Originally published in Finextra on February 1, 2021
Last year Amazon announced the adoption of a game changer for payments; Amazon One, which allows shoppers to pay at stores by placing their palm over a scanning device when they walk in the door or when they check out. A bold move by the retail giant which aims to offer the complete shopping journey for customers by changing how identification at check-in can substitute authentication at check-out for payment.
It is important to highlight that biometrics has long been able to address the convenience and the security needed to enable innovative and safe payment experiences, so it is great to see these developments continuing. It’s a revolutionary concept in image recognition usage, however it does come with limitations on the payment side, as most payment methods aims is for ease of use for first-time payments by unknown customers re contactless.
How this works, is the first time a new customer, or alternatively existing Amazon account holders, use the technology, they will scan their palm and insert their payment card at a terminal. Any time after that they can simply pay with their hand – meaning it only works if the customer has registered with the system before. The technology has only been deployed in the USA for now in two of Amazon’s stores in Seattle, Washington. Over time, if successful the aim will likely be for Amazon to roll it out further enabling widespread adoption.
So, with Amazon taking the payments bull by the horn, what does this mean for the rest of the financial industry and are biometrics payments here to stay?
A need to adapt
The financial sector has long embraced innovation in tandem with the security industry and more recently, the retail industry. They’ve done it through new ways like contactless and lately mobile payments. Within that evolution, the traditional companies in the financial sector have moved at a more regular pace, while it’s been the disruptors like Monzo that have looked to push the boundaries and change the dynamic. However, these companies tend to be smaller, and have the agility to do this – with the established players adopting these innovations later, but still maintaining their customer base through their reputation and over many years of building trust. Amazon’s push into the sector represents a big disruption with such an established and trusted large player, with the infrastructure and customer base to establish itself.
With this move, the industry is being forced to react and show it can be innovative, or face losing potential customers to new players in the sector and ones with the pull that Amazon has.
Meeting Security Concerns and building trust
Even with Amazon’s reputation for disrupting a market and delivering a high-quality service though, when it comes to payments, security is more important than anything and introducing a new service takes times to be adopted by consumers. According to the UK Finance Payments Report 2020, for the first time in the UK, over half (51%) of all payments were done by card. Online and contactless payments were substantial drivers of this growth, with eight out of 10 UK adults using contactless payments in 2019. Also, the number of contactless payments made in the UK increased by 16% in 2019 to 8.6 billion payments. The rise in card payments has seen more users turn to online banking as well. In 2019, well over two-thirds of UK adults (72%) used online banking and over half (50%) used mobile banking.
In terms of implementing biometric payments, it is important to remember that there have been multiple attempts to introduce the idea of the consumer being both the payment method and the security. Whilst the notion of people being both, may fill some with excitement, it may also alienate others, so it is important that the security is seen to be just as robust as the buzz surrounding it.
Despite many changing their payment habits during the pandemic, they still might be reluctant to hand data over to big corporations. Where established financial players have the advantage is in that they’ve been responsible for people’s money for years and have, more often than not, shown they can integrate new technologies when the moment is right and in a safe way.
In order for Amazon to be successful, it must look to build that trust amongst consumers beyond its regular practices and show it can handle innovative technologies that the wider public may not be comfortable with. To do that it needs to ensure the right security protocols are in place meaning securing all data, both at rest and in motion, through tokenisation or encryption to ensure that data remains protected whether it's being processed in-store or through the card details which will be held on file at Amazon. It must do all of this, but while also educating and informing its customers that is what it is doing and build that trust that it will be keeping their sensitive details safe. If it can do that, it presents a real challenge to an industry that has long had its established global players and now needs to be wary and prepared to fight back and keep their place.
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