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Do we really need cards for payment?


Payments have been in practice since very early signs of trade. In ancient days, people used to exchange their goods during trade. This barter system served the purpose for many years. Later on coins were used for purchasing goods instead of some other goods. This way of trade using coins aimed at creating uniform value for "goods" in constant denomination. This practice has still been used by entire humanity today; however mode of recognizing and realizing value has been constantly evolving.  Payments were made using coins, currency notes till second half of 20th century. Towards end of 20th century there have been radicle shifts in this space. People started using paper cheques, drafts, pay orders and other form of paper instruments in addition to currency notes and coins. With evolution of internet, e-payment took preference where no paper is involved as instrument to exchange money. At the same time plastic cards started making entry in the world of payment.

In 21st century technology evolved at exponential pace. It affected payment industry as well. Today it's very common to use your mobile smartphone or wearable device like watch to pay for your coffee, order latest fashion clothes, daily needs, on highway vehicles need not stop booth to pay toll, vehicles pay parking fees on the go. These are just few examples of recent innovations in making payments. However great innovations come with great risk. Focused efforts are required to overcome these risks. Since money has transformed itself to electronic and mobile formats, burglary also has respective versions. It's apparent that authentication and authorization played critical role in ensuring data security. Authentication and authorization techniques evolved during recent time from single factor to multi-factor authentication. Medical advancements in research helped creating biometric authentication technique which is difficult to break into. Thus combination of various advanced researches are being explored today to make payment secure, easy and reliable.

Biometric techniques are currently being used to confirm authentication of payer for the mode of payment in question. For example, user's card has a slot for placing finger of his/her credit card, once user touches this slot and uses card, card can be used to initiate payment. Later on user uses chip and pin mechanism to complete the transaction. If user do not touch the fingerprint pad before card is inserted into to POS terminal or some other user tries to process this card, transaction is not processed successfully and alerts were sent to various parties assuming fraudulent transaction. Such technology is being evaluated by leading network companies today. In all these examples, one thing is common - multi-factor authentication for payment initiated by traditional mode like credit card. Underlying assumption is unique biometric identity helps us ensure, person initiating transaction is owner of the card. There are reports of using ECG or vein pattern in lieu of fingerprints.

In addition to authenticating person, biometric uniqueness has potential to eliminate plastic cards to initiate payment. This method will further strengthen payment processing making it more secure from theft or fraudulent usage. In proposed ideal scenario, card issuer will register card holder's fingerprint and link it against card account. Acquirer will provide merchant with POS terminal which has fingerprint reader. When card holder makes purchase, card holder taps his/her fingerprint to scanner at POS terminal. In this transaction initiation, information that will flow over network is purchase details and biometric identity. Issuer will further decode biometric id to card account and provide authorization. Since biometric fingerprint scanned at POS cannot be faked, authentication process can be saved if perfect match of scanned image is found with issuer. This way payment can be made in scenarios where typically card is swiped for in-store purchases. If fingerprint scanning mobile application is made available by merchant, mobile purchases can also come in this purview. However it will not yet be useful to online purchases. Still mobile and in-store purchases can cover more than 50% of card transactions.


Hi Dattaprasad,

I read your article. This article really worth but I am unable to connect biometrics with card replacement and still wondering the example which you mentioned above.
In example its mentioned that we can use fingerprints instead of card.

My view - We can use fingerprints as a another mode of authentication (instead of PIN) but can't replace credit card.

Question - How Acquirer bank will recognize the issuer bank from fingerprints of purchaser ?

Vaibhav Ahuja

Its really true that cards are not necessary for payments. Anything that identify a person or account can be used as identifier.biometric is one of them. But it will take some years for it to be successfully due to band width and issue's. Mobile can be taken as replacement for card.

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