• James Stickland , CEO at Veridium


• 15.02.2018 09:15 am
undisclosed

We’re all aware of how readily available biometrics are by this point. If you aren’t approving that purchase of a cup of coffee you just made with Face ID you probably unlocked your smartphone with a fingerprint, or use that fingerprint to log into your banking app. But consumers aren’t the only ones with their eye on biometrics as a convenient way to secure access to the things they consider important. Many financial institutions and governments have already embraced biometric authentication as the standard for verifying the identity of customers opening accounts, requesting services, and making payments.

And we’re not just talking about purchasing cups of coffee either.

Goodbye Chip & PIN

It seems like just a year ago that we were heralding the benefits of Chip & PIN for securing our card-based transactions. But by the end of 2017, we saw statistics that financial fraud has actually risen since this technology was introduced in some areas. And now, some nations like India and China are already moving away from Chip & PIN in favor of mobile biometric authentication.

How this works is, whenever you may a purchase, your card issuer can send a push notification to your smartphone requesting authentication. You scan your fingerprint, face, or whichever biometric you prefer, and it’s authenticated. This works seamlessly when using a mobile wallet, but seems trickier when using a card to make a purchase. It requires a POS system update and a robust back-end to communicate quickly with the shopper’s device and back. And yet, in India the view is every payment should be mobile authenticated by the end of next year.

Both the ease with which purchases can be made with mobile wallets and the requirement to upgrade POS systems to continue supporting purchases made with cards highlight a key opportunity here to eliminate the need for plastic entirely.

India Leading the Way for Mobile Payments

India is setting a star example for proximity mobile payments currently, with 30 percent of smartphone users expected to pay for goods with their smartphone, rather than a card, in 2018. This, combined with the push to embrace QR codes as the primary mode for digital payments, is expected to drive the Indian digital payments industry to grow to $500 billion USD by 2020. The Indian government is furthering these efforts by creating a policy environment to make digital transactions easier, issuing licenses for payments banks that will help fintech firms launch digital wallets and digital-only banking services.

Paired with the Aadhaar project, this trend puts India at the forefront of secure biometric authenticated mobile payments.

China Moving Beyond Cash & Cards

What India is beginning to do, however, urban China has already accomplished. Walking through shops or dining out, staff will ask if you’re paying with WeChat or Alipay before they even mention cash or cards. Mobile payments and digital wallets have become a way of life in China, driven by availability of technology. Even street musicians can be seen with QR codes for those passing by to scan and give them a tip.

In fact, the two companies driving the majority of mobile payments in China, Ant Financial (Alipay) and Tencent (WeChat), are expected tosurpass Visa and MasterCard in total global transactions this year.

The massive abandonment of cash and cards throughout urban China has put the Chinese on the cutting-edge of mobile payments and biometric authentication isn’t far behind. Alipay users authenticate payments with facial recognition, and WeChat uses fingerprints.

Europe Isn’t Far Behind

The trend isn’t isolated to Asian countries either. Sweden has been leading the mobile payment revolution as well, reported to be leading the race to being a “cashless society” as far back as 2015. Unsurprising, as Sweden was also the first European nation to introduce bank notes.

The nation has been driving the migration to cards, and now mobile payments for years, eliminating cash from shopping, public transit, and more. In fact, the majority of banks in Sweden simply stopped keeping cash on hand or accepting cash deposits, as there was no demand for it. This is in part because the banks have teamed up to provide Swede’s with mobile payments in a joint app called Swish. Since, over half the Swedish population has adopted the app, many using it exclusively.

Of course, the technology that’s helping drive adoption and secure payments – biometrics.

But Where’s the United States?

The one question we should be asking in all of this is where is the United States? The US was slow to embrace Chip & PIN, so perhaps it shouldn’t be a surprise that it’s only now adopting it as other nations are already replacing it with mobile payments authenticated with biometrics. Why, though, has the US been so hellbent on remaining behind the times? It isn’t regulatory – the EU has already begun adopting strong regulations to protect consumer privacy that the US could adapt for its own needs. Perhaps it’s because other financial challenges, such as reducing money laundering, come first? Or perhaps it’s a mistrust in the technology that has been key to securing this trend in other nations – biometrics.

As the mobile payments wave continues to sweep from east to west, the United States might just be the last bastion of cash and plastic payments, but luckily, the rest of the world is already setting global standards for adoption, deployment, security, and privacy that the US will be able to adapt and, hopefully, improve upon.