Why banks like BMO are testing Pay by Selfie technology
As the US enters an era where the responsibility for credit card fraud is shifting to stores and merchants, banks are looking for new ways to verify user identities when you’re using one of their credit cards. The concern about security is well-founded: In 2014 alone, over 1 billion personal records were illegally accessed, and that number will certainly rise as hackers employ increasingly sophisticated schemes to get at customer and card data. Last year, in 2015, Vtech, the US prison system, and the FBI were all hacked.
To reduce the possibility of fraud, Canadian bank BMO announced earlier this week that it’s rolling out a new technology called Pay-by-Selfie. Developed by MasterCard, the technology places a biometric security layer on top of general credit card usage. When a card holder swipes his card during a transaction, he also takes a picture of himself. The photo is then compared to an original photo the card holder took of himself when first signing up for the service. If it matches, boom — the transaction goes through.
Steve Pedersen, head of North American corporate card products for BMO Financial Group, explained in a statement, “Mitigating the risk of fraud is always our top priority, and the inclusion of this technology is going to make payment authentication easier, and will strengthen the security of the entire payments ecosystem.”
BMO is first introducing Pay-by-Selfie to its own employees so it can work out any kinks in the system before rolling it out to the bank’s clients. In August of 2015, First Tech Federal Credit Union was the first financial institution to trial MasterCard’s new technology. BMO and other FIs are increasingly experimenting with new technologies. New EMV standards are spurring a technology upgrade cycle on the cards themselves as well as across the payments ecosystem. Merchants and card providers who don’t follow the new regulations may see their write-offs for fraudulent transactions increase dramatically over the next couple of years.
Technology like Pay-by-Selfie isn’t just about security — it’s also about upgrading banking technology to a point where it’s on par with other apps customers are using. Part of the magic of on-demand driving apps like Uber and Gett is that they have made the entire taxi payment process invisible to the user. Both firms allow you to take a snapshot of your credit card, so there’s no need to clumsily input credit card and identity details using a mobile device. Banks understand that they’re not only competing with one another in this environment, but they’re competing to have their apps on their customers’ home screens.
“As an industry we have to go this way. Our customers are expecting it of us and it’s important for us as an industry to show the innovation,” BMO’s Pedersen told CNBC in an interview.
Pay-by-Selfie was developed by MasterCard in its in-house technology lab, MasterCard Labs. The credit card firm has prioritized driving innovation in payments as it wants to play a major role globally in moving the world from cash to credit. The Pay-by-Selfie service is part of a larger biometric push called MasterCard Identity Check, which offers retailers a range of verification services including single-use passcodes sent to customers via SMS.
According to Finextra, MasterCard’s 6 month pilot program with ABN Amro customers ended with more than three quarters of participants saying that they wanted to continue using a fingerprint and/or facial recognition to complete payments. Approximately 90 percent of the 750 participants in the trial said they wanted to replace their passwords with biometric identification.
MasterCard isn’t the only firm focused on using facial recognition to verify transactions. Online retail giant Amazon recently filed a patent on a process that would “allow shoppers to make purchases by taking photos and/or videos of themselves rather than keying in their account password.” Amazon isn’t the only online retailer thinking along these lines, either. Chinese Internet giant Alibaba is also developing a payment system based on facial recognition.
“[Using] online payments to buy things is always a big headache,” Alibaba founder, Jack Ma told a conference in 2015. “You forget your password, you worry about security. Today we’ll show you a new technology, how in the future people will buy things online.”Photo credit: d26b73 via Visual Hunt / CC BY