MAG Insights

The latest buzzword in payments seems to be “biometrics”.  It isn’t a new term or a new concept, but it is growing in popularity and acceptance and there are a few factors that exist in the market that merchants should consider.

I was talking with a friend, a non-payments person, and she told me she just turned on Face ID with her bank.  I acted a little surprised and she said, “Well I wasn’t sure if I wanted them to have that information”.  This conversation represents one of the biggest misconceptions in the biometrics space.  My friend thought that her bank now had her Face ID.  The reality is that her phone’s secure element had a mathematical representation (cryptogram) of her face that was checked each time the Face ID was triggered by apps on her phone.  The mathematical representation is created by the software on the phone and is based on an algorithm.  Sure, there is a chance that the algorithm could be hacked and if the hacker got into your phone, they would have access to your accounts.  The big question is, would consumers be willing to take that risk?  For iPhone users, that answer appears to be yes.

Let’s turn to POS and look at the developments in biometrics within.  Most of the time, biometrics in POS are used as part of a multi-factor authentication that is used in place of a PIN.  To use your account, you have to have more than just the palm, finger, or retinal scan match; but there are no standards around this as part of acceptance.  Each card network, processor, or provider will set their own rules here.  The bigger issue with biometrics is getting customers to take the time to set up the biometrics for each retailer.  That is where processors/acquirers come in, they can drive customers to set up their accounts once for multiple merchants.  Again, the customers hold the destiny of success here.

In addition to customer sentiment, merchants need to consider privacy regulations.  Some of the most stringent regulations are in Europe, but California is not far behind and who knows what the Federal regulators will begin looking at in the future.  These regulations require stringent measures to protect consumer data. Failure to properly secure biometric data could lead to severe legal and financial consequences.  Just like other technologies, merchants need to understand the privacy considerations with any biometrics.  While there will never be a full proof protection, it is important to ensure that privacy considerations are covered within your contracting process.

Who are the big players in this space?  The leader of the charge was Apple with the introduction of the iPhone, but other smartphone providers quickly fell in line.  However, when you look at the list of top filers of patents over the past 12 years, the list is more diverse than just smartphone companies.  Based on the number of patents filed, the top players in biometrics are:

• Softbank Group 
• Intel
• Samsung Group
• LG Corp
• Alphabet
• Capital One Financial
• Mastercard
• Visa 
• Toshiba
• NEC