Imagine walking into a shopping mall on a bright Sunday afternoon, checking out the latest personalized offers available at your favourite stores, buying clothes and leveraging your gold loyalty membership, indulging in a beer and a sumptuous Thai lunch at your happy hours hangout, and ending the day with a new movie at the multiplex. Quite a pleasant afternoon. Now imagine this without your wallet. No cash in hand, none of your eight debit and credit cards or 15 loyalty cards.
Sounds rather futuristic? Not exactly. There is a mini revolution of sorts under way in North America (which I’m hoping will spread and come to the rescue of forgetful souls such as myself) that leverages the power of biometrics in making the above a reality.
One such commercial enterprise is Paybytouch which enables customers to register themselves with their fingerprint and link their payment (credit and debit) cards and loyalty cards. On having completed their shopping, registered customers can simply authenticate themselves at the cash register using their fingerprint, select the payment mode of their choice and complete their purchase.
The benefits for the customer include sheer convenience, added security and a single view access to potentially all the payment relationships, while securing loyalty benefits on every visit to the store. The elegance of the programme is in its ability to address the entire spectrum of audiences, banked or unbanked, teenage or adult, working professionals or homemakers. Its potential ability in catalysing theuse of electronic payments and participation in loyalty programmes is immense.
The potential benefits for banks, financial institutions and retailers stem from the huge customer convenience acting as a differentiating opportunity, offering an avenue to up-sell and potentially lowering costs across the customer life cycle.
In India, biometrics have been typically considered for access control security, fingerprint identification systems by police administrations, and even by the finance ministry for introduction of biometric based Permanent Account Numbers to all income taxpayers. Similarly, the ministry of home affairs isevaluating biometrics-based citizen identity cards. But, I believe there are two clear opportunity segments in the payments and loyalty space in the country. The first would be in addressing the needs of the unbanked across urban and rural India where illiteracy is one of the leading obstacles to financial inclusion.
Biometrics eases customer authentication—one of the key steps for any financial transaction. Be it for opening an account or accessing it thereafter, biometrics-based services have been incorporated in smart cards, ATMs and point of sale machines quite successfully. Though rather early days for microfinance and related banking activities, the overall business model involving new or re-engineered user interfaces, processes and customer life cycle managements is evolving rapidly.
The second opportunity is in the rapidly expanding mass affluent audience, where customers increasingly seek security and convenience in their banking and payment services. Both financial institutions and organized retailing can tap the potential here. With a plethora of credit, debit and prepaid cards, customers seek to maximize the benefits from their multiple relationships and the flexibility to access all their payment relationships at any point of time.
Hence, increasingly, they would like to see their multiple payment options at retail purchase points enabling ease of choice. A biometrics- based interface clubbed with a single view of all account relationships offers the ideal solution.
For large organized retailers, one of the largest challenges has been in managing the costs of running a large loyalty programme over the customer life cycle and sustaining customer engagement. The biometric approach would negate the need for plastic, ensure that all customers once registered can access and gain from their loyalty relationships on every visit to any of its stores, even if they are not carrying their card.
For any large organized retailer, the cost benefit analysis would involve the costs saved in instant online registration, stopping loyalty card issuance or reissuance, and enhanced activation levels of their loyalty customer bases compared with the incremental investments.
You may wonder why opportunities in two distinct industries are being traced in the same article. We are currently at the inflection point of two explosive trajectories in organized retailing and retail banking services. The symbiotic relationship within these two sectors is going to grow manifold and hence the need for convergence in user experience.
Would customers adopt this new animal of biometrics? Would it be considered a potential intrusion of one’s identity? Well, show customers the value and adhere to strict security norms, and the adoption would follow a natural course (you’ve got grandmothers booking railway tickets on the Internet!).
Is it cost-effective? Even recent installations of ATMs and other devices with biometrics services have shown that the incremental costs are not as high as you might think. With scale, and wider end-use platforms, the costs would only head southwards in the years to come.
We are witnessing inflection points in modern retailing and microfinance. This would be the correct time to evaluate the customer environment and invest in infrastructure that would serve well into the future.
Upendra Namburi is a senior banking and finance professional with a leading multinational. Comment at firstname.lastname@example.org