Point of Sale News: Are Selfies and Retina Scans the Future of Payments Security?

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Originally posted on Point of Sale News

Think about the last time you paid for something in cash? Was it something small, such as a cup of coffee or a sandwich? Could you have just as easily paid with a card? It’s likely that the person in line in front of you (and behind you) paid with a card. Now think about the last time you paid a friend or family member back in cash.

In today’s increasingly digital, Venmo supported, Paypal pushing, contactless world, it’s pretty evident that cash transactions are becoming a thing of the past as new payments innovations are entering the market. According to research firm RBR, 417 billion transactions in 2014 were cashless, and the final number for 2015 is expected to be significantly higher.

Since the launch of Apple Pay, mobile payments and digital wallets have increasingly become a major topic of discussion, with many suggesting that e-commerce will replace cash and credit cards as the dominant method of payment. Apple touts that the service accounts for more than $2 out of every $3 spent using contactless payments, and Apple CEO Tim Cook believes it will replace the “fairly antiquated payment process” and “forever change the way all of us buy things.”

While cashless payments have increased annually since 2010, ATM cash withdrawals have risen at nearly the same rate, revealing a significant proportion of the global population still prefers to use cash. Some countries like Sweden are making significant headway in adopting cashless alternatives like mobile payments with currency representing only 2 percent of its economy, but 7.7 percent of payment transactions in the United States still involve bills and coins and the country is a long way from kissing cash goodbye.

Why is a country that is usually so quick to embrace Apple products, hesitant to swap their wallets and designer bags for mobile phones and smartwatches?

Mobile payments are building momentum slowly in the United States because Americans are accustomed to using credit cards and feel there is no incentive to use a mobile wallet. A survey from research firm Chadwick Martin Bailey revealed that while mobile wallet usage among U.S. smartphone owners increased from 9 percent in 2013 to 15 percent in 2015, an overwhelming 63 percent of respondents said they have yet to use a mobile wallet and don’t intend to.

Security (36 percent) and convenience (31 percent) are considered the biggest barriers to mobile payment adoption. Many Americans still cling to cash as they inherently trust it more than digital payment methods and can use it at most retailers; whereas, mobile payments are not yet available at many stores.

The increasing number of data breaches at high-profile retailers makes customers uneasy and unlikely to wholeheartedly place their trust in mobile payment technology. For mobile payments to succeed, providers must address security challenges. A strong authentication mechanism that confirms the identity of the user before authorizing the transaction needs to be put in place for mobile payments to be truly secure.

Banks and mobile payment providers are considering biometrics like ‘selfie’ security and fingerprint technology, or wearable gadgets and retina scans as potential new security measures. While some of these ideas are feasible, many likely will not be adopted due to high implementation costs. Further, ubiquity is important – these technologies must be able to be adopted by banks, card issuers, and the general public.

These new innovations in the fintech space help to solve the security measure of user identity, but we must also be sure payment solutions mitigate fraud risks before we go completely cashless. Bankrate analyst Mike Cetera points out that “a lot of these mobile wallet systems have unique codes that are used whenever a transaction is made and fingerprint security for confirming payment that credit cards don’t have. On the other hand, there are experts out there that warn it’s just a matter of time before even these systems are breached.”

Once the United States decides to officially rid itself of cash, banks will still need to determine which payment method to rally behind, either mobile or credit cards. As cards are responsible for the largest portion of cashless payments and are the fastest growing cashless payment instrument (accounting for 55 percent of cashless payments worldwide in 2014), banks would be wise to direct consumers towards using existing card technology. Moreover, 40 percent of millennials, the audience that represents the largest share of both the U.S. and employed populations, said they would no longer use cash if their credit or debit card could replace all forms of cash transactions. To avoid headaches, banks should seriously consider pushing for cards over mobile payments as it’s cheaper to implement and is essentially pay per click from merchant to bank or issuer.

Innovations like MasterCard’s new facial recognition scan are targeted towards the selfie-loving millennial generation, but for consumers that place a high value on security, mainstream technologies like this are not going to win them over. There’s no need to reinvent the wheel to appeal to consumers looking for a payment option that satisfies both their desire for security and convenience as there are already cashless payment solutions available for commercial use that fulfill these requirements.

Ultimately, banks need to evaluate the tried-and-true payment options currently on the market to determine which one is the easiest to implement from a technological and cost perspective. With the cost of payment card fraud set to double to $35.5 billion annually by 2020 worldwide, secure payment solutions can save banks and card issuers large sums of money as their implementation costs pale in comparison to the amount of money they lose each year due to fraud.

As new technologies have taken over everything we do, from the way we get around to the way we work to the way we make purchases and exchange goods, secure and fast payments solutions are a priority for consumers and the financial industry as a whole. While mobile is being hailed as the future of the digital payments landscape and the catalyst to becoming a cashless society, mobile payments aren’t likely to replace cards or cash anytime soon as they still need to overcome security dilemmas, such as attacks by online hackers, before they achieve mass adoption.

Mobile payments, wearables, retina scanners, vein pattern recognition, fingerprint recognition and other innovative payment solutions are promising, but not fool-proof. Rather than implement these new security measures, what we should strive for is a solution that does not require a change to the current payments infrastructure in order to attain security and convenience. To really pique the interest of banks, we need a cashless payment method that bridges the gap between widely-accepted credit cards and a burgeoning technology like mobile payments. Going forward, future payment options need to be viable on all fronts – something both consumers want to use and banks can afford to deploy.

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