Biometric identity verification is becoming increasingly important as payment networks and financial institutions look for ways to strengthen security without adding unnecessary friction to transactions. Biometrics can help issuers distinguish legitimate customers from fraudsters while potentially reducing costly false declines that prevent valid transactions from being completed.
However, biometric payment authentication introduces unique security challenges. Unlike passwords, biometric identifiers such as fingerprints cannot simply be changed if compromised. Financial institutions must therefore protect biometric information while determining how much authentication is appropriate for different transactions. A flexible approach combining biometrics with other authentication factors could provide a stronger balance between security, convenience, and payment conversion rates.
The industry-wide drive to realize the perceived ideal of unencumbered identification and transaction credentialing has gained critical mass in the marketplace. As stated in the article, much of the output form the Mobile World Congress last week in Barcelona was reported as having a focus on security verification.
You can understand the appeal of the proposition for consumers looking to take advantage of the convenience of mobile payments. Meanwhile, MasterCard aims to use this technology to reduce the number of false declines that cost it dear: in the past year, the value of false declines has hit $118bn (£85bn) per annum – more than 13 times the total amount lost annually to card fraud.
Payment networks and issuer banks will be rightfully seeking to achieve a more favorable balance between the flow of commerce and fraud prevention. The promise offered by biometric based identity verification seemingly offers a panacea to this conundrum, but is itself fraught with peril, as the article goes on to point out.
But there are bigger questions to be considered here. Whilst not ideal, passwords can be changed. Fingers and fingerprints can’t be. As an industry we need bullet proof methods of storing this data securely before we play Russian Roulette with people’s identities.
Mercator Advisory Group anticipates the drive to improving conversion rates will certainly necessitate enhanced data security associated with biometric information, and will eventually yield a hybrid solution that will draw on intrinsic and self-determined factors to verify identity. Individual choice in identity verification, coupled with increasing levels of stringency dependent on the value of the transaction will become commonplace. The value of the transaction will determine the level of biometric verification and the associated level of data security.
Biometric identity verification has significant potential to improve payment security while reducing the friction associated with traditional authentication methods. Its effectiveness, however, will depend on how securely biometric information is stored and how financial institutions integrate it with other identity verification technologies.
Rather than relying on a single biometric identifier, payment authentication is likely to evolve toward hybrid models that combine multiple intrinsic and user-controlled factors. Risk-based authentication can further strengthen this approach by adjusting verification requirements according to transaction value and risk. This could allow financial institutions to improve fraud prevention and reduce false declines without unnecessarily complicating legitimate transactions.
Overview by Joseph Walent, Senior Analyst, Emerging Technologies Advisory Service at Mercator Advisory Group
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