Payments

11:15 AM
Paul Schaus
Paul Schaus
Commentary
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Biometrics: Mobile Paymentsí Secret Weapon

Why biometrics will be the key to mobile payments adoption.

How long does it take a consumer to swipe their credit card at the point of sale? Two seconds? Five seconds?

How long does it take a consumer to enter their password into their mobile phone to make the same payment at the point of sale?

Actually the answer doesn’t matter -- not unless the time it takes to use a mobile payment app is less than the time it takes to swipe a piece of plastic.

Until making a mobile payment becomes faster than using a credit card, mobile payments will be stuck in low gear. And the key to making mobile payments fast is to use biometrics to solve the authentication problem and eliminate the need for consumers to enter a password. Widespread adoption of biometrics -- whether its face, fingerprints, hand geometry, handwriting, iris, retinal, vein, or voice -- is the tipping point for mobile payments.

[For more from CCG Catalyst's Paul Schaus, check out: Developing a Stronger IT Governance Process]

We often think of biometrics as being leading technology, but in fact, biometrics has been around since 1858 when Sir William Herschel used handprints to identify Civil Service of India employees from others who might claim to be employees on payday. And consumers are becoming more comfortable with biometrics in the form of voice and fingerprints. Research firm Frost and Sullivan estimates that the number of global biometrics smartphone users will reach 471.11 million in 2017.

Not all types biometrics will enjoy widespread adoption. For example, it’s unlikely that consumers will adopt retinal scanning. Consumers are happy to swipe a finger or two or speak to their mobile device; fewer would be comfortable looking into a retinal scanner—even if the scanner doesn’t actually touch their eye.

Thing is, consumers want to use their mobile device for payments. According to Pew Research, 90% of U.S. adults have a mobile phone, 58% have smartphones and 42% have tablets. An Accenture survey revealed that 71% of in-store shoppers are interested in paying by mobile phone but only 9% of retailers have mobile wallet capabilities. Even though users must access and log in to the Starbucks payment app, the coffee titan reports that 15% of its in-store transactions in the U.S. are mobile payments.

The banking industry is experimenting with biometrics and payments. In February, U.S. Bank announced that employees are piloting software that allows them to use their voice to login and access a credit card account on a mobile device.

Barclays recently announced the Barclay’s Biometric Reader for its corporate banking customers in the U.K. beginning in 2015. The reader uses Finger Vein Authentication Technology (VeinID) from Hitachi to allow users to scan their finger to authorize payments and access online accounts. Apparently, vein patterns are more difficult to spoof than even fingerprints.

Along with the launch of iPhone 6, Apple announced Apple Pay which uses near-field communication (NFC) and Touch ID, a fingerprint sensor to authenticate purchases. Users can enroll multiple fingerprints. Credit card information will be stored in the iPhone’s PassBook app. On the heels of the Apple Pay unveiling, U.S. Bank announced that U.S. Bank consumer credit and debit cards will be integrated into to the iPhone 6, 6 Plus, and Apple Watch. U.S. Bank expects to launch the service later in the fall.

By 2019, Frost and Sullivan predict that biometrics will be considered a mature technology that will naturally migrate to mobile devices.

I don’t think it’s going to take until 2019. The mobile device has accelerated the rate of technological acceptance. Within two years, biometrics will be mainstream and that’s when mobile payments will catch fire. Adoption of mobile payments will be much faster than the adoption of online banking and bill pay. Mobile payments just needs a push, and that push is biometrics.

Paul Schaus is the president, CEO and founder of CCG Catalyst, a bank consulting firm providing strategic direction for banks. He leads a team of banking subject matter experts across North America. In addition to maintaining the firm's traditional consulting of business and ... View Full Bio

