Understanding Biometrics in Banking and Finance
In today’s digital age, the world is gradually moving away from cash, leading to a more interconnected payments ecosystem. With the rapid growth of e-commerce, digital payments via cards and mobile wallets are skyrocketing. As reported by GlobalData analytics, these modes of payments now account for nine out of ten in-store transactions by value. This figure is set to rise even further as smartphones become more prevalent.
However, with the rise in digital transactions, the risk of fraudulent activities also rises. Global payment card fraud losses were estimated to be around $22bn in 2024. As fraudsters are becoming more sophisticated, the need for advanced security measures is more urgent than ever. Banks and fintech companies are now turning to innovative authentication methods like biometrics, both at the point of sale and in the digital realm, to combat fraud.
The Emergence of Biometrics in Finance
Biometrics are increasingly becoming a vital part of the authentication process in the financial industry. According to GlobalData’s 2024 Financial Services Consumer Survey, 86% of respondents globally said they always or sometimes use biometric features on their payment platforms. Habitual use of fingerprints and facial recognition to unlock phones has paved the way for their application in payment approvals.
Both policymakers and businesses are heavily investing in biometrics. For instance, the EU’s Digital Identity Wallet programme is currently running large-scale pilots across numerous countries, aiming to extend the use of wallets from finance to everyday scenarios such as banking, travel tickets, and retail payments. Similarly, Ant International has added iris recognition to its Alipay+ GlassPay smart-glasses solution, which combines iris pattern and voiceprint checks to secure hands-free payments in augmented-reality environments. As the boundaries of biometrics continue to expand, payment brands need to keep pace.
Evolution of Biometric Technology in Finance
The rise in biometric pilots can be attributed to the maturity of biometric technology itself. Card schemes, processors, and specialist vendors have successfully integrated fingerprint sensors onto cards and consumer devices. For example, Thales, a technology company, has deployed biometric payment cards in markets from Cyprus and Lebanon to the UK and Switzerland. The fingerprints are captured and stored securely on the card rather than in a central database, enhancing security.
Another significant factor is the realization that not all biometrics are equal at the checkout. The Covid-19 pandemic highlighted the drawbacks of touch-based readers in public spaces. Innovations like palm recognition allow shoppers to simply hold a hand over a reader, similar to tapping a card or phone. Amazon One links a shopper’s palm to a payment method and is now live beyond Amazon Go stores, including in supermarkets and venues. Mastercard is piloting pay-by-palm in Uruguay, targeting in-store queues.
Adapting to the Biometric Era
With the growing prominence of biometrics, issuers and acquirers need to adapt quickly. That means figuring out how to best harness biometrics without upsetting customers or running afoul of regulators. Disciplined pilots, careful measurement, and a clear understanding of where biometrics truly improve the in-store experience are crucial.
Early use cases that stand out include grocery chains, quick-service restaurants, public transport, and large tourist venues. These are environments where facial and fingerprint-based biometric payments are already common. However, these venues are also where new technologies like palm recognition are making payments even faster and more secure.
When implementing biometric payments, privacy and data governance are paramount. Biometric-forward payment approaches need sufficient guardrails to protect against cybercrime. Many biometric payment schemes already mirror this approach: Mastercard’s and Thales’ biometric cards keep fingerprint templates on the card itself, encrypting raw biometrics and minimizing risk.
Issuers and acquirers need to partner with expert partners such as card schemes, terminal manufacturers, biometric specialists, and risk-analytics providers. Such collaborations can help them leverage existing tokenisation, dynamic CVV, and AI-driven fraud tools, gain access to multi-country rollouts and standards efforts, and reduce integration pain for merchants.
With the right approach, issuers and acquirers have a strong basis for dominating biometric-era checkouts and creating faster, safer, and more trustworthy in-store experiences for their customers.
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