Revolutionary advances in payment technology continue to redefine the way consumers purchase everything from groceries to gas.
As technological advances make buying and selling faster and easier, demand for digital and contactless payments is on the rise. This progress is so important, in fact, that digital and contactless payments are becoming a major player in consumer purchasing decisions: 30% of consumers say they’re less likely to buy from a local business if it doesn’t offer contactless payment, and more than half of high-income consumers avoid local businesses that don’t offer contactless payment.
The next wave of change comes in the form of biometrics, a type of artificial intelligence (AI) that many Americans have already experienced. Biometrics are streamlining U.S. airport security checkpoint experiences and even evolving how we order food in restaurants. Now biometrics are being used for a new purpose: to authenticate and authorize payments.
Consumers Are Ready to Use Biometrics
As biometrics technology becomes more prevalent, consumers are becoming more confident using it in their daily lives.
A recent report from Penn State College of Engineering reveals that 61.1% of consumers are comfortable using facial recognition technology. Additionally, half of surveyed consumers in a study by Fingerprints.com, a leading biometrics company, say they now want a biometrics payment option and would be willing to switch banks so they could use one.
What Is Pay by Face, and How Does It Work?
Biometric payment methods allow consumers to authenticate and authorize purchases using their face. This technology is known as pay by face, facial payment, facial recognition payment (FRP), or smile to pay.
At point of payment, the technology matches the customer's face with data created and stored during an initial setup (which typically includes a scan of a customer’s face). Once a facial payment system connects the customer's preferred account to their biometrics, the customer’s identity is verified, and the payment is made.
This streamlined process benefits consumers, merchants, and payment processors by reducing the steps a consumer needs to take to make a payment, cutting down time customers spend waiting in lines, and helping stores increase sales volume. Stores can embrace additional benefits by being able to sell more products in less time.
How Close Is the United States to Paying by Face?
China, the world’s largest market, is already using facial recognition payment in subway stations and 1,000+ convenience stores. Other countries are rolling it out, as well. Russia deployed facial biometrics to accept Moscow Metro payments, and the FIFA World Cup employs facial recognition to scan for disorderly fans.
Although pay-by-face technology isn’t widespread in the United States, merchants are moving in that direction. In fact, 86% of IT and line-of-business executives predict that AI, such as pay-by-face technology, will be very or critically important to business success in the next two years.
“Using facial recognition and other AI-based biometric technologies to process payments is an emerging AI use case,” says Beena Ammanath, executive director for the Deloitte AI Institute. “It’s not here yet, but it’s most certainly coming in the near future. There are some core building blocks that need to be in place before facial payment technology is ready for prime time. Simply throwing more money at the problem won’t be enough.”
How far away is America’s real-world rollout of pay by face? The answer depends on how quickly certain challenges can be addressed.
Data Management
According to Ammanath, Deloitte AI Institute research indicates that poor data are one of the major barriers that prevent the widespread deployment of AI-based technologies. A strong data backbone is needed to capture relevant biometrics information and use technology to recognize authorized users and process transactions.
Reliable systems must be in place to map faces and store facial data with accuracy and efficiency. This will require hiring data management workers who have the necessary skills to oversee all the analytic tasks essential to building trust in facial payment technology.
Regulatory Guidelines
Illinois currently restricts the use of biometrics, and other states may follow close behind. Although no facial recognition laws exist at the federal level today, several are being considered, and they may mirror facial recognition data protections seen in other parts of the world.
European Union General Data Protection Regulation (EU GDPR) laws, for example, safeguard biometrics information, including facial recognition data, by requiring every payment to be authenticated by certain touchpoints (called two- or three-factor authentication; EU GDPR requires two-factor authentication):
- Something only the user knows (e.g., a PIN)
- Something only the user has (e.g., a key fob)
- Something the user is (e.g., biometrics)
Facial recognition fulfills one of the three methods required for two-factor authentication, but a second would also be needed (a password or device, for example). In three-factor authentication, all three authentication methods are required.
Regulation at the federal level won’t be the only factor to consider, either. Rules and guidelines will be needed within companies that deploy pay-by-face technology, too. “Widespread deployment of technologies like facial payment requires enterprise-wide data governance and clear strategies for harnessing the power of AI and data,” explains Ammanath.
Security and Privacy Concerns
While no payment system is completely immune to vulnerability, pay-by-face technology is currently more difficult to hack than other authentication methods.
And while signs indicate that consumer comfort levels are rising — and will continue to do so — some consumers are still hesitant to use biometrics due to concerns about data privacy.
“The holy grail for digital payments is to find a mechanism that is both highly convenient and highly secure,” says Ammanath.
AI-First Businesses Lead the Way
By 2025, the market value of facial recognition is expected to reach $8.5 billion, which represents significant growth from $3.8 billion in 2020. The demand for frictionless, contactless payments is climbing as consumers and merchants become more comfortable using biometrics to complete transactions quickly and securely.
“Visionary [companies] are becoming ‘AI-first’ businesses,” says Ammanath. “Adoption of facial payment systems in the United States and other countries seems almost certain in the not-too-distant future.”
