2020 began a new decade with the pivotal coronavirus epidemic, which experts have surmised will significantly impact the retail industry. One of these results may be a boost in the trend toward cashless payments.
Biometric payment options are one facet of cashless payments that has trended, even before the coronavirus laid siege on the U.S. Biometrics technologies is expected to be a $11.1 billion industry by 2023, according to a July 2019 press release from Frost & Sullivan, a research and consulting firm. Still, this technology carries some security risks and liabilities. Convenience services operators will want to develop their awareness of this technology moving forward this year.
Biometrics, in brief
“Simply stated, biometric technology is for authentication and/or identification of a person based on physical characteristics,” said Michael Kasavana, the MSU/NAMA Endowed Professor Emeritus from Michigan State University.
Fingerprints are the most common form of biometrics in the automated retail industry in the U.S. Other examples include facial recognition, finger vein, walking patterns, voice, DNA, signatures and iris [eye].
Lincoln Smith, VP of product and co-founder at Swyft, said what sets these forms apart is the cost of the biometric hardware, accuracy of the scan and the size of the individual’s biometric database file. These database files can be very large and are often communicated over a mobile (3G/4G) connection with limited bandwidth.
Tim Perkins, cloud and internet services consultant at Tech2Success, said, “Fingerprint is regarded as the most economical option at this time, as the cost of production for readers has finally dropped in recent years.”
Facial recognition is on the industry’s horizon though, and biometrics may help operators with their own business security since they can be used for door locks and laptop security, he noted.
“Biometric use is really only limited by your available resources and imagination, with the capability to be implemented most anywhere a need to verify identity exists,” he said.
A growing trend
William Kolpasky, product manager at 365 Retail Markets, said biometrics, an alternative to cash, will play a large role in the U.S. shift toward cashless payments.
“As our solutions continue to integrate biometrics and mobile technology — such as our 365Pay app — into their products, consumers will only become more comfortable with their use and will come to rely upon those identification methods for the fastest checkout possible,” he said. “Pulling out your credit card was incrementally faster than using cash, and now biometrics makes checkout even faster than credit card.”
Kasavana predicts the use of biometrics within convenience services in closed venues, such as private break rooms’ vending machines and micro markets, will increase in the next several years. The use of the technology makes good business sense in situations where the same set of employees or customers frequently uses the same point of sale.
“As most vending and micro market customers learn, there is no faster form of settlement [method of payment] than a clear biometric,” he said. “Operators lean toward biometrics when they realize that the speed and transactional cost can be superior to credit/debit card acceptance and processing.”
Smith predicts consumers’ familiarity with biometrics technology will boost their comfort level. “Firstly, we’ll see another wave of mobile interaction just like WeChat Pay in China,” Smith said. “Then we’ll see that go away completely as consumers are willing to have their mobile data now held on the cloud and looked up using a biometric scan.”
Companies will then adopt it to stay competitive, with manufacturers or suppliers leading the adoption of the technology in automatic retail.
“I think the biggest impact will come from top down, where the likes of Coke or Pepsi will incorporate new experiences for their consumers,” he said. “Otherwise I would expect this from the bottom up; companies that serve these operators are where we should expect to see the change. Companies such as Cantaloupe Systems [part of USA Technologies], who provide a software to assist in route and inventory management will likely be the ones to include a biometric add-on to allow for authentication in operations.”
An increase in the sale of age-restricted products, such as cannabidiol-infused products or alcohol, in automated retail would be another promoter of the use of biometrics. “If that ends up happening, it’s pretty much guaranteed some form of biometrics will be the payment method, which we’ve already seen happen elsewhere in the world,” Perkins said.
Advantages of biometrics
Biometrics provides several benefits for automated retail, including the elimination of problems associated with passwords, disabilities and data security, Kasavana said.
Kolpasky said biometrics also enhances the user experience and checkout process, and 365 offers micro markets with biometric capabilities pre-built into the units, making the process of accepting biometric data extremely easy and seamless.