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HAnatomi
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HAnatomi,
User Rank: Apprentice
10/20/2014 | 9:29:01 PM
Re: FALSE SENSE OF SECURITY
Talking about security and experience is one thing.  Talking about a false sense of security or experience is another.  It would be fine if we are told that the convenience is thus raised, though at the price of lowered security.  It does not make a false sense of security.  But it would make a false sense of security if we are that the security is also raised.  Apple and others who offer biometric sensors are expected to do something about this.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
10/20/2014 | 10:50:51 AM
Re: FALSE SENSE OF SECURITY
That definitely is an issue. I've heard people talk about that with EMV Chip-and-PIN payments cards -- if you forgot your PIN they can still override it for you, eliminating that second authentication. But I think most people in the industry feel that that is necessary sometimes for the sake of the customer experience. They don't want to make it impossible to make a payment if one of the two factors doesn't work.
Nathan Golia
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Nathan Golia,
User Rank: Author
10/19/2014 | 10:58:54 PM
Re: fingerprints for payments
I don't know. My wife's fingerprint iPhone lock went south within a month of her buying the phone. Back to password unlock. Unfortunately components like this that depend on high sensitivity are going to be provided by low bidders and one could see the consumer experience falter after a while.
HAnatomi
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HAnatomi,
User Rank: Apprentice
10/10/2014 | 11:12:26 PM
FALSE SENSE OF SECURITY
Biometrics can theoretically be operated together with passwords in two ways, (1) by AND/conjunction or (2) by OR/disjunction.  I would appreciate to hear if someone knows of a biometric product operated by (1).  The users of such products must have been notified that, when falsely rejected by the biometric sensor with the devices finally locked, they would have to see the device reset.  It is the same with the biometrics operated without passwords altogether.

 Biometric products like Apple's Touch ID are generally operated by (2) so that users can unlock the devices by passwords when falsely rejected by the biometric sensors.  This means that the overall vulnerability of the product is the sum of the vulnerability of biometrics (x) and that of a password (y).  The sum (x + y - xy) is necessarily larger than the vulnerability of a password (y), say, the devices with Touch ID and other biometric sensors are less secure than the devices protected only by a password.

 It is very worrying to see so many ICT people being indifferent to the difference between AND/conjunction and OR/disjunction when talking about "using two factors together".
KBurger
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KBurger,
User Rank: Author
10/9/2014 | 2:22:50 PM
Re: Obstacles?
I agree, it's already been noted that just because Apple is Apple and iPhone is iPhone, that will get lots of people interested in mobile payments who never paid attention before. The same no doubt will be true about biometrics security.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
10/9/2014 | 1:44:52 PM
Re: Obstacles?
I heard recently that there's already been 10 million orders for iPhone 6's. So I think that people are going to be learning through experience at this point. That's a lot of people walking around with biometric-capable phones.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
10/9/2014 | 1:43:02 PM
Re: fingerprints for payments
Thank you for the comment. That's definitely a key problem that has to be worked out for biometrics and mobile payments to succeed. There's so much interest in biometrics right now, and so much investment, because of the increasing dangers around cyber security right now. I have to think that with all of that effort and investment that biometric readers are growing much more refined in their ability to successfully authenticate someone.
KBurger
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KBurger,
User Rank: Author
10/9/2014 | 1:35:39 PM
Obstacles?
Wow, this seems so obvious and simple -- compelling argument, Paul. But I wonder -- why hasn't this happened sooner? Has the biometric technology simply not been advanced enough? Is it about cost, or standards? Also, although you cite persuasive statistics about the consumer interest in mobile payments, will there be an educational factor around adoption of biometrics? Will consumers need to be persuaded it's not just easier, but also safe -- and potentially safer than card transactions/security?
lwood321
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lwood321,
User Rank: Apprentice
10/9/2014 | 12:58:11 PM
Re: fingerprints for payments
As usual Mr. Schaus is 100% correct.  The reliablity of this technology is proven tens of thousands of times daily and has been for the last 15 years at our local proving grounds known as "The House of Mouse." Now THAT is a real-world test!  If the finger is scanned properly and the software allows the opportunity for multiple positions (as the Iphone does), I am confident in this technology.  Those who are concerned should be careful not to think yesterday's technology compares to today's (and today's is just the beginning). 
pbug
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pbug,
User Rank: Moderator
10/9/2014 | 12:30:03 PM
fingerprints for payments
I use a fingerprint scanner for clocking in at the volunteer ambulance corp that I'm part of.  It does sort of work, sometimes.  Today my thumb works, tomorrow a different finger works, next day none of them work.  If we didn't have a key fob backup half the time we'd never be able to clock in.  Sure, fingerprint readers and scanners have improved over the last few decades (I first encountered one around 1979) but people present their finger tips differently every single time they scan, thus making them far from highly reliable.  Imagine the line at a checkout while people make numerous attempts to scan!
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