Fintech startups and traditional financial service providers have seen significant upside opportunities in the payments sector. Smartphones are already an integral channel for eCommerce and Point of Sale (POS) payment transactions.
The global COVID-19 pandemic accelerated the transition to mobile phones for payments. Throughout the pandemic, mobile devices were facilitating payment transactions online and in-person — e.g. while using the Internet to shop at retail sites, or on-premises by using a digital wallet via Near-Field Communication (NFC).
Remote Mobile Payments Market Development
According to the latest worldwide market study by Juniper Research, the value of biometrically authenticated remote mobile payments will reach $1.2 trillion across the globe by 2027 — that’s rising from $332 billion in 2022.
These transactions use biometrics, typically facial and fingerprint recognition, to authenticate remote mobile payments. This growth of 365 percent is driven by recent regulatory changes, with the introduction of Strong Customer Authentication (SCA) driving usage.
The new research study identified Original Equipment Manufacturer (OEM) pay solutions — including Apple Pay — as a driver of mobile payment biometrics adoption.
Juniper analysts urged OEM-Pay vendors to use their influence over smartphone design to enhance built-in biometric systems within devices and ensure that security is maintained as new threats emerge.
The SCA requirement of PSD2 (Second Payment Services Directive) has motivated financial institutions to implement biometric authentication. To meet this requirement, providers have capitalized on smartphone biometric authentication capabilities, accelerating the technology’s adoption.
The research study found that the volume of biometrically authenticated remote mobile payments will grow by 383 percent over the next 5 years, reaching 39.5 billion globally by 2027.
To maintain trust and reduce fraud, financial institutions are implementing step-up authentication, where certain transactions are escalated for biometric approval based on risk scoring. Therefore, vendors must offer multiple ways to authenticate, as well as develop new techniques to keep biometrics secure.
Juniper analysts found that facial recognition is paving the way for greater adoption of biometrics in mobile payments, with OEM-Pay solutions leveraging the near-ubiquity of facial recognition capabilities to provide easier checkout experiences for customers.
However, with the use of facial recognition increasing, the technology has become a target for malicious actors using advanced spoofing techniques, such as digital injection attacks.
Outlook for Mobile Payment Applications Growth
According to the Juniper assessment, mobile authentication vendors must prioritize the design and implementation of enhanced liveness detection, and anti-spoofing techniques, to combat the ever-evolving role of fraudulent players and ensure that security is not compromised.
Authentication for smartphone-based payments and access to services is typically achieved through a variety of means, often involving a PIN or password. And, mobile devices have already provided a variety of different forms of biometric authentication.
That said, while true password-less authentication hasn’t reached widespread adoption, there’s a surge in creating user experiences where passwords are masked — such as biometrics used to unlock a password. I anticipate that this approach could gain increased adoption over time, thereby increasing growth.