“At 365, we want to maximize the convenience options built into our products.” he said. “We want to remove as many barriers as possible in the checkout flow, and through the use of biometrics we can really streamline that process to offer a great experience for users.”
Perkins echoed Kolpasky’s assessment of the increase of speed and Kasavana’s stating that it allows for more secure transactions. He added that operators should keep in mind that biometrics technology itself continues to develop.
“Just as computers continue to become smaller, cheaper and more powerful, biometrics technology is still evolving,” he said. “Don’t let that deter you from implementing. Your consumer base is accepting of the tech. It makes the sale more efficient for them and both the operator and consumer can feel more comfortable about the security and authenticity of the transaction.”
Kasavana added that recognition and reliability is paramount in biometrics.
“Realizing that the cost of processing will be less than a comparison to alternate forms of settlement [methods of payment], operators are often interested in providing the opportunity to customers already familiar with fingerprint and/or facial recognition common to mobile phones or tablet devices,” he said.
Value of biometrics
Smith remarked on the cost-to-benefit ratio of biometrics and the motivations behind its use in automated retail.
“Brands often like to add an edge to their consumer experience by doing some of these things, while vend operators typically don’t see any efficiencies from biometrics in their operations,” Smith said. “So it really depends on who the key decision-maker is and the business purpose.”
He said that as a vending operator, his company doesn’t see a significant benefit from using biometrics in operations.
“Vend operators typically work in a high volume, low margin business, and squeeze the efficiencies as much as possible,” he said. “Having a replenisher running a route and using biometrics to authenticate and unlock a lock or access an app doesn’t really save us time.”
Mobile and web apps, geolocation and PIN codes are lower cost technologies that can save time in vending operations, he said.
“Brands and retailers that are trying to add that edge often already have some existing app or experience in their stores that they can integrate to some biometric system,” he added. “By far the biggest challenge with biometrics is the barrier to opt-in. It’s easy to authenticate once someone is in the system, but getting them into the system is a challenge. Businesses have enough trouble getting consumers to download a mobile app.”
He said that because of the lack of consumer adoption operators see limited increase in sales, which is vastly outweighed by the cost of biometrics.
“From a consumer perspective it is yet to be more convenient because of the barrier to opt in, which means the rollout of the technology is slow, which means that the experience is usually not synonymous with the technology just yet because it’s not everywhere,” he added.
Smith said that if a large-scale operator took the risk of adopting biometrics across their operations, that would be a more successful boost of the use biometrics in the industry than if a small operator did so. Biometrics would also be more successful as a payment method if the operator were to provide consumers with a special benefit, like a loyalty program.
“If someone were to ‘try’ this in just a handful of locations, it is destined to fail because it is not going to change consumer behavior. If they can roll something out on a national scale, then it has a chance of gaining traction,” he said. “And that’s the fine balance. The technology needs to be tested on a small scale because of the cost of a national rollout. But it needs to be rolled out nationally to create a change in behavior. It is difficult for anyone to do unless they have the budget, the desire and the critical mass.”
Security concerns
Another aspect of biometrics that necessitates caution but can also benefit operators is the security of this private information. Operators can build their own databases or pay for access to existing databases, Perkins said.
Privacy acts, including California’s CCPA and Europe’s GDPR, have indicated concerns over the use and sharing of personally identifiable information, Smith noted. To lower the risks and increase customers’ comfort, operators can limit storage of biometrics data to the individual vending machine or micro market kiosk, Kasavana said. It’s also critical to be transparent about method and duration of data storage with customers.
“Operators must first gain customer agreement by providing a digital or printed document that enables customers to opt in,” he said. “This is part of the reason that a closed venue with a restricted population works most effectively as the customers have agreed to actively participate in a biometric data collection for the sole purpose of conducting point of sale transactions.”
