Biometric payments involve authentication through biological characteristics. It verifies a person’s identity using fingerprints, facial recognition, or iris scans before payment processing. These features are unique to every individual and thus enable secure payment transactions. This payment method is used by various industries globally. In 2023, the global biometric payment market reportedly stood at USD 8.53 billion. It is expected to reach USD 34.71 billion by 2032, growing at a CAGR of 17%.
How did this unique payment method emerge? How many types of biometric payment methods exist? What are its advantages? Are there any challenges associated with it? Will businesses continue to adopt it in the future? Read on to find out more about biometric payments.
The Origins and Growth of Biometric Payment Technology
Modern biometric payment technology was introduced in the early 2000s. Pay By Touch was among the first payment systems to introduce biometric payment methods. It facilitated payment transactions using fingerprints. However, the method remained restricted to government and institutional use.
Biometric authentication garnered attention in 2013 when Apple added the Touch ID feature to its iPhone 5S. It allowed users to unlock their phones swiftly and make payments using their face or fingerprint scans. This technology has become an integral part of smartphones and is used to authenticate app logins, payments, and device access. The use of biometric smart cards and payment systems is also on the rise.
Real-World Applications of Biometric Payments
Biometric payment methods are used for:
- Banking Transactions: Many banks have enabled account access and payment authorisation through biometrics. Biometric smart cards, which use fingerprint sensors to authenticate transactions, are also being introduced.
- Retail Transactions: Several businesses have integrated biometrics into online and in-store transactions. Customers can easily use identifiers such as fingerprints or iris scans to authenticate retail payment transactions.
- Government Sector: The government uses this payment method to ensure that welfare benefits are distributed to the right people.
- Digital Wallets: The new age payment wallets are also embedded with biometric authentication to enable quick transactions.
- Healthcare Industry: Biometric authentication allows hospitals, clinics, and other healthcare facilities to enhance the security of their patients’ medical records. It ensures that patients’ confidential medical information can be accessed only by authorised personnel.
- Offices: Many offices allow entry only with biometric authentication to enhance security. The technology is also used to mark employee attendance accurately.
Exploring the Different Kinds of Biometric Authentication
Here is a look at the different kinds of biometric authentication:
- Fingerprint Recognition: This is one of the oldest and most widely used biometric authentication methods. It scans the unique patterns on a person’s fingers before authorising a transaction. It is commonly used in smartphones and security systems to verify the user’s identity with a single touch.
- Facial Recognition: Facial recognition is gaining momentum. It is mostly used for unlocking phones and authenticating people’s identities at airport security checks. The technology scans a person’s facial features, such as the shape of their eyes, jawline, etc., and compares them with their stored image.
- Iris Recognition: The coloured part of the eye is scanned to identify a person and process payments, and enable access. It is used in places that require stringent security measures. Every iris pattern is unique and stays the same throughout a person’s lifetime.
- Voice Recognition: It analyses a person’s tone, pitch, and speed. Each person’s voice has unique patterns that the system learns to identify. It is used in mobile banking services and customer service systems to verify a user’s identity. However, it is still not widely used.
The Surge in Biometric Payments
The popularity of biometric payments is increasing with more industries adopting this secure payment method. While businesses can strengthen their security by inculcating this unique payment method, customers enjoy the convenience of using it. It is easier to use biometrics than keying in PINs and passwords or using signatures. It is also more accurate for authorisation, which is why there has been a surge in its use, especially at banks and government facilities.
The popularity of biometric payments can also be attributed to smartphone integration. Because of this integration, customers have become familiar with its use and thus accept this payment method.
Key Advantages of Using Biometric Payment Systems
Biometric payment systems offer various benefits. Here is a quick look at the key advantages they offer:
1. Offers Speed and Convenience
One of the main benefits of biometric payments is that they speed up the checkout process. Customers do not have to enter their passwords manually and complete other authentication formalities; the payment can be authenticated with just one touch.
2. Lowers the Risk of Fraud
Using this technology can lower the possibility of fraudulent transactions, as stealing or copying biometrics is difficult.
3. Enhances Customer Experience
The system enhances customer satisfaction because of speed and accuracy. This can lead to an increase in your sales.
4. Simplifies Global Transactions
It simplifies global financial transactions by removing the need for language-based inputs as it uses unique physical features for identification.
5. Gives Competitive Edge
Biometric payment technology is still picking up. Not many businesses have adopted it yet. You can get an edge over your competitors by offering this payment method.
Limitations and Concerns with Biometric Payment Systems
Though biometric payments are beneficial, they possess their own set of challenges as follows:
1. Privacy Concerns
Biometric data must be stored and managed with utmost caution. Strict measures must be taken to protect this data. Businesses should comply with the standard data protection regulations to ensure the safety of the user information.
2. Hesitation to Use
Many users still hesitate to use this payment method because of the privacy concerns it raises. They are sceptical about the protection and use of their personal data.
3. Set Up Cost
Businesses require spending a substantial amount to set up biometric payment systems. In addition to investing money in procuring hardware and software systems, they must pay to integrate the systems into their payment infrastructures.
4. Changing Technology
Biometric systems constantly evolve with newer technologies to strengthen security and functionality. Businesses require updating their systems regularly. This involves investing time and money.
5. Regulatory Challenges
As this payment method evolves with the changing technology, its regulatory norms are amended, with newer clauses added. This is done to strengthen the security and address any existing concerns. Businesses must stay updated with the changing norms and comply with them to keep this payment method running.
6. System Failure
At times, the system can fail to recognise the biometrics of legitimate users. Even worse, they may authenticate the wrong individual. Although such cases are rare, they can be quite exasperating. In addition to facing financial loss, customers lose trust in that brand and the payment method. Likewise, the business can face serious financial repercussions and reputational damage.
7. Third-Party Involvement
Many businesses depend on third-party providers for integrating and using biometric payment technology. In such a case, they do not have much control over the security practices. If the provider does not follow stringent security measures, their data is at risk.
What’s Next for Biometric Payments?
Here’s what the future may hold for biometric payments:
- With the advancement in technology, we can expect the introduction of many more biometric modalities, such as vein pattern and heartbeat recognition.
- The unique payment method will witness a wider adoption. Many sectors will leverage it because of the convenience and security it offers.
- The biometric payments system design will be made more user-friendly to offer ease of access for more people.
- Security measures will be strengthened with time to keep the customer data secure and ensure authentic transactions.
- Biometric payment systems will likely be integrated with newer technologies such as Internet of Things (IoT), blockchain, and artificial intelligence.
- With AI and machine learning, the accuracy of these payments is expected to improve along with their speed.
- Global standards for biometric payments may be adopted to facilitate secure and easy cross-border financial transactions.
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Conclusion
The biological characteristics of a person are used to authenticate biometric payments. Different types of biometrics include facial recognition, fingerprints, voice recognition, and iris scans. It is considered a secure payment method because it is almost impossible to steal an individual’s biometric data. Due to the enhanced security and various other benefits, many businesses are adopting this method to carry out payment transactions. However, the unique payment method comes with certain limitations and challenges. The possibility of technical glitches, the need for constant upgrades, and the cost involved in the process can pose a challenge. In addition to understanding its advantages, businesses must consider the challenges involved in the process before adopting this payment method.
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