From card issuers to retailers: how biometric smart cards benefit the entire payments ecosystem

From card issuers to retailers: how biometric smart cards benefit the entire payments ecosystem

David Orme

Senior Vice President at IDEX Biometrics ASA

Views 854

From card issuers to retailers: how biometric smart cards benefit the entire payments ecosystem

06.12.2019 09:30 am

With the roll-out of biometric fingerprint authentication smart cards, consumers will soon be able to make payments feeling more confident about the heightened security their new cards will offer. However, it’s not just consumers that stand to benefit from this advanced technology. Biometric payment cards will impact the entire ecosystem - from payment networks, smart card and secure Integrated Circuit (IC) vendors, through to biometric sensor manufacturers, retailers and merchants.

To make biometric payments a success though, each participant needs to fulfil its role effectively to ensure the next stage in the process can do the same. Every element of the ecosystem must interact and work seamlessly together, with common development and delivery goals of biometric payment cards driving the market to where it is today.

So, this brings us to the question of how biometric payment cards can benefit each of the key players in the ecosystem.

Smart card vendors: The biometric payment card is a high value proposition, which will help card vendors improve margins in a market where traditional payment card Average Selling Prices (ASPs) continue to suffer, resulting in year-on-year heavy ASP degradation.

In addition to payment cards the majority of smart card vendors also have expertise in other areas of biometric applications, for example in government identities, border control and national ID programs. From a security perspective, existing expertise in providing a secure environment from which card data can be stored and securely transacted is a huge bonus, when it comes to ensuring the right biometric payment card support is put in place.

Secure IC vendors: This group plays a key role at the beginning of the biometric value chain, supplying the required smart card chipsets used across a variety of applications. In fact, payment cards are one of the largest secure IC markets.

Much like smart card vendors, secure IC vendors are well versed within the payment cards market, with expertise in the supply of payment network-certified solutions that meet the Europay, Mastercard, Visa (EMV) standard. With vendor consolidation rife in the chipset market over the last few years, this presents an opportunity for leading secure IC players to take advantage of the next volume wave.

Issuers, banks and financial institutions: In contrast to secure IC vendors, banks, issuers, and financial institutions are at the end of the supply chain - issuing and personalising payment cards to a global customer base. However, the rising wave of fintechs and challenger banks is forcing traditional banks to focus on product and service differentiation as they try to compete against more agile entities and retain brand loyalty.

The biometric payment card is one potential solution for customer retention. Not only does it provide product and brand differentiation, but an improved, secure payment option – which is fast becoming a consumer must-have. In fact, recent research by IDEX Biometrics ASA found that more than three-in-five (63%) UK consumers are worried that their contactless payment cards could be used fraudulently. Notably, nearly half (49%) of consumers state they would actually feel more secure if they were able to use their fingerprint and PIN to authenticate transactions via their payment card. This suggests that consumers would be much more confident about contactless payments if their bank card was protected by biometric authentication, such as a fingerprint scan, and not just a PIN as the verification method.

Payment networks: At the centre of the entire ecosystem are the payment networks themselves. They hold a unique position, interacting with all players in the chain. Branded cards make payment networks a household name from a consumer perspective. This, in turn, means they have a central role to play in the development and certification of payment cards and standards to address security. In addition, payments are processed and authenticated over their networks, which means they are liable for any fraudulent transaction.

Consequently, security is of paramount importance to this group. It is in their interest to reduce fraudulent payment activity to lower liability-related costs. This will also help to gain and retain consumer trust, which is imperative to the livelihood of payment networks as they take a cut from all transactions made through them.

Retailers and merchants: Retailers and merchants are at the receiving end of the biometric payment card process, as the digital payment authentication technology. The biometric payment card has been designed to work with existing contact and contactless POS terminals, meaning retailers and merchants can reap the rewards without having to upgrade their existing POS infrastructure.

The growth and acceptance of contactless payments has increased these forms of transactions in the last decade. However, the majority of payment networks, have a maximum transaction limit, typically in the £30 range. Adding another level of multi-factor authentication (MFA) to this type of transaction, opens the opportunity to remove these spending caps though. This will help merchants and retailers to provide customers with more convenient and secure shopping experiences for all levels of spend.

For each transaction made via a POS portal, a fee has to be paid by the merchant which is typically split into 3/4 segments, with a proportion going to the payment network including processors, acquirers, and issuing banks. The risk of payment fraud is also added to transaction fees by the payment networks. Improvements to payment card security through innovative biometric means, should translate to lower-risk transactions and in turn, reduce these associated transaction fees, helping merchants improve revenue margins.

To fully realise the true benefits of biometric fingerprint payment cards for everyone in the ecosystem, all players need to support and promote the education of the market. By doing so we are more likely to gain consumer trust and encourage adoption while delivering a safer, more convenient payment experience to the end consumer.

Latest blogs

Olivia Marcey BlackLine

Artificial Intelligence: What Tasks Can Self-Learning Systems Really Perform For Finance?

Go to wherever you listen to your podcasts. Type in “artificial intelligence.” Fall down the rabbit hole. There’s a ton of hype around AI—some of it sensationalist, some of it dark, and some of it downright terrifying. But, while podcasters, Read more »

Matthew Phillips Diebold Nixdorf

Are We Building The Right Foundations For Banking Innovation?

The future of banking could be closer than we think. As the industry continues to build the bridges between the financial services of today and the financial services of tomorrow, the pockets of innovation coming to the fore are impressive. From AI Read more »

Dr Bimal Roy Bhanu Ai XPRT

Are you keeping up with the Regulator?

Not many things in life are certain, but in the financial services industry it’s obvious to all participants that regulators are continually tightening the national and international governance, risk and compliance requirements. The ultimate aim for Read more »

Quinn Perrott TRAction

EMIR Refit - so what’s new?

Last year, the European Commission published a series of amendments to the European Markets Infrastructure Regulation (“EMIR”). Read more »

Christian Ball GFT Group

Cloud And The Open Banking Opportunity

Although open banking has legislative origins - and is compulsory in some countries - it is also a major catalyst to bank transformation. In addition to the opportunity to generate new revenue streams, improve services and attract new customers, Read more »

Related Blogs

Thomas Rex Fingerprints

Are biometrics pointing to opportunities for banks?

Innovation comes in many forms. It makes the world around us look better, work faster and be more useful for companies, consumers and communities. Biometric technology has been around now for some time, but recent technological developments are Read more »

Lina Andolf-Orup Fingerprints

Fingerprint On The Pulse: Biometrics On The Move In More Places Than One

We may be halfway through 2019, but as the year hurtles onwards, it’s important to pause and reflect on the latest and greatest news from Q2. With milestones surpassed – and fading into the distance – coupled with the ongoing adoption of biometrics Read more »

Lina Andolf-Orup Fingerprints

Finger on the pulse! 2019’s big biometric news so far…

It’s already Q2! It has been a momentous few months for biometrics, so it’s not surprising the year is passing so quickly. New products launched, new milestones reached, and new market trials initiated. Biometrics is expanding and advancing rapidly Read more »

Hakan Nordfjell Gemalto UK

Integration of Biometric Technology Into Consumers Daily Lives

It’s encouraging to see more conversations take place around the role biometric sensors can play in authentication. Increased consumer demand for these services highlights the potential this technology has. With most of us having to remember an Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel