Fueling Innovation Beyond Security - Biometrics in Payments

Subscribe To Download This Insight

2Q 2018 | IN-5119

Biometrics will easily transition into and merge with the VA, smart home, and automotive markets, while other markets like blockchain will present a few extra hurdles. Multiple entities will need to coordinate in order to realize the success of blockchain biometrics in payments.

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.


Going Beyond Security


Biometrics have been brought into the spotlight as a more secure, convenient, and non-sharable alternative to passwords. While all related modalities have had their ups and downs over the last decade (with face and fingerprints more so than others), the technology has now reached a critical point where end users actually expect consumer electronics (CE) to have at least some sort of biometric authentication enabled. Having CE secured and penetration rates increasing with every single quarter have resulted in payment applications being hailed as the holy grail for biometrics, perhaps rightly so.

Fueled by the exponential increase of mobile payments and the amount of digital-only transactions worldwide (particularly in APAC), related modalities are steadily finding their way into the very core of payments. Biometrics is not just an additional security layer or a more “personalized” authentication solution. It has effectively been transformed into an “enabling technology” and one that not only acts as a highly potent agent that will empower the gears of digital payments in all of its forms and verticals, but also one that will help up-and-coming technological innovations. It will also help cement brand new, critical, and transformative market shifts where security is only a fraction of its implementation power.

So, which applications fit the aforementioned prerequisites and how can biometrics fuel future innovation? ABI Research has identified the following major areas: Virtual Assistants (VAs), smart home, automotive, the Open Banking Initiative, and blockchain. Some of these (e.g., VAs) are expected to enjoy an easier transition into and merge with biometrics, while others (e.g., blockchain) will have a few more hurdles to overcome.

The Connecting Glue for Future Innovation


Payment “By Proxy” and the Rise of Intelligent VAs: In the past few years, VAs have effectively been transformed from a mere gimmick with borderline frustrating capabilities, to quite interesting pieces of software, capturing the attention of deep learning developers, creating sophisticated models and expanding natural language processing (NLP) capabilities. VAs are slowly starting to escape the confines of food fetching and Wikipedia reading, and are branching out toward more future-looking endeavors, strengthened by biometrics. Armed with better voice recognition, NLP, and more advanced commands, VAs can initiate payments in CE, smart home, and even in automotive applications.

Connecting Future Markets Like Automotive and Smart Cities: While car-sharing, infotainment, personalization, and driver/passenger health monitoring are expected to be the primary applications of biometrics in the automotive market, the rise of behavioral analytics and machine learning-fueled VAs pushes both industries toward the realization of more convenient forms of payments from the comfort of one’s vehicle. This future is also highly correlated to the emergence of smart city applications. This occurs because automotive, biometrics, and smart cities converge under one common denominator: hyper-connected applications and a secure and streamlined payment experience.

Tech Companies Can Endeavor to Overshadow Banks: The Open Banking Initiative is a brand new critical variable that fintech has to take into account. According to this regulatory change, aided by the EU Directive 2015/2366, banks will be required to unlock their customers’ banking data to any other authorized party with the use of open-source APIs. This means that said data could be funneled through almost any app and social media platform by any large or small tech vendor (provided the necessary security measures are in place). The “West Five” (Google, Amazon, Facebook, Apple, and Microsoft) and the “APAC Three” (Alipay, Baidu, and Tencent) are expected to be at the forefront of this shift, but a dichotomy is on the horizon. On the one side of the battlefield, banks will lose the monopoly of users’ banking data, while on the other side, the tech vendors will be able to not only enrich their own machine learning algorithms (and, subsequently, their products) with fresh, valuable data, but this will also cut off visibility of a certain fraction of transaction data from the banks themselves. Biometric vendors, however, can capitalize on this turn of events by supporting both camps at the same time. Through the clever use of SDKs, they can empower banking software and bring a secure and convenient experience to their customers, and at the same time provide a much-needed personalized security layer to tech vendors (much like what Alipay is currently driving toward).

Forcing Blockchain Biometrics into Payments


While security is indeed the primary reason for the introduction of biometric modalities in the aforementioned instances, note that in all cases it can also act as the connecting glue that empowers the adoption of new technologies and business strategies. There are cases, however, where vendors are trying to force biometrics into new market shifts, seeing only an arbitrary (and perhaps unattainable for now) end result, rather than focusing on a step-by-step implementation, thus leading to further confusion.

An example of this confusion includes the use of blockchain for biometric payments. This is not because the technology is not mature or secure enough. In fact, this has never stopped large tech vendors from implementing biometrics in the past and having their products hacked from the very first day they made it to the public. Rather, it is because, while all the different chess pieces are already in play (such as embedded secure elements, clearly defined blockchain architecture, or decentralized credential storage like the FIDO UAF specification), they have yet to align in a manner consistent with this market strategy. This challenge can be illustrated by the most important hurdle, which needs to be overcome for this endeavor: coordination between different entities. On top of other related technical considerations, such as allowing crypto-elements to accommodate crypto-biometrics, a number of different parties need to be able to coordinate for the successful realization of blockchain biometrics in payments, including:

  1. Biometric algorithm developers (e.g., Precise Biometrics, NEXT Biometrics)
  2. Biometric sensor vendors (e.g., FPC, Synaptics)
  3. Blockchain and blockchain-biometric specialists (e.g., HYPR, Veridium)
  4. Device OEMs (e.g., Samsung, Xiaomi)
  5. Possibly even legislative and standardization entities (e.g., NIST, IEEE)

This is not to suggest that this is an unattainable endeavor or that biometrics and blockchain just don’t mix (in fact, blockchain biometrics is expected to find prosperous ground in enterprise access control). However, ABI Research posits that the payments markets is a very unique beast to tackle and one that will be quite resistant to this change, at least for the near future.