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FROM CARD ISSUERS TO RETAILERS: HOW BIOMETRIC SMART CARDS BENEFIT THE ENTIRE PAYMENTS ECOSYSTEM

David Orme, Senior Vice President at IDEX Biometrics ASA

 

With the roll-out of biometric fingerprint authentication smart cards, consumers will soon be able to make payments feeling more confident about the heightened security their new cards will offer. However, it’s not just consumers that stand to benefit from this advanced technology. Biometric payment cards will impact the entire ecosystem – from payment networks, smart card and secure Integrated Circuit (IC) vendors, through to biometric sensor manufacturers, retailers and merchants.

To make biometric payments a success though, each participant needs to fulfil its role effectively to ensure the next stage in the process can do the same. Every element of the ecosystem must interact and work seamlessly together, with common development and delivery goals of biometric payment cards driving the market to where it is today.

So, this brings us to the question of how biometric payment cards can benefit each of the key players in the ecosystem.

 

Smart card vendors: The biometric payment card is a high value proposition, which will help card vendors improve margins in a market where traditional payment card Average Selling Prices (ASPs) continue to suffer, resulting in year-on-year heavy ASP degradation.

In addition to payment cards the majority of smart card vendors also have expertise in other areas of biometric applications, for example in government identities, border control and national ID programs. From a security perspective, existing expertise in providing a secure environment from which card data can be stored and securely transacted is a huge bonus, when it comes to ensuring the right biometric payment card support is put in place.

 

Secure IC vendors: This group plays a key role at the beginning of the biometric value chain, supplying the required smart card chipsets used across a variety of applications. In fact, payment cards are one of the largest secure IC markets.

Much like smart card vendors, secure IC vendors are well versed within the payment cards market, with expertise in the supply of payment network-certified solutions that meet the Europay, Mastercard, Visa (EMV) standard. With vendor consolidation rife in the chipset market over the last few years, this presents an opportunity for leading secure IC players to take advantage of the next volume wave.

 

Issuers, banks and financial institutions: In contrast to secure IC vendors, banks, issuers, and financial institutions are at the end of the supply chain – issuing and personalising payment cards to a global customer base. However, the rising wave of fintechs and challenger banks is forcing traditional banks to focus on product and service differentiation as they try to compete against more agile entities and retain brand loyalty.

The biometric payment card is one potential solution for customer retention. Not only does it provide product and brand differentiation, but an improved, secure payment option – which is fast becoming a consumer must-have. In fact, recent research by IDEX Biometrics ASA found that more than three-in-five (63%) UK consumers are worried that their contactless payment cards could be used fraudulently. Notably, nearly half (49%) of consumers state they would actually feel more secure if they were able to use their fingerprint and PIN to authenticate transactions via their payment card. This suggests that consumers would be much more confident about contactless payments if their bank card was protected by biometric authentication, such as a fingerprint scan, and not just a PIN as the verification method.

 

Payment networks: At the centre of the entire ecosystem are the payment networks themselves. They hold a unique position, interacting with all players in the chain. Branded cards make payment networks a household name from a consumer perspective. This, in turn, means they have a central role to play in the development and certification of payment cards and standards to address security. In addition, payments are processed and authenticated over their networks, which means they are liable for any fraudulent transaction.

Consequently, security is of paramount importance to this group. It is in their interest to reduce fraudulent payment activity to lower liability-related costs. This will also help to gain and retain consumer trust, which is imperative to the livelihood of payment networks as they take a cut from all transactions made through them.

 

Retailers and merchants: Retailers and merchants are at the receiving end of the biometric payment card process, as the digital payment authentication technology. The biometric payment card has been designed to work with existing contact and contactless POS terminals, meaning retailers and merchants can reap the rewards without having to upgrade their existing POS infrastructure.

The growth and acceptance of contactless payments has increased these forms of transactions in the last decade. However, the majority of payment networks, have a maximum transaction limit, typically in the £30 range. Adding another level of multi-factor authentication (MFA) to this type of transaction, opens the opportunity to remove these spending caps though. This will help merchants and retailers to provide customers with more convenient and secure shopping experiences for all levels of spend.

