U.S. credit unions continue to be on the forefront of payments evolution. In January, Visa announced it would begin testing a fingerprint-enabled credit card in the United States with Utah-based Mountain America Credit Union. Until now, testing of similar platforms has mainly occurred outside the country and with large banks. MasterCard, which piloted its biometric card with Absa Bank in South Africa, says it will be ready to roll the cards out in the U.S. by April 2019.
What do Visa’s domestic testing and MasterCard’s newly announced timeline tell us about the near-term future of biometric payments? We asked CO-OP Product Manager Chole Casber for his insight…
What kind of impact could a fingerprint-enabled payments card bring to the market?
The most important benefit credit unions and their members could see from the introduction of a biometric payment mechanism like the ones Visa and MasterCard are testing is a potential reduction in fraud. Biometrics tend to be more secure than a PIN or signature. A PIN can be forgotten (or stolen), and a signature provides minimal fraud protection in-and-of itself. The lack of confidence in signatures can be seen in the recent decisions of major issuers to do away with signatures at the POS completely.
In addition, card issuers could see some cost savings in terms of PIN management, such as reductions in IVR system usage, as well as those secondary PIN mailers that go out following newly issued plastic and at cardholder request.
For consumers, the promise of a fingerprint-enabled card or selfie-enabled digital payment is one of seamlessness and security. No PIN to remember, no signature to scroll. And then there’s the feel-good security of knowing your account can’t be used by anyone else because purchases are authenticated by your fingerprint or face.
How will biometric cards work online or in digital wallets?
That’s a great question and one of many outstanding queries. As the migration to EMV chip cards has demonstrated, the card-not-present environment continues to be a challenge for issuers from a fraud perspective.
There are quite a few technologies, both issuer- and consumer-facing, that are emerging to mitigate digital payments fraud. Tokenization, consumer alerts, behavioral biometrics, artificial intelligence and machine learning – each of these technologies is going through its own testing scenarios to stem the tide of increased digital payment fraud.
My anticipation is the eventual market-leading biometric card(s) will incorporate one or more of these to offer an additional layer of protection to issuers and cardholders when shopping digitally.
Cost savings is great, but these cards sound expensive. Will they be?
In the case of fingerprint-enabled plastic, the cost per card is likely going to increase. Biometric cards could be even more costly to produce than EMV chip cards. Aside from being more costly to product and manage, additional costs could arise from things like card personalization, the need for in-branch technology, card destruction and configurations like multiple fingerprints for multiple cardholders.
Speaking of EMV chip cards, do you anticipate similar cardholder struggles or challenges with biometric cards?
Any time consumers are confronted with change, there are challenges. Because the cards are so new, the technical details around deployment are fuzzy. The industry learned quite a few lessons during the EMV migration about the importance of ease and speed to the checkout experience. Hopefully those lessons will inform the rollout of subsequent card formats, including biometric plastic.
The other thing to consider is lack of ubiquity. If there is more of a drip rollout than a mass rollout, cardholders with biometric cards could find they are unable to use them everywhere they want to. Depending on the level of frustration, this could lead to abandonment of the card all together.
What is CO-OP doing to prepare for the future of biometric payment mechanisms?
CO-OP sees biometric cards as a potentially promising technology to reduce fraud and improve the member payments experience. Our product teams are working with the firm’s vendor partners to vet a solution that provides a holistic and repeatable approach for our credit union clients. We’re very cognizant of the need for an end-to-end solution that is easy and reasonably affordable to deploy.
Innovation for innovation’s sake is never a good business practice, and we want to balance innovation with what’s best for our credit unions and their members. Innovations that solve a real problem, and those that can be deployed without major disruption to the credit union and its members offer the most promise on our collective path to digital transformation. When we identify technologies and solutions that meet this standard, our next step is to strategize how CO-OP can take on the heavy lifting, lowering barriers to entry for our credit union clients and limiting the employee and consumer impact.
What’s next for biometric cards?
This technology is still new. As with most of the new payment solution we have seen over the past several decades, there are sure to be different implementation options. Even the options that pick up traction most quickly will still need to go through beta implementations to answer questions, uncover stumbling blocks and configure things like standardization, interoperability and mass availability.
Although innovation works at the speed of light these days, the complex U.S. payments infrastructure requires a lot of legwork. It will be some time before we see biometric-enabled credit and debit cards hit the mainstream. CO-OP will continue to investigate and report on the technology’s evolution and will mobilize its teams to get fast answers to the inevitable questions that arise.