Dave Orme, Senior Vice President at IDEX Biometrics
Traditional payment card issuers are under pressure. Once secure and established, they are now challenged on all sides. The digital transformation of our world lets small, audacious brands set up and trade with ease. With mere clicks they fill the screen of any smartphone or monitor, tempting consumers with innovative digital services.
How can established banks and other financial institutions, burdened by long-established and cumbersome processes compete with newer challenger banks, using technology adeptly to provide seamless digital banking experiences?
The digital revolution — for it is no less than that — forces everyone to innovate. Innovation is where the battles for reputation and market share are now won and lost. And with card payments now accounting for the majority of UK transactions, the tailoring and personalisation of the payment experience is the main battleground.
Card payments are the chief interaction that consumers have with their issuer’s brand. They are key to daily life and consumers expect the same personalised service across all payment experiences, from instore to online and through to smartphone applications.
But customers demand something else from card providers, too. Security. And that is why integrating fingerprint biometrics into payment cards is an effective brand differentiator for card issuers. Not only is fingerprint technology personalised by definition, but when coupled with an established financial brand, it can make a winning combination.
Security as a differentiator
Card fraud is a huge problem. Financial Fraud Action UK (FFA UK) reports that in 2016, fraud across payment cards, remote banking and cheques totalled £768.8 billion, up 2% on 2015. A huge 80% of this fraud involved payment cards. There was a 30% increase in cards lost and stolen, generating losses of £96.3 million1.
Aside from its value to branding, the use of fingerprints to authenticate payment card transactions is vital to fighting crime. The unique and un-shareable nature of fingerprints makes them ideal for combating fraud. With fingerprint data securely stored on the payment card, there is no central database for cybercriminals to steal or hack them from. This, in turn, renders a biometric payment card completely useless to anyone but the owner.
We bank and shop online. We ask Alexa, not the bank clerk, to tell us where the nearest cashpoint is. If banks don’t impress people online and through payment processes, they don’t impress or reach them at all.
The payment card is one of the key mediums banks and issuers can use to communicate with their customers, who are having less and less interaction with their banks, so it is the perfect format to build brand loyalty.
Society’s embracing of technology creates opportunity for card issuers, who promise convenience and security via online banking and payment cards. But technology has raised customers’ expectations.
Customers expect user journeys to be tailored and personalised. Biometrics, the ultimate in personalisation, lets banks show their commitment to security, their understanding of new technologies and personalised service. This drives up brand loyalty in a marketplace where it is very scarce.
A card incorporating the owner’s fingerprint has a value beyond its enhanced security, it elevates the card from being a static generic solution, to a personalised and tailored user experience. A biometric card is prime branding real estate and creates a tangible link between owner, card and issuer.
Biometric authentication also lets issuers co-brand payment processes, connecting traditional banks with new partners and transactions. The proliferating IoT makes co-branding with equipment and/or component manufacturers a real possibility. If card providers can convince customers of watertight security, the future seems almost limitless.
Phil Sealy, principal analyst at ABI Research, explored this in a recent biometric whitepaper. “Take ride-sharing as an example, a biometric sensor card could be co-branded and supported by the car OEM (original equipment manufacturer), and an issuing bank, allowing the ability to pay at the point of sale, while also being leveraged as a platform from which a user can securely access a ride-sharing scheme… As for the IoT, the opportunity for co-branding opens new market opportunities for those involved. It may enable an issuing bank to play and operate in end markets that previously remained out of reach.”
IoT is proliferating market convergence and the use of payments in the smart home is just one example. Customers will soon expect to pay for their coffee pods, milk and other products via the appliances that use them. Fridges will order foods running low, a quick chat with the voice-activated washing machine will trigger a delivery of detergent.
The potential is huge, but so is the need for security.
Consider the risk of your toddler or bored teenager asking the washing machine to order more detergent than you can’t store — or afford. What authentication would limit this risk to a level acceptable for the average consumer? Fingerprint authentication.
Today the world needs secure cards. Card issuers need to optimise brand value in a crowded market. As global markets open up and the IoT generates a new retail experience, cards with fingerprint authentication will give their issuers a clear USP, act as a brand differentiator and greatly reduce the issuers’ risk of fraud loss.
But as with most branding innovations, early adopters are likely to reap the greatest benefits.