For each transaction made via a POS portal, a fee has to be paid by the merchant which is typically split into 3/4 segments, with a proportion going to the payment network including processors, acquirers, and issuing banks. The risk of payment fraud is also added to transaction fees by the payment networks. Improvements to payment card security through innovative biometric means, should translate to lower-risk transactions and in turn, reduce these associated transaction fees, helping merchants improve revenue margins.

To fully realise the true benefits of biometric fingerprint payment cards for everyone in the ecosystem, all players need to support and promote the education of the market. By doing so we are more likely to gain consumer trust and encourage adoption while delivering a safer, more convenient payment experience to the end consumer.

 

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Business

HOW TECHNOLOGY IS MAKING AIRLINES SMARTER DURING LOCKDOWN

Captain Nadhem is the General Manager of Alpha Aviation UAE

 

2020 has provided challenges to all industries, but few have been as directly hit as air travel by the Covid-19 pandemic. Across the world, entire fleets have been grounded as international airports closed and travel bans were introduced worldwide.

Unfortunately, the challenges faced by airlines do not stop there. Airline economics dictate that planes be used as much as possible. For larger planes, this means keeping them in the air as close to 24/7 as is possible. For this reason, there simply aren’t enough dedicated storage facilities at global hub airports. At Frankfurt Airport for example, the tarmac on the 4th runway is now the home of many of the airport’s planes. It can also often take as long as 30 days to return a commercial jet to circulation after it has been mothballed.

As a result, many planes that are still in circulation have been transferred to the Indian sub-continent where air travel hasn’t been as badly disrupted. It will take some time for them to be rehomed to their previous routes if flight paths do reopen. In 2021, the aviation industry will also need to adapt and re-assess both its fleet sizes and operational strategies in order to re-build in the wake of this global crisis.

Pilots account for a key proportion of overhead costs and airlines will be constantly rethinking their pilot training strategy, which is likely to include a need to outsource and decentralise to maximise efficiency. At the same time, trained pilots will require training updates and renewals to their licenses, even as fleets are grounded.

Flight simulators have therefore assumed a crucial role in 2020. Usually developed to keep experienced crews sharp by creating challenging scenarios in safe environment for them to overcome, they have now become important across the industry for several reasons. Flying, like any other skill, requires constant practice to maintain the highest level of competency. That’s why airlines have recency rules that require pilots to perform a specified number of take-offs, landings and approaches within a certain period of time.

Advancements in simulator technology continue to bridge the gap between theory and reality. At Alpha Aviation we’ve recently invested in the new Alsim-AL172 flight simulator that features a Cessna 172 cockpit, with two seats and a flight deck. As pilots still need to clock up over 1,500 flying hours to receive their ATP certificate, advanced simulators like these will also be effective in providing pilot training without the operational costs of a real flight.

This year also highlighted the need for regulators to make changes to the training process. For example, there will need to be more reliance on e-learning in the initial cadet training and the acceptance of integrated technology in simulator training will also be important. Further adoption of Artificial Intelligence (AI) can also offer a vital competitive advantage.

AI technologies have already been widely adopted across the aviation industry. From facial recognition at airport passport security to baggage check-in and remote aircraft monitoring. For years these innovations have been streamlining processes, both for operators and customers. However, AI has a much greater potential beyond these practical applications.

Among other benefits, AI and machine learning algorithms excel at recognising patterns and are extremely efficient at collating data from the process of training cadets. As most flight simulators are already equipped with sensors that generate considerable amounts of data, this resource can now be used to assess pilot competency from the onset of training.

Powerful AI and machine learning systems can analyse hundreds of flight parameters and sort through thousands of hours of simulator data to produce findings that a human coach wouldn’t have been able to determine. For example, AI programmes can evaluate a pilot’s ability as they execute key manoeuvres and create a comprehensive assessment of a cadet’s strengths and weaknesses based on real-time data.

