09 March 2016
Payments in the blink of an eye: the rise of biometric banking
A few years ago, few would have imagined that paying a bill could be as simple as tapping your ring or watch against a screen. But this is now becoming a familiar sight as consumers are demanding faster and simpler transactions to complement ever-busier lifestyles.
There is still a long way to go - less than one in five people in North America are estimated to use mobile payments on a regular basis. However the industry is tipped for fast growth this year, boosted by the success of recent high-profile launches such as Apple Pay. Global payment revenue will hit $2.3 trillion and account for 43% of all banking-services revenue by 2018, according to forecasts by global consultancy McKinsey.
Seven years ago, London-based company VocaLink developed the Faster Payments system, which allows banking customers to transfer money to other accounts almost instantly. Making it easier for consumers to pay for goods is a win-win for companies. It is estimated that more than half of people shopping on a smartphone will abandon their purchase before paying, mainly because of usability issues that make it difficult to complete the transaction. In 2014, poor mobile shopping experiences accounted for £6bn in lost sales, according to calculations by identity management company Jumio.
Instant transactions are also beneficial because it means the money is paid in or moved out straight away, allowing business owners to keep a closer eye on cash flow. There are 5.4 million small and medium enterprises in the UK, accepting hundreds or thousands worth of takings every day. For the smallest companies, sometimes even a few hours can make a difference.
Over the next few years, the way we pay for goods could be transformed again. Biometric technology, where a person is verified from one or more distinguishing biological traits, has captured the attention of consumers but has yet to win them over.
Unlike passwords, biometrics cannot be lost or forgotten. They are also difficult to forge or share, being unique to each user. Therefore the method could provide a more secure way and convenient way to make payments.
On the other hand, there are numerous ethical arguments that have been put forward to oppose the use of biometrics - mostly relating to concerns about privacy. There are concerns that second-generation” biometric technologies could spring up, monitoring individuals covertly. Others question how their data could be used.
Progress has been made. Many new smartphones now have fingerprint scanning, and some banks also allow people to log in with a touch ID. Meanwhile others are testing finger vein authentication and iris scanners which could trigger transactions in the blink of an eye.
Biometric security arrangements will catch on at some point, but they aren’t likely to become commonplace anytime soon. Banks and payment companies still have a long way to go in proving to consumers they are a non-invasive and secure way of making payments. Yet once companies can persuade consumers to get over their concerns, the technological possibilities are endless.