Payments

How Mastercard is applying lessons from Apple Pay to its plastic cards

  • Mastercard has made strides in mobile payments, but credit cards still aren't going anywhere for a while
  • Taking a page from Apple Pay, Mastercard is testing biometric authentication on plastic credit cards
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How Mastercard is applying lessons from Apple Pay to its plastic cards

Apple may have gotten people used to the idea of authenticating payments and verifying identity with their fingerprint, but that Pay product hasn’t really taken off yet. Now, Mastercard wants to bring that behavioral habit to its cards.

The credit card giant revealed Thursday that it’s testing fingerprint biometrics in cards in South Africa to help it to detect and prevent fraud, with plans to run the same trial in Europe and Asia. A future version of the card will employ contactless technology, according to Mastercard.

“Companies are looking at Apple Pay’s failure to really take off and thinking about how to improve the user experience of both mobile and existing payments systems,” said George Avetisov, CEO of biometric security company HYPR Corp.

The card works with existing chip card terminals at the point of sale. Customers just insert the chip per usual while keeping their finger or thumbprint on the embedded sensor. At least for now, customers have to go to a physical bank branch in order to obtain the card and register their fingerprint to it.

It almost seems like a step back from global mobile payments efforts – but then again, mobile payments haven’t really reached their tipping point in most regions yet, with Asia being the exception.

Mastercard’s main business may be in cards but the company has already made strides in innovating mobile payments, most notably by launching payment technology in October that lets customers verify their identity with fingerprints or selfies when shopping online.

“It’s going to take a long time for biometrics to kill the password, but there will always be some kind of use case for the password as long as it’s around,” Avetisov said. “It’s the same thing here. It’ll take a long time for mobile payments to kill credit cards, and there will be interesting use cases for plastic credit cards.”

It is unrealistic that the biometric cards will come to the U.S., since its issuers have just migrating away from magstripe cards to chip cards requiring signatures from cardholders. The point of the migration was to increase security and reduce card present fraud but many argue the switch from stripe to chip makes little difference unless cardholders can enter their pin to verify a payment, versus providing a signature.

Many merchants and retailers still haven’t implemented a year and a half after the deadline to do so. The delay stems largely from the high costs associated with the migration, and it’s likely there will be similar pushback if they’re required to implement a chip-and-pin process.

“The next logical step in EMV authentication is chip-and-pin, however, most issuers have balked at the increased cost,” said Mike Moeser, director of payments at Javelin Strategy. “Deploying a fingerprint scan on a card would be a significantly more expensive EMV deployment that likely would not be cost justified.”

Nevertheless the biometric card is a useful innovation for the security and usability of credit cards. Mastercard should expect feedback from the test on how it can work with merchants in using biometrics to defeat counterfeit card fraud at retail locations, Moeser said. It’s also a useful application in areas with poor or no Internet connection and a stronger security measure for high value or no-limit credit cards, Avetisov said.

“People need to understand it’s going to be a very long time before we kill the credit card,” he said.

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