Paysafe: Building consumer trust in authenticating payments using biometrics
Over the last fe...
Merchant Acquiring CEO, Europe at Paysafe, Andrea Dunlop discusses building consumer trust in authenticating payments using biometrics.
Over the last few years biometric technology has increasingly become a part of our everyday lives, whether we’ve realised it or not. For example we’ve been scanning our faces at border control, and using Apple’s facial recognition features and fingerprints to access our smartphones.
Yet despite biometrics becoming commonplace, it seems that consumers are still wary of their use in conjunction with their financial data, with over half (56%) still preferring the humble password to authenticate payments, according to our latest research.
However, using our biometrics will be key to authenticating card-not-present (CNP) payments once compliance with Strong Customer Authentication (SCA) legislation is enforced.
SCA is a new European regulatory requirement to reduce fraud and make online payments more secure. It requires authentication via at least two of the following elements: something you know (password/PIN), something you have (phone/hardware token) and something you are (fingerprint or face recognition). Ahead of the deadline, it’s clear that work needs to be done to reassure consumers that using their biometrics is both safe and secure.
The role of SCA for businesses
In April 2019, the card schemes introduced new rules in Europe enforcing the adoption of 3D Secure 2.0 (3DS2), the new EMVCo security standard that allows customers to authenticate high-risk transactions with confidence, in compliance with the SCA regulations. are therefore obliged to transfer all of their European partners to 3DS2 by the SCA deadline.
The new requirements introduce multi-factor authentication for both eCommerce and mCommerce. This means that, while passwords – a factor called “what you know” – are still acceptable, issuers should also implement other factors, such as “what you have” (for example a verification code sent via SMS) and “who you are” (fingerprints and other biometrics).
Implementing these authentication methods facilitates the potential removal of passwords from authentication entirely, which will enhance security as there are more layers to the authentication process, while also streamlining the payment process for consumers. This is a significant benefit to merchants with mobile retail channels in particular as all consumers would need to do is scan their fingerprint on their own smart device to make a payment. This would create a convenient and efficient user experience, which is key for consumers.
The introduction of SCA also will make a significant difference for consumers when verifying payments. 95% of all transactions won’t have to be manually authenticated as less low risk and low value transactions will not have to be verified, and many payment methods will either be exempt from, or out of scope of, the standard. Additionally, with the static password system of verification as the major source of consumer frustration when making a payment (and merchant irritation due to its role in driving up cart abandonment rates), replacing this with authentication systems that are not only stronger but have a better user experience is key.
Consumer appetite for biometric authentication isn’t strong
This shift to place biometrics at the heart of payment verification may appear to be a win-win in the battle to provide secure and convenient payments. However, ultimately consumer appetite to leave password-based authentication behind and embrace biometrics will determine its speed of adoption and ultimate success. A large proportion (79%) of consumers still favour passwords for making payments online due to concerns about the security of new biometric options. The primary reason consumers wish to avoid them (45%) seems to be a lack of trust, and many have also stated they do not know enough about biometrics to trust them (35%). It is now in the hands of card issuers, online businesses, and PSPs to inform consumers on the security benefits of biometric payments to build trust.
But while consumers have certain perceptions of the risks posed by biometric payments, there is still a clear appetite to adopt due to their convenience. Many consumers believe that using biometrics is a significantly quicker and more efficient way of paying for goods and services (62%). Also, there are significant number of consumers that are already using biometric authentication methods including fingerprint (42%), facial recognition (17%) and voice-activated technologies (12%). It’s clear that convenience is driving adoption, but there is still a way to go before it is fully mainstream.
Full adoption of biometrics: sooner rather than later?
For consumers, greater trust in biometric authentication means that they will soon be open to the frictionless benefits of password-free eCommerce on devices such as Smart Homes, connected fridges, and IoT-enabled vehicles. Like any new solution/product, however, it’ll take time to get used to but once consumers start using it regularly and trusting this method to authenticate payments then they’ll no longer fear using it.
Biometrics provide a great opportunity to smooth payment processes and reduce cart abandonment. But, without the right education consumers could easily put off customers and potentially lead to the reverse – more cart abandonment issues where passwords aren’t required. Merchants need to tread carefully and reassure customers that biometrics are secure and trustworthy in order to smooth the path to adoption.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.