The data collected from these training sessions can also be analysed by AI programmes to evaluate how the cadets fly certain training routes, for example, considering their angle of descent and acceleration periods. From this, airlines can gather enough data to build a picture of each pilot’s unique flying style and determine the optimum routes for them to fly.

A crucial part of this assessment centres around the rate each pilot burns fuel. Real-time decisions about the throttle settings during take-off and the climb can have a significant impact on the amount of fuel burned during a flight. With airlines spending around 33 percent of their operational costs on fuel, reducing the rate that fuel is burned can have a considerable effect on the finances of an airline and its carbon footprint.

Airlines already use AI systems to collect flight data regarding route distance, altitudes, and aircraft weight to determine the amount of fuel needed for a flight. However, now the data collected from simulators can also be used to pair pilots to specific routes, based on optimum fuel usage. This will result in cost savings for the airline by optimising the potential of their pilot crew to reduce excess overheads.

As we continue to work directly with regulators and the airlines to further expand the use of technology and AI in the industry, our ability to continue to adapt and innovate in this crisis will hopefully mean clearer skies ahead.

 

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Finance

HOW COVID-19 HAS RESHAPED THE PAYMENTS LANDSCAPE

By Mohamed Chaudry, Group Chief Financial Officer of FoodHub

 

The year 2020 may well have sounded the death knell for the saying cash is king. As the pandemic took over our world, consumer behaviour altered considerably as people embraced contactless payment, e-commerce and delivery services for many of the things we once handed over notes to buy.

Finextra reports that research carried out by YouGov for the ATM network Link found that 58% of Brits are using cash a lot less often thanks to the pandemic, with 54% avoiding it altogether and using alternative payment methods.

Some 76% of those questioned by YouGov added that they think the crisis will affect their future use of cash over the next six months.

 

Adapt to survive

Many businesses, particularly those in the food sector, quickly worked out they needed to pivot and adapt if they were to survive. Social distancing measures, lockdowns and the economic downturn hit the hospitality industry hard.

Safe and convenient online payments provide food businesses with a solid foundation from which to operate. The year 2020 saw the rise of payment gateways and the size of the market is likely to escalate in the coming months, giving online merchants more choice over the gateways they choose to work with.

Many of these platforms are embracing the changes in innovative ways, adapting to the altered way of life and creating different ways to facilitate recurring online payments and members’ due models. They can also put in place order ahead services for restaurants and expanded delivery options.

 

‘Seamless’ payments process

As lockdown restrictions continue to drive more people online, the e-commerce industry needs to offer seamless online payments to maximise its soaring popularity. The right payments provider should be able to guarantee security, offer access to fast-growing markets and a plethora of relevant payment methods for each market, all components that provide expansion opportunities and a better consumer experience.

Payment providers allow food businesses to focus on their core business and meet new customer demand while they take over the non-core competency tasks. Platforms such as online food portals need to design their site or app to make it as easy as possible for merchants to onboard and customers to use.

As the use of online payments racks up, online security has never been more important. Increases in one inevitably result in the increase of fraud or cyberattacks. Platforms and businesses must ensure customer data is protected. Payment partners can ensure security is key, their greater size and expertise providing the added edge to small businesses that do not have that capability.

 

Building a loyal customer base

Payment security is what will encourage—and keep—customers who haven’t previously used online food portals. Building a loyal, local customer base can encourage businesses to consider expansion—perhaps opening more venues in their region or county or even nationwide.

Promoting the ways in which a platform can benefit customers and a community—in the midst of a pandemic, for example, many people will be conscious that their local takeaway/restaurants, etc., are suffering and they’ll be anxious to help—is another way to broaden a platform’s appeal. An app that doesn’t charge a service fee or take a commission from its partners is one way to do this.

Covid-19 has accelerated consumers’ whole-scale move to online payments faster than anyone can have imagined, and they want convenient, relevant and secure payment services for markets that have previously been served mainly by cash or card.

The pressure is on for retailers (and especially food retailers who want to survive) to ensure they can meet this demand.

 

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