As the retail and banking industries continue to migrate away from traditional magnetic strip payment cards to chip-enabled credit and debit cards as part of an effort to increase the security of retail transactions, the growing use of mobile payments has thrown yet another wrinkle into the mix.
One of the primary reasons why mobile payments are viewed as being more secure than card-based transactions is that they leverage biometric authentication as a means of verifying the identity of the consumer. With Apple Pay, for example, the user simply places their finger on their iPhone when they are near a contactless reader to confirm a payment.
According to a recent report from Tractica, shipments of onboard fingerprint readers in mobiles devices is expected to surpass one billion units annually by 2021, representing 34 percent of all smartphone and tablet shipments worldwide that year. Those figures are expected to be even higher in some regions. In North America, 51 percent of all mobile devices will include fingerprint sensors by 2021, the research firm said.
While mobile payments have launched a new era of convenience in shopping, Ralph Dangelmaier, CEO of BlueSnap, a payment gateway and provider of other e-commerce tools, said that mobile payments and the role that biometrics play in them have also created a lot of confusion in the marketplace among consumers.
“People either really seem to embrace biometrics… or their reaction is, ‘Oh my God, my fingerprint doesn’t work.’ It’s not like you can reset your fingerprint, so the whole phone resets and people get freaked out about that,” said Dangelmaier. “You really get three different flavors (with biometric payment users); you get just complete misunderstanding; another flavor would be, ‘I just love this, it is the greatest thing ever,’ because they can just tap their finger and go; and then you have people that are just completely scared of it.”
On the positive side, Dangelmaier said that biometric payments make transactions more seamless and the use of a fingerprint does it make it more secure than the old swipe-and-sign method with payment cards. With that being said, Dangelmaier said that criminals can still break into most smartphones because they all still leverage passcodes in addition to biometric authentication.
“If I use biometrics on Apple Pay, I still have a passcode. If use biometrics on American Express, I still have a passcode, so people think that they are protected, but in reality somebody could still get your passcode,” explained Dangelmaier. “People also complain about the setup. Some people just don’t have a strong fingerprint… or it just takes a long time to get setup with it.”
Although it is not all that common a concern, Dangelmaier said some people even fear thieves would resort to cutting off their fingers or pulling out their eyeballs if they have these types of biometric security measures on their phones. Other people feel that biometric authentication for payments is unnecessary as long as their information remains encrypted.
While biometric payments are relatively new, Dangelmaier said that the infrastructure is already in place to support them on a broad scale.
“You can go into Whole Foods and use your fingerprint to initiate your American Express card and pay using your iPhone and PayPal just came out with a one-touch payment as well, so I think it is coming to the stores now,” he added. “I think we’ve got a couple of things going on. If you look at all of commerce, it’s about a $25 trillion market. E-commerce is only about $1.7 trillion of that $25 trillion and mobile is only about 10 percent of (e-commerce), so mobile is really tiny and biometrics is only a couple of percent of that. We’re really, really early in this whole thing.”
Over the next 10 years, Dangelmaier believes that biometrics is going to become a more normal part of everyday retail transactions and it will likely encompass more than just mobile phones.
“It could be a wrist band… or anything really. I really think that the fingerprint, one-touch payment is going to be a big hit,” concluded Dangelmaier. “People are going to be in lines and instead of signing, they’re just going to put their fingerprint down. I think that will replace PIN-and-signature at some point and you could even argue that it is more secure from a merchant’s point-of-view.”
