Biometrics – The Future (Again) of Payments

During the mid-2000’s start-up companies such as Pay by Touch and BioPay were piloting biometric payment platforms through gas station chains and grocery stores in the US.  At its height, Pay by Touch had several million users before the company crashed due to management problems.  The knock on biometrics as a payment vehicle has always been privacy concerns and the Big Brother mentality, which many attribute to the lower than expected adoption rates initially, and why biometrics has not caught on since.  I would argue that a bigger reason for low adoption has to do with the lack of scale and vision when it comes to the go to market strategy to drive people to use this channel.  Historically, providers of biometric payment terminals have targeted store chains as the guinea pigs for this technology, allowing consumers to only use biometric payments at certain individual locations.  This alone destroyed one of the main adoption factors needed to gain the critical mass required, which is convenience.  Why would anyone adopt biometrics as a payment vehicle if it can only be used at a single location, while still having to use traditional plastic cards at other locations?  This approach did not provide any opportunity for the consumer to truly embark on a device free payment experience. 

Interestingly enough, biometric technology is again being discussed as the potential future of payments globally.  Countries, including India and South Africa, are embarking on sweeping changes to bring forward biometric payments, with banks and MasterCard leading the way.  In Japan, many ATMs now have biometric readers in addition to, or in place of, an ATM card due to the higher levels of security inherent with biometrics.  With fingerprint and retina scanners becoming more readily available technology, especially on mobile phones and laptops, the convenience factor for biometric payments can easily extend beyond the physical point of sale terminals to include virtual payments as well.

Many payments companies are innovating with other newer technology to enhance the consumer experience at the point of sale.  Currently, two platforms are leading the way in changing the payments landscape, Chip Technology and Near Field Communication.  Both methods incorporate cell phones as the payment device, which many are saying will lead to high early adoption rates given the ever-rising usage of cell phones in the US.  Cell phones as the payment vehicle also provides the opportunity to incorporate additional value add features such as location and promotional services, which may further accelerate consumer adoption.

There are two potential innovations to pursue, a mobile payments path focused on enhanced customer experience and the security and true convenience of biometric payments.  At the end of the day, convenience and security remain key attributes and drivers of adoption and success.  Even though mobile payments are a necessary step, and one with a greater chance of high adoption in the short term, the payments industry should also prepare for other alternative payment methods, such as biometrics, as a truly transformational trigger focused on enhanced security and convenience.

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