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How Covid-19 has transformed the payments sector

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Digital payments have transformed consumer spending behaviour over the last few years, but many believe the coronavirus pandemic will further accelerate the shift to a cashless society. In fact, most retailers and service providers have already transitioned to cashless and specify contactless payments only to minimise the risk of contamination. For many consumers using contactless payments provides much needed reassurance whilst shopping during the pandemic.

In light of the Covid-19 crisis, both the European Banking Authority (EBA) and the World Health Organisation (WHO) have encouraged people to not use cash in order to promote consumer protection and facilitate safe payments. The WHO goes as far as to recommend ‘holding a card above a payment terminal’ – or paying with a contactless card or smartphone payment app.

Contactless payment limit increases

To support customers through this move to contactless, PIN-free card payment limits have been raised from £30 to £45 in the UK, and from €30 to €50 in EU countries. In the United States of America, this reaches $250. This limit increase aims to reduce the need for physical contact during transactions and to minimise the number of transactions where customers will need to touch ‘dirty’ pin pads. Since raising the payment limit in Germany contactless payments in that country have increased from 35 per cent to 50 per cent of all transactions so far this year.

So what does this mean for the payments industry beyond the current climate? While the move to contactless is welcome to protect consumers during this challenging time, increasing payment limits on contactless payments does raise questions about the security of payment transactions in the future.

A more hygienic way to pay

With these updates to the way we pay for goods changing our payments behaviour, we will all become used to making fast, contactless card payments. Yet, there is still the risk of payment card fraud, in particular lost and stolen fraud. Therefore, the payment industry needs to adopt a third way – a secure method of payment that reduces the level of card fraud while also removing the need for contact between the consumer and the Point of Sale (PoS) or the retailer.

There is still a lot to learn about the virus, but it appears to survive for at least several hours on surfaces, according to the World Health Organisation. Towards the beginning of this pandemic, South Korea’s central bank said it would quarantine incoming cash from local banks for two weeks to remove any traces of the virus.

Using fingerprint biometrics to verify payments is a way to not only improve security but also hygiene in payments of the future. With a fingerprint biometric smart card, consumers can scan their fingerprint on their own payment card to secure a transaction above the contactless payment limit.

This process secures the card to the owner and ensures they don’t need to touch shared pin pads during a purchase. Therefore, consumers can shop feeling assured that their money, and their personal health will be protected, regardless of how much they are spending.

Simple, fast and secure payments

When paying for goods, consumers want a transaction process that is secure and free from hold ups. Introducing authorisation with a fingerprint will secure the payment card, removing the need for PINS and reducing the need for a payment limit.

Importantly this process will also make the transaction faster as the in-card fingerprint sensors are positioned to provide consumers with an easy, one-tap process for payment. By embracing fingerprint biometric payment cards, banks and payment providers will not only improve consumer security and hygiene, but also make the process of purchasing goods using their contactless card quicker and easier. Ultimately this can help cut the transaction time and, in today’s difficult retail environment, help to reduce queues at the checkout.

Personal protection is key

Contactless payments are quick and convenient, but are they safe? Biometric fingerprint authorisation links the person to the payment card. For transactions to be processed, the card has to be in the owner’s physical possession. This eliminates the incentive for theft or mis-use of payment cards. 

With this new method, fingerprint data is held securely on the card, not in a centralised database. Therefore, the owner’s biometric data never leaves the card and cannot be subject to a data breach. On top of that, as the owner has to present their fingerprint for a transaction, consent is required to use their data for every transaction. This makes the payment process secure for the payment provider, but also for the consumer, ensuring that their data cannot be hacked or recreated.

The future of payments

Contactless cards have become an increasingly popular payment method, accounting for £80.5 billion of payments in 2019, with a rise of 16 per cent on the previous year. The pandemic is helping to accelerate this shift towards a cashless economy even more. High street chains have been quick to recognise the value of contactless payments and in Europe, it’s now rare to see any shop or restaurant that does not accept contactless methods. While contactless adoption has traditionally been slower in the US, even mega-retailer Walmart has recently introduced contactless options for in-store shopping and delivery to protect its customers during the pandemic.

This is a changing and uncertain time. But we are currently seeing a widespread change in consumer behaviour with many consumers paying for goods and services by tapping their card rather than using cash. As consumer behaviour around payment continues to change, it seems likely that in a post-Covid-19 world, cashless solutions will be more important than ever. If consumers like and get used to the process of faster contactless payments with higher limits during this period, they will be loathed to lose them when life returns to ‘normal’.

These changes have even led many analysts to suggest this large-scale shift to contactless card payments could mean the end for cash in the long term, as more consumers embrace contactless to increase safety during the payment process, and beyond.

With consumers increasingly demanding greater security and hygiene in their payment process, it’s important that banks and card providers respond to this health crisis now by embracing innovative, secure and hygienic fingerprint biometric smart cards, to prepare the payments sector for the future.

David Orme, Senior Vice President, IDEX Biometrics ASA

David Orme
David Orme is Senior Vice President of IDEX Biometrics.