The Market Needs Future Proof Payment Solutions
In 2007, Equens started researching biometric payments. We were ready to pilot the first ‘fingertip’ payment project, Tip2Pay, with the largest Dutch supermarket chain Albert Heijn in the middle of last year. For a period of six months, customers of Albert Heijn were able to pay for their groceries using their fingertips. The objective of the pilot was to investigate the potential of this technology as a new payment method and to establish whether it would be received positively by consumers.
After consumers had provided proof of identification and their financial details, a scan was made of the unique parts of their fingertip. Their name and address details, bank account number and – optionally – their customer loyalty card were registered in accordance with Dutch privacy laws.
Afterwards they were able to pay quickly and securely by placing their fingertip on the reader at the checkout. Equens processed all fingertip payments. The pilot was conducted in co-operation with it-werke, a company that specialises in integrating biometric technology in retail and consumer applications. The it-werke fingertip payment system is already in use at 120 retail stores in Germany, among them large retail chains like Metro, Edeka or Globus.
An evaluation of the results took place immediately after the pilot. The first result of note was that a surprisingly high number of people responded to the customer survey. More than half of the 580 customers that were involved in the pilot responded to the survey. A large majority of them, more than 86%, indicated that they were satisfied – or even very satisfied – with the system. When asked what they liked about the system, again the majority, some 80%, said that the payment method was very convenient as they could authorise payments with nothing more than their fingertip.
Customers also pointed out that they could forget their wallets, their cash and their pincode and would still be able to pay. Another advantage mentioned by many customers was the speed of the process – it was faster than any other payment method. Partially, this was owed to the fact that the Albert Heijn customer loyalty card was coupled to the Tip2Pay system. All offers and reductions were automatically included without the need to scan the card. Everyone wants to pay quickly and move to the front of the line at the checkout, and the pilot pleased customers and retailers alike.
The evaluation also looked at the technical aspects of the system and asked the question: how robust are biometric payments? For example, if your finger is cold or wet, the technology reacts differently. Some people also had fingerprints that were not clear enough and could therefore not participate in the trial. Although the majority of the people had no problems with their fingerprints, we are currently also evaluating which other biometric technologies, such as iris, facial or vein recognition, could be used for payment transactions either stand alone or as combinations. However, it is currently too early to speculate which technology or combination of technologies would be adequate to be introduced to the mass market. What’s important is that we know that consumers overwhelmingly appreciated the technology and that senior citizens were eager to sign up.
Another important outcome of the pilot project is related to security. The majority of the customers perceived the Tip2Pay system as being very secure. For trial purposes, the security was adequate, but the main objective was to get user experience, not to test the security of the technology.
One journalist tricked the system, but the benefit for real fraudsters seems to be too low compared to the risk, since they have to go into a shop and look the cashier in the eye. What’s more, if we were to introduce biometrics into the payments industry, additional security measures would definitely be needed. In short, the objectives of the pilot were fully met, since we learned how consumers experienced the technology and we gained experience with biometric payments.
In the area of e-invoicing, Equens sees the need to interconnect different service providers in different countries. The company is piloting e-invoicing in Italy, Belgium, the Netherlands and Finland and has already been processing invoices in Italy for quite some time. The other countries will follow soon. In the Netherlands, we are part of the Holland Financial Centre and try to help to improve the standardisation in e-invoicing. If we could get rid of paper invoices, there are huge potential savings to be made in Europe. The estimates are that some €100bn to €300bn could be saved per year. But some hurdles still have to be overcome. First there are legal hurdles, second there are different standards in the European countries and lastly we have to deal with varying business requirements.
A European expert group of some 30 people, that was established by the EU Commission in the beginning of 2008, is working on a European framework that will remove these hurdles. Out of some 900 applications, Equens’ Michael Salmony, executive adviser to the Equens’ Board, was one of the few that succeeded getting a seat at the table. Due to the different requirements of the tax authorities per country, it is complicated and cumbersome to deduct VAT on invoices from other countries.
Progress is being made though. In January, the European Commission proposed a legal framework to increase the use of e-invoicing. In particular it eliminates the current barriers to e-invoicing by treating paper and electronic invoices equally. This is certainly also owed to the efforts of the expert group.
There are many initiatives with respect to standardisation, such as OASIS, UN/CEFACT, TWIST, CEN/ISSS, etc, but there is still no internationally agreed standard. To give you an example, if you receive an e-invoice from Italy with the date in a certain format, your local system might not be able to translate it. There are also issues with respect to integrity and authenticity. We need to align existing standards so that they are interoperable.
One very critical hurdle in the process is the business requirements. All stakeholders have to be involved and need to be consulted to find out what their needs are. Therefore, the expert group consulted with corporate and banking associations such as the European Associations of Corporate Treasures (EACT), the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) and the European Payments Council (EPC). After the consultation, however, it will be critical not to forget to communicate and market these initiatives broadly in Europe as well.
I see Equens’s representation in the expert groups as key in helping to shape the future European payments market. Our goal is to build experience and learn by undertaking concrete actions in the area of innovative payment methods. This enables us to help our customers, and thus ourselves, to stay fit for the future.