.
So what does any of this have to do with being able to buy your groceries or pay for your morning coffee?
Well as things currently stand, you probably use cash, card or perhaps even a mobile or paywear option for most, if not all, of your payments. And if you’re using a card or mobile wallet to pay, you’re currently required to enter a form of verification before making a purchase over a certain amount (usually $100) - generally in the form of a pin or passcode.
The introduction of biometric authentication for payments would drastically alter our current reliance on pins and passcodes for security, with a fingerprint scan or facial recognition the most likely replacements in the future. Believe it or not, these forms of authentication aren’t new though. Fingerprint scans have been used in the United States and other countries as a way to pay for over a decade, and if you own a smartphone you’re probably already familiar with using your fingerprint as a form of security.
Why are biometric payments being implemented?
Simply put, biometrics payments could improve the current payment system in two ways: security and convenience.
As credit card use has become more and more popular in Australia, so too has the prevalence of credit card fraud. In fact, figures from the Australian Payments Network revealed that ‘card not present’ fraud - generally fraud which is conducted online or over the phone - cost Australians $417.6 million in 2016. So as card use becomes more and more popular, increased security will be a necessity to ensure that Australians remain secure in their card use - and biometric authentication is likely to play a large part in that.
Because of the unique characteristics and accessibility of the features of your body (you’re unlikely to be travelling anywhere without your fingerprints right?), payments which encompass biometrics as either a partial or full form of security could be ideal for protection against fraud and scams.
With the potential future elimination of pins and passcodes altogether when making payments, the introduction of biometric authentication could also prove to make payments more convenient for consumers. Unlike learning a pin or password, Aussies would simply need to swipe their finger or (as funny as it sounds) smile for a selfie!
How would they work?
There are two ways biometric authentication could be implemented into the existing payment matrix - either as part of a two-step (also known as two-factor) verification security process in combination with an existing pin or passcode, or as a standalone form of security - a straight up replacement for pins and passcodes.
Currently, the consensus around biometric authentication is that it will be integrated as part of mobile wallet technology. Currently nowhere near as popular as cash or cards as a payment option, mobile wallets - which are essentially apps for your smartphone which allow you to make contactless payments at a point of sale (POS) - are slowly gaining traction among Australian technophiles.
Many smartphone users may already be aware of their option to pay using a mobile wallet, with an increasing number of Australian banks and financial institutions offering services such as Apple Pay, Samsung Pay and Android Pay. For a more extensive overview and list of providers who offer these services, check out our handy guide to paying with your smartphone.
Who will provide biometric payments in Australia?
The drive to implement biometric payments is currently being led by financial services giants like Visa, Mastercard and American Express, rather than individual banks or providers. In fact, both Visa and Mastercard made announcements in 2017 about the future implementation of biometrics as a form of payment in Australia.
In December 2017, Visa announced that Australian shoppers could expect to be able to use their fingerprints or face as a form of payment authentication some time in 2018. The company allegedly informed banks and other providers that customers who use a mobile wallet to pay would no longer need to use a pin for purchases over $100, instead being able to use biometric authentication.
"Five years ago, the idea that entering a PIN could become a rare experience would have been almost unbelievable," said Joe Cunningham, Visa Asia Pacific Head of Risk, at the time. “How we pay is changing fundamentally and security needs to move at the same speed. Biometrics are a crucial part of that future.”
Earlier in 2017, Mastercard put forward its own idea for biometric authentication called Mastercard Identity Check - also known as ‘selfie pay’. Using a smartphone app, Mastercard customers would be able to verify their identity and thus pay securely via facial recognition or a fingerprint scan. The system would act as a part of a two-factor form of verification, so consumers would still need to hang on to their pins or passcodes.
However, a recent report has indicated that Mastercard Australia’s counterparts in the United Kingdom are set to launch a payment security system entirely based on biometrics which would be released in the UK as early as May, 2019. The system, called Mastercard Identity Check Mobile, would ditch pins and passwords altogether, with customers simply able to use a fingerprint scan or facial recognition (via a selfie) to authenticate their payments.
“Biometric technologies perfectly meet the public’s expectation for state-of-the-art security when making a payment,” said Mark Barnett, president of Mastercard UK and Ireland. “This will be of great benefit to everyone: consumers, retailers and banks. It will make the purchase much smoother, and instead of having to remember passwords to authenticate, shoppers will have the chance to use a fingerprint or a picture of themselves.”
Are there any concerns?
As with many types of emerging technology, one of the major concerns about biometric authentication is the privacy of individuals. While the technology is expected to increase the security of customer payments and prevent things like card fraud, critics have raised questions about the ability of banks and providers to keep their customers details safe.
Rather than storing the actual details of an individual - such as a fingerprint or facial scan - in a database, providers are instead expected to keep an encrypted number in their records which will be generated from the measurements of a fingerprint or facial scan.
Will pins and passcodes be eliminated altogether?
For fans of the good old pin, there’s certainly some uncertainty about whether passcodes of any sort will remain a fixture of payment security in the future. As Mastercard has shown in both of its ‘Identity Check’ proposals in Australia and the United Kingdom, biometric authentication can either be used in conjunction with a passcode or pin as a form of two factor verification, or as a complete replacement.
If Mastercard’s trials of their new ‘Identity Check Mobile’ system are any indicator though, biometric payments could become a seriously popular option sometime soon, with the company reporting that participants in its European trial preferred it to the current system of pins and passcodes.