The Challenge from Contactless Payments
Despite the success of these two companies, experts are wary to say that biometric payments are the next step.
Nick Holland, the director of research in emerging technologies for Mercator Advisory Group, said he believes retail businesses will lean towards contactless smart card payment systems. Mercator is an independent research and advisory services firm exclusively focused on the payments industry.
The leading United States credit card associations are developing systems whereby customers skim a token near a terminal to access their accounts, he said. The benefits of this contactless smart card technology speeds up purchasing time, which is the real focus of merchant retailers.
Merchants have taken to the biometric payment systems mainly for the novelty of the item and the speed of purchase, he said. However, the contactless smart card technology has distinct advantages in that the leading credit card associations will issue millions of token in high-profile rollouts with massive chains such as fast food restaurants. Biometric payment systems will have a hard time competing against the power and prestige of these credit card associations.
Holland believes that businesses will be hesitant to install biometric payment systems for the same reason that they have been slow to adopt the smart card technology already widely used in Europe. Due to the fast and efficient communications network in the United States, the country has been able to avoid widespread credit card and check fraud because the consumers and business can discover fraud rather quickly.
"Fraud hasn't hit the same level here as it has in the rest of the world," Holland said. "I don't think that security is that big of an issue yet."
If biometric systems were adopted nationwide, Holland said they would still require a PIN number or some other form of identification for them to be viable. Without an identifier, he said there would be millions of finger scans to search through making the system slow to find a match. Also, the accuracy of finger scan recognition systems is fairly good in a small sample size, Holland said, but identifying an individual in a database of millions with the current the level of accuracy is not technically feasible yet. This accuracy is only likely to get worse as scanners get dirty in high traffic environments like fast food restaurants and gas stations.
Holland said he views the future of biometric scanners as an addition to the smart card technology, where customers scan their fingers for extra security. A good example of this use of biometric security is Japan, he said, where cell phone companies are looking to install finger scanners readers on cell phones so that the owner is the only one that can use the phone.
Porter and McNally disagree with the theory that biometric payments will lose out to smart card or Radio Frequency Identification (RFID) technology, in which a person waves a token by a reader for access to their accounts. Neither system can compete with the security of biometric systems, they say. Consumers can lose their smart card or wand, but they can't lose their fingerprint.
Though biometric technology has been around for years, biometric payment systems have been slow in coming because the technology only recently improved in speed and accuracy. McNally estimates that Pay By Touch has a 95 percent accuracy rating. Based on 40 unique finger data points, a failed scan would only mean that a person cannot access their account, McNally said. The system would never confuse two finger scans.
Consumers and business owners may view finger scanning payment systems as a little intrusive at first, Porter said. But after they experience the speed, security and cost savings, business appreciate the safety and consumers will gravitate to the convenience.
"We are saying go to the beach and leave you wallet at home. Just use your finger if you want to buy a drink or have some ice cream," Porter said.
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