Biometric cards can jolt PSD2’s authentication rules
With a lot of focus on PSD2’s mandate for the implementation of Strong Customer AuthenticationSCA (or, to those unfamiliar,) in 2019, biometrics is set to play a big role in muscling up banking’s authentication. The European mandate and its implementation by banks has stirred a lot of discussion across the continent, especially in the U.K.
It’s great to see the fruit of years of work filtering down to consumer end points. PSD2 aims to make consumers’ lives and services better, and SCA is just one example of the regulation in action. But some consumers are already seeing every fifth contactless transaction rejected to force an authentication, creating confusion and frustration at the point of sale.
Biometric payment cards offer the perfect answer to SCA requirements. By adding strong authentication to the “tap,” consumers can benefit from greater security without harming the user experience of contactless or slowing throughput time for merchants.
When introducing new solutions and services, aligning a bank’s transformation strategy with the desires of consumers is an interesting course to plot. Following our consumer research, we set out to understand how the opinions of banks compared - including understanding the importance they placed on biometrics and why.
The one thing that everyone can agree on is the importance of contactless payments. Both banks and consumers consider them to be the most important payment method. Whether this is through a card or a mobile, the days of magstripe (and, dare I say Chip & PIN!) are numbered.
However, there is one striking difference between consumers and banks when it comes to contactless payments. For the banks, the biggest issue with contactless is being able to lift the payment cap, but security is consumers’ main concern.
Adding biometric payments to the process can help address consumers’ security concerns while empowering banks to finally lift the payment cap. The widespread proliferation of biometrics for smartphone authentication means consumers are comfortable with the technology. Plus, with added security, it can finally enable those high-value contactless payments, creating a win-win for both banks and consumers.
All stakeholders now recognize the value of biometric cards. Consumers want the technology, the largest card manufacturers are driving implementations forward, and banks around the world are prioritizing biometrics in their roadmaps. Those in pilot have the ambition of scaling up to a commercial launch, which Crédit Agricole in France has stated its goal to include biometrics in its payments strategy in 2020.
But how fast will biometrics be adopted for payment cards? No one really knows, but it’s interesting to put it in perspective and to consider the historical adoption rate of new technologies in the payment card area. Chip & PIN smartcards were introduced around 1995 and reached a billion cards about 18 years later. Next came contactless cards in 2007, which took about eight years to reach a billion cards. In both of these cases the payment terminal infrastructure had to be upgraded, which took major effort and cost. For biometric cards to take off this is not necessary, as they typically can work with today’s contactless or contact-only terminals. Therefore, the roll-out might be faster this time around. In 2020, all POS terminals will be contactless, which is also an important driver.