Biometric Payments for Dummies

Biometric Payments is in fact not a new technology, it has been in the payments market for years and years already! No worries people, it blew my mind as well after some documentation struggling. With this post I hope to give you all an overview of what I am talking about.

For those who are not familiar with biometric payments, I hope this gives you the understanding to be able to discuss this topic with collegues. And for those who are familiar with it, please correct me where I am wrong or complete the discussion with your experiences or knowledge.
 

What is biometrics?

In my first blog I gave a definition of biometric payments, but in this post I would like to go a little deeper, starting with a definition of Biometrics.

Biometrics is “the study of unchanging measurable biological characteristics that are unique to each individual- such as fingerprints or irises. Biometrics can be implemented by: companies, governments, military, border control, hospitals, bank etc. To either verify a person’s identity for something or to identify individuals to record information about them such as with criminals, for example”.

Of course not all of these biometric options are to be used for identification, they need to be susceptible the the following characteristics: reliable, unique, collectable, convenient, longevity, universal and acceptable.

The most common solutions are indeed fingerprint and hand readers, iris scanners and voice recognition.

Biometrics will most commonly be used for two purposes:

• Verification purpose: the system compares the person’s identifty with the captured biometric data.  You identify yourself with a card for example and instead of giving your PIN-code you just give your fingerprint
•  Indentification purpose: the system recognises you by your biometric id. and you can login for example.

 And biometric payments is...

Now let's go back to the definition I gave in my first post: “a biometric payments is a point of sale (POS) technology that uses biometric authentication to identify the user and authorize the deduction of funds from a bank account. Fingerprint payment, based on fingerscanning, is the most common biometric payment method. Often, the system uses two-factor authentication, in which the finger scan takes the place of the card swipe and the user types in a PIN (personal ID number) as usual.”

Simply said: a consumer pays with the touch of his finger on a fingerprint scanner. This can be compared to a consumer using his credit (or debit) card to make a payment, at least from a customer point of view (the technology behind it could be totally different). However, biometric payment tend to be much faster (Pay-by-Touch and Biopay claimed the end-to-end transaction processing took about  5 to 15 seconds) and much cheaper (because they are treated as an automated clearinghouse debit).

It could also be used as an extra security measure if a bank decides to combine it with a PIN-code at ATMs for example, or a replacement of your whole wallet (ID-cards, credit and debit card maybe even driver's licence, if only technology would be that far). No more worries of loosing your credit cards or bank account info, since it is all collected in one fingerprint!

Biometric payments back to the future

Biometric payments is not a new concept at all. Already in a mid- to late ‘90s the first biometric pilots were launched (that means biometric payments exists almost as long a the commercialized mobile phone!)... The programs failed unfortunately.

The first succesful project was in South Africa in 1996 where fingerprint scanning was implemented on ATMs. From the moment Standard Bank tried to standardise it, fingerprint scanning failed after all.

Bank United tried tried biometric in 2001 using iris scans at ATMs, but an aquisition made an end to that project.

Several projects like that passed the history of biometric payments.

Again, the best business on biometric payments seems be done in developing countries: South Africa, Colombia, Nepal...

In Colombia farmers are paid for their coffee beans on an account, instead of giving them cash. Since people in Colombia are accustomed to using fingerprints (they have it on their ID-card as well) they don’t ask themselve the ‘big-brother-watching’ idea.
South Africa is, in general, one of the most progressive adaptor of biometric, so no wonder also biometric payments are more popular there than elsewhere. As in Colombia this has mainly to do with the fact that they’re comfortable with biometric technology, government was promoting it already in the early ‘90s.

However, it is not only developing countries of course. Let us take  some examples out of the United States: Wal-Mart and Costo for example are investigation whether or not to start with biometric payments. Their biggest motive is probably the lower transaction-processing fees (clients don’t use debit or creditcards anymore), others are a higher security, faster checkout etc...

In the States it seems more common then I expected:  Pay-by-Touch pushed the biometric technology in the market already in the ‘90s. After their bankruptcy other providers took over (like Indivos Inc. for example) with more supermarkets and grocery stores investigation the advantages of biometric payments. Even Shell has been piloting already with the Pay-by-Touch technology.

Next time we go further with this with some thoughts why this might or will not work in Europe (that where I will also take into account all received comments on biometrics so far, like the ones from my last post on Finextra). Why did all those projects fails in the United States? Is there a future with biometric payments, when might we expect this to boom? I am not sure I will be able to find all the answers, so every help is welcome of course.

I just hope to be able to get all the biometric payments together in case one day there are other people like me, interested in biometric payments but not really knowing where to go for all this information.

I hope it was (and will be) as usefull and interesting for you, as it was for me.