The market for contactless payment cards grew exponentially over the past year, supported by ongoing hygiene concerns amid coronavirus, but obstacles to its success remain in terms of transaction limits and its vulnerability to fraud.
These challenges could be circumvented through biometric payment cards that rely on a fingertip sensor embedded in the card’s chip to authenticate the user. This innovation has garnered the financial world’s interest with UBS Bank indicating that biometric payment cards with built-in fingerprint sensors could add $5 billion to revenue in the global banking sector by 2026.
In the UAE, contactless payments now make up 84 percent of all face-to-face card payment transactions as customers move away from tapping PIN codes on POS machines amid coronavirus concerns, a recent study by Dubai-based bank Emirates NBD recently indicated. The global contactless payment market size was valued at $1.2bn in 2019 and is forecasted to reach $5.4bn by 2027, according to research from Allied Market Research.
This growth, however, could be further increased were it not for the bank-imposed limits on how much can be spent through the contactless card without the need for a PIN verification.
While this is meant to minimise the risk or damages from fraud, it ends up discouraging customers – wary of touching a POS machine in the age of Covid-19 – from making big-ticket purchases with their contactless cards, explained Ramzi Saboury, general manager of fintech company Zwipe, MENA region.
For example, banking industry trade body UK Finance recently asked HM Treasury to consider increasing the maximum amount that can be paid using contactless cards from £45 to £100, according to an article by Computer Weekly. In the UAE, the Central Bank increased the transaction limit for contactless cards from AED300 to AED500 last year.
As such, biometric payment solutions are increasingly being embraced as a means to further the growth of the contactless payment market by offering almost fool-proof solutions to fraud challenges.
“With contactless cards, transactions over a certain limit require customers to enter their PIN code on the POS machine which is something most everyone avoids nowadays for fear of exposing themselves to coronavirus,” said Saboury.
“While it is understandable that big payments through contactless cards require authentication, biometric cards eliminate this need as only the user whose fingerprint has been registered on the card can execute a transaction,” he continued.
Ramzi Saboury, general manager of fintech company Zwipe, MENA region.
After two trials and product development work, Zwipe will be releasing its third generation biometric payment card for commercial use in October.
“Through biometric payment cards, we are almost annulling fraud completely in POS purchases. Fraud is a big challenge nowadays and as scammers can skim your PIN number or card but how can they skim your fingerprint?” asked Saboury.
“There is no PIN or password stored anywhere with biometric card. Your fingerprint data is stored only on the card itself and never leaves it,” he added.
Almost 39 percent of UAE consumers were targets of attempted online fraud, 27 percent of consumers experienced phishing, 19 percent experienced credit card fraud and 17 percent reported receiving counterfeit goods, a new survey from Visa, Dubai Police and Dubai Economy indicated.
Using fingerprints as authentication for payment also means that customers don’t need to memorise a PIN number, added Saboury.
Established in 2009 in Norway, Zwipe set up presence in the MENA region in April and Saboury said “the MENA region looks very good in terms of the appetite and momentum we have seen for biometric payments. It is very promising.”
Customers are wary of touching a POS machine in the age of Covid-19.
“Global research indicates that the highest growth in card users for 2021-2022 is here in the MENA region. At the same time, it is considered a largely unbanked region if you look at the emerging market opportunities and the countries going out of sanction with zero cards,” said Saboury.
Zwipe is in talks with 30 prominent bank groups operating out of the region to launch the pilot programme for the biometric payment cards next month.
“We have banks in Kuwait, Saudi Arabia, UAE, Oman, Jordan, Iraq, and Egypt reacting and preparing their systems for the pilot programme. These are the leading banks operating in the region and would have a domino effect on the others,” said Saboury.
Zwipe is also launching the biometric cards with banks in Europe and the US but Saboury said the MENA region could be the pioneers of this payment solution.
Mobile payment solutions, through the likes of Apple Pay, are the main rivals for contactless biometric cards with some saying it is a more environmentally friendly method of payment (versus plastic cards) and more convenient.
The counterargument proposed by Saboury is that mobile payment solutions don’t work everywhere in the world and that some people prefer not to carry their phone around or worry about battery loss. Only time will tell which of the two camps is right.
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