In the 1989 movie Back to the Future Part II, characters are depicted accessing doors and paying for things (e.g., a cab fare) by fingerprint. Increasingly, this is becoming reality - a society where a person is their form of access and payment, and where any physical device is a convenience rather than a constraint.
These are times of unprecedented growth and innovation in the biometric technology market. In 2017, the global biometric market was valued at just shy of $15 billion USD. By 2025, the size of the market is forecast to skyrocket 400% to nearly $60 billion in value (Source: Grand View Research, Inc.). This represents a Compound Annual Growth Rate (CAGR) of almost 20% over the 8-year period. In comparison, the S&P 500 grows at a CAGR of roughly 10% (based on 100-year historical returns from 1917 to 2017).
Beyond the astounding increase in market size, the explosion in the breadth of biometric applications is equally impressive. Biometric technology has moved from niche use cases in government, security, and transport, to a wide array of business models. Banking and finance, hospitality, healthcare, consumer electronics, fitness, family entertainment centers and amusements, retail, and other industries are adopting biometric options for authentication and identification.
Apple released its Touch ID feature on the iPhone 5S in 2013. Since its release, other mobile device companies have introduced additional biometric authentication features, such as facial and iris recognition. As these technologies become more mainstream, consumer hesitance to adopt biometrics has precipitously declined. In turn, this has led to the current wave of innovation in the industry.
This blog post highlights three applications of biometric technology that will likely become increasingly commonplace in the coming years, including payments, student programs, and national identification. Each of the three sections discusses not only the core application, but the holistic value propositions created around the core use case. In addition, these profiles focus on applications in the physical world, as opposed to online, and pertain to both the private and public sectors.
The ability to pay with biometric technology eliminates the time customers spend shuffling through personal items and pockets to produce any form of payment (e.g., cash, cards, mobile devices), thereby expediting merchant queues. Paying via biometrics also greatly mitigates the likelihood that the customer or merchant become a victim of fraud, subsequently enhancing transactional security. This functionality is currently being used around the globe, in combination with features ranging from ordering preference recommendations to loyalty to facility entry and more.
Alibaba's Ant Financial in China has unveiled "smile to pay" technology, allowing customers to pay via facial recognition at ordering kiosks, without the need for a phone, card, or cash (Source: TechCrunch). Oftentimes, applications such as these remember common orders to make the checkout experience even faster and more satisfying. In the United States, Yombu is deploying its payment technology - frequently linked to access control or loyalty - at locations nationally. In the "quick serve" space, at places like coffee shops, fast food, and convenience stores, Yombu's technology allows customers to pay by fingerprint at point of sale and instantly earn rewards - no cash, card, phone, or other device required. The company also anonymizes transaction data for merchants, allowing them to leverage customer data for targeted marketing campaigns.
Yombu operates across a range of other sectors, including fitness and family entertainment centers (e.g., indoor trampoline parks, indoor children's play centers). In these locations, it can be particularly inconvenient to carry cash, cards, or a phone. Yombu resolves several problems in each industry beyond payments. For example, in fitness clubs, Yombu's biometric solution suite includes a way for members to enter the facility by fingerprint as well as a personal training session check-in feature that helps mitigate trainer fraud and improve data quality. In this space, Yombu is working with large software partners such as Motionsoft to implement its technology at top national fitness chains.
CLEAR, another player in the U.S., also recently expanded beyond airport security to expedite sports fans through stadium security lines and allow for age verification plus payment for alcohol (and other) purchases (Source: BusinessWire). CenturyLink and Safeco fields in Seattle have been outfitted with this technology at select entry points and concession stands. In order to replace a traditional ID review with biometric age validation, CLEAR and its stadium partners had to work with the State of Washington to gain approval. For the ability to speed through airport lines and now pay at stadiums, CLEAR charges end users an annual subscription fee.
In the future, beyond expedited lines and fraud reduction, biometric models can impart other benefits on the financial services sector. For example, biometric-linked checking programs for retail banks have the power to reduce the cost to serve lower-income customers. By removing the need for banks to issue (and re-issue) plastic debit cards, financial institutions could more profitably service mass market customer segments.
A range of biometric applications are being deployed at primary, secondary, and higher education institutions. Typical programs include food redemption at cafeterias, attendance and library book tracking, building access control, and even locker authentication.
The most common application is replacing food redemption via tickets (or ID cards) with a fingerprint (or iris) scan. As far back as two decades ago, secondary schools in the U.S., Asia, and particularly the United Kingdom (UK) began implementing school lunch purchase programs predicated on the fingerprint biometric. The benefits of biometric authentication in cafeterias include speeding up queues, offering students a convenient way to pay, and notably, removing any outward identifier that could stigmatize a student redeeming a subsidized meal.
To provide one recent example pertaining to food redemption, in 2017, the Vista Unified Public-School District in San Diego rolled out a fingerprint-based school lunch purchasing system across all schools in the district (Source: San Diego Union Tribune). In higher education, Virginia Commonwealth University (VCU) installed iris biometric readers for dining hall access in 2015. Before the implementation of iris ID, students who lost their ID cards over the weekend would not be able to receive a replacement ID - or subsequently eat in the dining hall - until the following Monday when the administrative offices reopened (Source: CR80 News).
The UK has led the pack with roughly 4 out of 10 secondary schools (as of 2014) using biometric technology as a means of identifying pupils (Source: Independent.co.uk). School lunch redemption and attendance tracking are the most common uses in the UK, but some school libraries also offer students the ability to check out books by fingerprint. Global growth in the education segment of the biometric technology market is expected to outpace overall growth, with a 26% CAGR through 2021 (Source: Technavio).
The Aadhaar program, which is managed by the Unique Identification Authority of India (UIDAI), represents the world's largest biometric ID system. Through the system, citizens register their biometrics - specifically fingerprint and iris - and are given a unique 12-digit number. While Aadhaar is by no means without issue, it is a good example of how a national biometric program could work at scale and offer a range of benefits.
Considered proof of residence, the Aadhaar system allows government departments, banks, telecoms, and other entities to validate a person's identity. One of the first major Aadhaar programs involved linking biometric validation to the direct benefit transfer scheme; the goal was to mitigate fraud in the welfare program by requiring biometric validation to receive a direct governmental cash transfer. Government agencies have also created biometric-verified attendance systems using the program, which prevent delinquency and better link pay to actual hours worked.
In addition, Aadhaar is paving the way for a post-mobile-pay world. Western Union in India requires customers to use their fingerprint to identify themselves before completing a money transfer, obviating the need to show any physical documents. And in 2017, the Indian government mandated that banks and ATM and payment networks migrate to Aadhaar-based biometric ID in order to prevent fraud and increase security as India moves toward becoming a cashless society (Source: Tearsheet).
Payments, student programs, and national identification are but three areas illustrating the rising prevalence of biometric technology. There are numerous other applications. In each setting, integrated solutions that extend beyond solving the core problem exponentially enhance value for constituents. As biometric systems continue to grow and become more commonplace, we are moving toward a frictionless world where all you need is you - each person is their own form of access, identification, payment, and more.
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