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As Japan becomes the latest country to experiment with biometric cards, advocates argue that high issuance costs will reduce over time as adoption picks up.
On Monday (May 23), Swedish biometrics firm Fingerprints and Japanese manufacturer MoriX announced that Mastercard has given them the green light to produce biometric payment cards for the Japanese market.
Such a move would mark the first launch of a biometric payment card in Japan and would bring to life a long period of experimentation between Fingerprints and MoriX.
In 2018, the two companies announced that they had partnered with Idemia, an augmented identity company, to conduct the first ever trial of a biometric payment card in Japan.
This was followed, in 2021, by an announcement that Fingerprints and MoriX would go ahead with the development of such a card.Receiving Mastercard’s approval for card production can be seen as the final piece of the puzzle.
By developed market standards, Japan is arguably behind many of its peers in terms of electronic payments. Cash is still the most popular payment method.
However, the country has made a significant push in recent years to increase non-cash payments. In the lead up to the 2019 Rugby World Cup and the 2020 Olympics Games, the government introduced several initiatives to promote electronic payments, including an incentive programme providing tax rebates on card and e-money payments.
Although COVID-19 interrupted much of these efforts, it has also provided new encouragement to move away from cash.
According to the Bank of International Settlements, card payments (including e-money) growth is accelerating in Japan, increasing year-on-year since 2016 and jumping by 23 percent in 2020.
Both companies will feel that biometrics cards are launching at a good time for the Japanese market.
“There is a growing preference for card transactions among Japanese consumers, who are choosing touch-free, safe and seamless ways to pay,” Fingerprints said in a statement.
“Adding biometrics to the contactless payment card will increase security, making it possible to remove the payment cap, currently at ¥20,000 ($157), and allow for hygienic and worriless contactless payments for all transactions.”
Michel Roig, president of payments and access at Fingerprints, added: “Introducing biometric payment cards in this region offers great benefits for banks, merchants and consumers alike, as contactless payments in Japan continue to grow quickly.”
Japan is not the first country to introduce biometric cards. A number of countries have piloted or launched the technology, including the US, France and South Africa.
In April 2021, Fingerprints and Mastercard launched the first biometric card in France, supporting two tiers of deferred debit cards issued by Crédit Agricole.
The France rollout was the product of a long-standing tie-up between Crédit Agricole and Mastercard.
In a 2019 pilot study, Mastercard partnered with Crédit Agricole to provide biometric cards to 200 customers in Touraine and Poitou, who could spend up to €30 per transaction using the card’s fingerprint sensor.
As the card evolved following its commercial launch, the biometric payment limit was raised from €30 to €50, and was later scrapped altogether.
In June 2021, Visa launched a biometric card issued by BNP Paribas, also using Fingerprints’ sensor technology.
How do biometric cards work?
According to Mastercard, its biometric cards have been designed to be accepted on all existing point of sale (POS) devices.
This means that POS devices do not require any specific update to accept them, as the full biometric processing happens entirely within the card.
As such, Mastercard is expecting that biometrics will ensure that physical cards continue to be a popular way to pay, despite the emergence of mobile payments, digital wallets and quick response (QR) codes.
“Biometric cards improve the convenience and security of payment cards," Dania Saidam, vice president of communications at Mastercard, told VIXIO.
“Ultimately, it is all about offering choice to consumers and ensuring that however they choose to pay, it is seamless and secure.”
Stefan Petterson, head of investor relations at Fingerprints, said he also believes that biometrics will safeguard physical cards from rival payment methods.
“Our view is that adding biometrics will increase the attractiveness of using payment cards,” he said.
“There will be no need for a PIN, and the increased security means that you will be able to use contactless payments regardless of the amount, i.e. no payment caps.”
Petterson added that biometrics will also make such cards compliant with Payment Services Directive 2 (PSD2) and Strong Customer Authentication (SCA).
“There will be no need to bother users with PIN verification after a certain number of contactless payments are made,” he said, “or when a certain aggregate payment amount is reached.”
For Saidam, biometrics offers a kind of unbreakable two-factor authentication. “Fingerprints are an inherence factor (something you are), which complements a possession factor (something you own) to enable strong, two-factor authentication, as articulated in the PSD2 framework,” she said.
At present, Mastercard’s biometric cards are designed primarily for in-store purchases; however, both Petterson and Saidam noted that there are “ongoing discussions” regarding enabling them for online payments.
What are the costs?
For banks and end users, one of the first questions that will come to mind when looking at biometric payment cards is what costs are involved, and are they worth it?
Compared with regular cards, biometric cards are significantly more expensive to produce and run.
However, according to Petterson, there is also a certain type of consumer who is willing to pay significantly more in fees to go biometric.
BNP Paribas, for example, charges customers an additional fee of €24 per year to use its Visa Premier biometric card.
Petterson says such fees more than cover the cost of issuing the card for the bank and a significant number of customers are happy to pay.
In 2021, for example, according to a Fingerprints survey of 1,000 people in France, 55 percent of respondents said they were willing to pay an average of €3.20 per month in extra fees to use a biometric card.
In theory, as uptake of biometric cards increases, production costs will likely be reduced over the time and end users will no longer need to pay a premium. This could then support mass rollout.
“Our aim is to continue enabling a lower total card cost,” said Petterson. “Our close partnerships with key ecosystem partners, such as leading secure element, inlay and card producers, enable the optimisation of various components in relation to each other.
“This makes it possible to reduce the complexity of the inlay while also simplifying the production process.”
Mastercard’s Saidam agrees that with increased uptake will come increased savings for consumers.
“With economies of scale and as adoption grows, card manufacturers will be able to propose biometric cards with a strong business case for issuers, similar to the roll-out of contactless cards,” she said.