Operators need to understand the requirements involved in acquiring customer permission, including providing a statement of use, where data will be stored (which indicates the level of exposure) and how it will be deleted at the end of a stated term or upon customer opt out, Kasavana explained.
Kolpasky said that biometrics technology can also be a sales tool as it encourages the consumer’s familiarity with a micro market kiosk, which increases their likelihood of using it.
“Consumers who opt to use biometrics as an account identifier really create the most streamlined checkout process for themselves, cutting out potential barriers to not being able to finalize a transaction. We hope they always have their fingers with them,” he added.
It also allows operators to offer a high tech, highly secure solution to their users.
“The capturing and storage biometric data is extremely secure since the format in which the data is preserved is only recognizable to the kiosk itself,” Kolpasky said. “Users do not have to worry about having their biometric data compromised, and it helps to provide an additional layer of security when accessing a stored value account.”
While using biometrics can increase security, hackers can still find ways to obtain biometrics data.
The data is still susceptible to breaches during data transfer or storage, just like the vast majority of other data forms, Perkins said.
Partnering with a technology provider that offers built-in biometric solutions is helpful for ensuring security and ease of use, Kolpasky said.
“The technology partner will be able to guide operators in the correct direction based on their own needs and the needs of their clients, making sure that the ideal solution is delivered,” he said. “By leveraging existing solutions, operators will be able to rely on the technology and security expertise of their partner.”
Use of biometric data is optional in operations, Kolpasky emphasized.
“To help stay in compliance with the ever-changing legal landscape around biometrics and consumer privacy protection concepts, 365 has introduced a series of Biometric and Privacy Policies that can be enabled on our devices,” he said. “Users can gain insight into how their data is being stored and what it is being used for and then can provide their consent if they wish to use the platform. 365 has also expanded our internal capabilities to handle requests by consumers to have certain data removed from their account (such as GDPR) if they no longer feel comfortable with using biometrics.”
Perkins said it’s best for operators to do business with reliable companies that specialize in data security. “Secure data storage is a must with biometrics and most operators won’t have that capability in-house,” he said. He also noted the involvement of privacy laws. “Operators using biometrics will want to stay in the loop on legislation,” Perkins said. “Biometrics and privacy rights can be expected to have contentious involvement with each other as the technology grows. But that’s the natural cycle."
Facial recognition, an upcoming trend
Facial recognition is the next big step for biometrics use in automatic retail, Perkins said. “Facial recognition is an existing technology used by many governments and corporations around the world, so the technology has been fleshed out already for the most part,” he said. “Groups are already taking advantage of this technology in other sectors, and it’s continuing to grow. Grocers, for example, are beginning to use facial with ‘checkout-less’ stores and for targeting ads, loyalty programs, etc.” He expects it will be a major player in the next few years, as it’s still being refined.
Understand potential benefits, then debut it
Smith recommended pinpointing where biometrics could be beneficial to an operation and proving it can be commercially viable before rolling it out on a larger scale.
“Understanding customer needs and designing solutions to fill them is critical for maximizing adoption rates and ultimately revenues,” Kolpasky said. “By having knowledge on what clients and users are looking for, operators can make sure they pick the solutions that are best going to serve those needs. Although biometrics play a large part in the industry, it’s important to also make sure the overall solution from backend management to customer facing UI [user interface] provides a cohesive experience. We recommend that operators fully understand the entire solution and how biometrics play a part in it.”
Perkins suggested operators who would like to get started with biometrics approach their suppliers or IT department. “Most will be excited to go over it with you or answer any questions,” he said.
What’s next
Kolpasky noted that end users will expect the automated retail industry to keep up with the latest technology trends, including biometrics. The technology will increase in quality and bring more options for operators who would like to customize solutions for clients and beat their competition, he added.
Perkins said, “Now is the time to begin familiarizing yourself with biometrics, especially biometric payment options. This technology is continuously growing, and we see it being implemented more and more in our daily lives. You do not want to be left behind.”
