New Biometric Credit Card Technology Is an Important Advance in Fraud Prevention

Fingerprint-activated credit cards can prevent fraud; biometric technology should be applied to online transactions

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Several technology companies are preparing to roll out biometric fingerprint-activated credit and debit cards on a global scale, including Zwipe, Visa and SmartMetric. Monica Eaton-Cardone, co-founder and CIO of international risk management firm Global Risk Technologies, believes biometric technology has the potential to transform the card payments industry by preventing fraudsters from using stolen cards. However, while fingerprint-activated credit cards are designed to thwart point-of-sale fraud, Eaton-Cardone emphasizes that it’s equally important to develop biometric safeguards for card-not-present (CNP) transactions.

According to The Nilson Report, card fraud contributed to $16.31 billion in losses worldwide in 2014, with the United States accounting for $7.86 billion of that total—nearly half of all losses. These figures include losses incurred from counterfeiting, CNP fraud, fraudulent application, and lost and stolen cards. The report predicts that global card fraud will exceed $35.54 billion in 2020.

In an effort to reverse those steadily increasing fraud losses, Zwipe and MasterCard partnered in 2014 to launch the world’s first biometric contactless payment card with an integrated fingerprint sensor following a successful pilot with Norway’s Sparebanken DIN. Last September, Visa announced its trial of a new biometric card design based on the EuroPay, MasterCard, Visa (EMV) chip standard, which supports match-on-card authentication using a biometric reader at ATM terminals. And at last month’s Smart Card Alliance Payments Summit, SmartMetric debuted its EMV-compliant biometric credit card, which uses a sub-micro fingerprint reader within the card to verify the user’s identity and activate the card.

“Technology is evolving at a rapid pace to address rising credit card fraud. EMV chips helped thwart counterfeit cards and biometric technology can prevent fraudsters from using stolen cards—it’s no longer simply a matter of forging a signature or hacking a PIN,” said Eaton-Cardone. “Fingerprint validation can be a very effective way to combat point-of-sale fraud and it’s already being used with smartphone digital wallets, such as Apple Pay. Yet, with a growing number of criminals turning to CNP fraud, the industry urgently needs to provide biometric safeguards for online transactions.”

While newer smartphones and the next generation of biometric cards may have a built-in fingerprint reader, fingerprint verification is not currently compatible with older phones, laptops or desktop computers. Because of these limitations, Eaton-Cardone calls for developers to create and implement other biometric verification tools that can be used with existing devices to combat CNP fraud. Since most mobile devices and many computers have an integrated camera and microphone, she considers facial recognition and voice recognition to be promising options.

“The ability to embed miniature fingerprint readers within a credit card is an exciting development. However, I believe the payments industry could benefit substantially by leveraging existing facial recognition and voice recognition technologies to enhance the security of online transactions,” asserted Eaton-Cardone. “Evidence suggests that EMV chip cards already started driving a greater proportion of credit card fraud to the online channel, so it’s important to act quickly to improve the security of online transactions. To succeed in reducing overall losses, developers must broaden the application of biometric technology to combat all types of card fraud.”

Monica Eaton-Cardone earned renown as an IT expert for her role in building the technology behind several successful chargeback management solutions, as well as her efforts to educate e-commerce merchants on fraud prevention tools and strategies. For further information, please click here.