As digital transactions become the norm, the demand for secure and convenient payment methods is at an all-time high. After one of the most challenging years in cybersecurity, the need to protect our increasingly digital lives is becoming more vital every year. Looking back at the holiday season, online consumer spending rose 4.9% year-over-year between November 1, 2023, and December 31, 2023, to a new record high of $222.1 billion.
This article looks at the landscape of biometric payment systems, focusing on the most widely used technologies and the companies at the forefront of innovative solutions.
Biometric Security Technologies
Biometric security systems use unique physical or behavioral characteristics to identify individuals to control access and are generally considered more secure than password-based systems. People tend to create simple, memorable passwords that are often easy to crack, and they also often reuse their passwords. Passwords can be stolen and guessed through brute force attacks, and users can be tricked into revealing them through fraudulent emails or websites.
Biometric security is used across a wide range of technologies and applications, such as unlocking smartphones or advanced passenger vehicles, providing authentication for banking transactions or healthcare services, enhancing security checks in airports, and validating retail payment systems. Biometric security technologies include:
- 3D Facial Recognition: This is enhanced from traditional 2D facial recognition and uses depth sensors to capture the shape of a face. This additional information increases accuracy and makes it harder to fool with photos or masks.
- Advances in Iris Recognition technology: This now allows accurate identification under diverse lighting conditions, enhancing usability in real-world scenarios.
- Vein Recognition: This involves scanning the pattern of veins in the hand or finger, which is highly unique to each individual and is considered more secure than fingerprint scanning as veins are internal and much more challenging to alter.
- Heartbeat Recognition: This is based on the unique electrical activity of the heart. It uses wearable technology and is ideal for applications requiring continuous identity verification.
- Behavioral Biometrics: This analyzes patterns in human activities like typing rhythm, gait and voice. It is becoming a popular solution when continuous authentication is desired.
- Multimodal Biometric Systems: This combines multiple biometric inputs (such as face, fingerprint and voice) for more accurate and secure authentication.
Biometric Payment Systems
Biometric payment is a point of sale (POS) technology that uses biometric authentication, often as part of a two-factor authentication process that includes a personal ID number. Biometric payment systems offer significant advantages in terms of security and convenience over traditional methods, including passwords, PINs and address information. The uniqueness of biometric data makes fraudulent transactions more challenging, offers a faster payment experience (often at a lower cost per transaction for the merchant), and alleviates the need to carry cash, cards or checks.
Given the personal nature of biometrics, it can be controversial. For example, fingerprint scanners are typically associated with law enforcement, and critics of such systems argue that the data could be made available to government agencies (or nefarious actors) without consumers’ permission or even knowledge. Many biometric payment service providers argue that they don’t store actual fingerprint information but rather maintain an encrypted number derived from fingerprint data. The number, not the actual print, is used to verify identity. Expect the tension between convenience, security and privacy to continue.
Juniper Research found that biometrics will authenticate over $3 trillion of payment transactions in 2025, an increase of over 650% from the $404 billion authenticated in 2020. According to Goode Intelligence, global biometric payments are expected to reach $5.8 trillion and more than 3 billion users by 2026.
Biometric cards combine the embedded chip technology with biometric authentication technologies to verify the cardholder’s identity for in-store purchases. The global biometric card market is expected to grow from $370 million in revenue in 2024 to $18.4 billion in 2029, representing a compound annual growth rate (CAGR) of 117.6%, according to Mordor Intelligence, with the fastest-growing market in Asia-Pacific and the largest in North America. Grandview Research estimates the global biometric card market to have been around $75.3 million in 2021, growing to $4.35 billion in 2030 for a CAGR of 62.3%.
The companies with the most widely used biometric technologies today are, unsurprisingly, the smartphone leaders. Apple’s (AAPL) Touch ID and Face ID integration with Apple Pay has become a benchmark in the industry. Similarly, Samsung Electronics (SSNLF) offers Samsung Pay, and Alphabet (GOOG) offers Google Pay.
Next up in the tech giants is Amazon (AMZN), with its touchless Amazon One solution that allows users to pay at retail checkout or get through entry gates just by hovering their palm over an Amazon One device. The solution was launched in 2020 in two of the company’s Go stores in Seattle. The company claims that it is 100 times more accurate than scanning two irises by combining palm and vein imagery, and after “millions of interactions among hundreds of thousands of enrolled identities,” it has not had one false positive. This functionality is expanded in the Amazon Web Services Amazon One Enterprise, which provides contactless access controls. In 2021, three U.S. senators published an open letter to Amazon’s CEO expressing their concerns over user privacy with the system. One of their concerns is that the data used for authentication is stored in the cloud, which makes it potentially vulnerable in contrast to an iPhone, which stores the biometric information solely on the device itself.
In November of 2023, Mastercard (MA) and NEC Corp (NIPNF) joined forces to create an advanced in-store facial recognition payment solution that will combine NEC’s facial recognition and liveness verification technology with Mastercard’s payment operations. NEC is known for its leading biometric authentication technologies. In 2022, Mastercard launched a Biometric Checkout Program [in partnership with NEC, Payface, Aurus, PaybyFace, PopID, and Fujitsu Limited (FJTSY)] that enabled participants to enroll in-store or at home through a merchant identity provider app. Once enrolled, users can complete transactions simply by smiling into a camera or waving their hand over a reader.
Another financial services giant, JPMorgan Chase (JPM), launched a pilot program to test biometric-based payments at some U.S. retailers in early 2023. Earlier this month, the company reported a successful proof of concept in Plano, TX, in partnership with Aramark (ARMK), which saw more than 1,000 enrolled users.
Thales Group (THLLY) is a French aerospace and defense company and one of Europe’s largest defense contractors with three reportable segments: Defense and Security, which provides products and services to defense customers, Aerospace, which sells avionics and satellites, and Digital Identity and Security, which provides biometric, data and identity security solutions, and payment services. The company’s shares have outperformed the S&P 500 ETF (SPY) over the past one and three years by 3.7% and 41.1%, respectively.
Synaptics Incorporated (SYNA) is known for its biometric touch sensors, including fingerprint sensors for smartphones and laptops. The company’s share rose 12% in one day last Friday following higher-than-expected fiscal Q1 results, which also prompted price target increases from analysts.
The following is a list of the top 10 companies, in descending order of volume of patents filed relating to biometric payments, 2010 through 2022:
- Softbank Group (SFTBY)
- Intel (INTC)
- Samsung Group
- LG Corp
- Capital One Financial (COF)
- Visa (V)
- Toshiba (TOSYY)
The Bottom Line
As technology advances, expect to see more innovative biometric solutions, including greater integration of AI to refine the accuracy of biometric systems. On a geographic basis, frontier and emerging economies will likely see the most rapid growth in biometric payment systems. It is easier to implement systems where there are few or no pre-existing systems than in developed economies with costly existing payment infrastructures. As technologies develop and consumers get more comfortable with measures to protect privacy, the blend of security and convenience will make biometric payments an integral part of our digital lives.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.