Japanese startups race to launch Biometric technology

Liquid Pay users need only place their finger on sensor to make payments. (Courtesy of Liquid)

TOKYO -- For a country so used to dealing in cash, it may come as something of a shock in Japan when people no longer even need to get their wallets out to pay for something.

That may happen sooner than many expect, as a number of companies race to develop payment systems using face and fingerprint recognition technology. 

Liquid, a Tokyo-based financial technology startup, is leading Japan's shift away from cash and credit cards. The company's technology allows users to complete payments by simply placing their fingers on a device, which has now been made available at 1,000 points across the country. Credit cards can be registered and balances can be charged online in advance.

Aside from the obvious benefits in terms of convenience, biometric authentication can provide a highly secure payment method, with a fraction of the risk of forgery or personal information theft involved with conventional systems.

Aeon Bank in November replaced some of its ATMs with machines that use Liquid's fingerprint authentication technology, eliminating the risk of cards being stolen or pin codes being spied on.

The startup boasts a number of high-profile shareholders who are working to introduce the technology, including SMBC Venture Capital, which falls under the wing of Sumitomo Mitsui Banking, and financial services company Credit Saison. Over the next year or two, next-generation authentication could become commonplace in a famously cash-driven society.

Credit card companies are also gearing up for the impending cardless era. Major provider JCB is developing a palm-scanning payment authentication system.

The business plans to launch a trial run of the technology in February for a limited sample of people such as company employees, and hopes to commercialize the system as soon as possible.

The process requires no specific device, keeping installation costs at a minimum -- users can register biometric data and make payments using only a camera.

In addition to using the technology for its own settlement services, JCB hopes to provide the platform to other sectors in the future.

QuicPay, a cardless payment platform provided by the JCB group, made their readers compatible with Apple Pay under a partnership soon after the service became available in Japan in October 2016.
As a result, the number of QuicPay users as of September had jumped nearly 40% from a year earlier to 6.73 million -- that compares with past annual growth rates of around 10%.
One of the biggest drivers behind the move toward biometric payment is a rapid increase in credit card fraud. For the July-September period, the value of transactions involving unauthorized credit card use rose 66.7% year-on-year to 5.72 billion yen ($51.6 million).
Japan has been slow to adopt credit cards with embedded integrated circuits and related crime has increased despite card companies' efforts to tackle it.
Another area of concern is the leak of card holders' personal information resulting from e-commerce.
Buying goods online is becoming increasingly popular, but adequate security measures are not always in place. Settlement through biometric identifiers could almost eliminate the chance of forgery.
The Japanese government is working to expand the availability of cardless payment to all popular tourist locations in time for the 2020 Tokyo Olympic and Paralympic Games, and the race to develop secure payment methods is set to intensify even further.