Face-to-face payments: Mobile vs Plastic

Face-to-face payments: Mobile vs Plastic
By Paul Prior, Senior Vice President Client Engagement

As recently reported (BBC, CNBC), MasterCard have just released a payment card with an in-built fingerprint sensor.  There is no question that the introduction of EMV has had a significant impact on driving down card-present fraud and while fingerprint scanners are not foolproof this type of biometric authentication is certainly more secure than a 4 digit PIN. This technology finally brings biometric authentication to face-to-face payments in a manner that doesn’t require the merchant to deploy additional hardware. It also potentially translates to a convenient mechanism for consumer authentication with no adoption barrier at a merchant with an EMV certified terminal.

 

In my view, the fact that a biometric authentication method has been added to the traditional plastic form factor, encourages a comparison with mobile NFC based payments given that biometric authentication has been available on smart devices for some time. My interest was particularly piqued by SC Magazine’ s headline “MasterCard hedges its bets on fingerprint scanner in new card” which I had hoped might touch on a comparison of plastic as a currently preferred method of consumer payments with mobile (NFC based) wallets. Disappointingly for me, the article focused more on the scanner and less on the hedging.

 

Challenges

My colleague Natasja Bolton has over the past couple of weeks, published a number of articles discussing the adoption and success of mobile payments. There is no denying the industry’s enthusiasm for this technology and indeed the various analyst/consultant/vested interests’ predictions about the growth potential of this market. The main issue however, appears to be adoption rates. American Banker reports on large players US Bank and  JPMorgan Chase making efforts to encourage mobile wallet adoption through loyalty, Although interestingly both articles acknowledge the adoption rates are not what they were expected to be. This however, is not discouraging organizations from investing in this technology. Pymnts.com reported recently that MasterCard themselves are driving MasterPass adoption through innovative partnerships and interesting use cases like the vending machine space. Even potential “disruptors” in the payments industry like Orange Bank seem to be firmly betting on the mobile outcome.

 

However, pymnts.com also presented findings from a 2017 survey that would suggest that the adoption of mobile wallets is actually in decline. In her article, “An Inconvenient Apple Pay Truth” Karen Webster suggests that “the reason [consumers] don’t use Apple Pay is because they’re happy with their existing payments method”.  Looking at the statistics reported, it appears that just less than half of respondents expressly indicated that the reason they don’t use mobile wallets is exactly because they’re happy with their current method (i.e. the plastic card). Also of interest is a significant percentage of respondents who indicated that they don’t know how mobile wallets work. I find this intriguing and I have to wonder why this is? In general, these wallets are not particularly difficult to use. In an age of smart devices being used by all and sundry, for all manner of complex functions, one has to at least consider that consumers are not motivated to learn simply because they are happy with their plastic! At present, despite the ubiquity of smart devices, I would suggest that consumers are not naturally inclined to reach for their phone as a form of payment. This may indeed change, and as alluded to above, the industry seems to be betting that ultimately it will. But for now, at least in terms of mobile NFC payments the tipping point appears some way away.

 

Anecdotally, this aligns with the opinions of a number of senior executives at some of our clients with whom I have personally discussed the issue. To paraphrase the old adage –  if it ain’t broke…

 

Which brings me back to MasterCard hedging their bets – in my view the introduction of this new card reinforces their commitment to the future of the plastic card as the form factor of choice for face-to-face transactions. Rightly or wrongly, there appears to be a consensus that even given the risk of these fingerprints being “hacked” (!), it is not cause enough for concern for security professionals to dissuade users from using this technology. Coincidentally this week, I also came across a meme that said “if ApplePay came before credit cards, the invention of a battery-free payment tool that fits in your wallet might be seen as an improvement”. I am not so sure, but it would appear that at least according to MasterCard, the lowly plastic card is not quite dead yet.

 

While an interesting topic in payment industry technology terms, from a Sysnet perspective however, the form factor is largely irrelevant. Additional and stronger authentication methods should be welcomed. However, until such time as the data being transmitted from the consumer to the acquirer (in the form of the PAN) is rendered useless to those that would be “hackers”, we will continue to concern ourselves with the security of every link in the payment chain.