Will pay by palm be a thing? Should it be?

Amazon is experimenting with a way to allow shoppers to use a palm-print biometric to authenticate payments and to do so in physical stores far beyond Amazon-owned brick-and-mortars. Amazon is reportedly looking at QSRs (quick-service restaurants), especially coffee shops.

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Amazon is experimenting with a way to allow shoppers to use a palm-print biometric to authenticate payments and to do so in physical stores far beyond Amazon-owned brick-and-mortars, (Whole Foods, AmazonGo, AmazonBooks, Amazon 4-Star and Amazon Pop-Up). Amazon is reportedly looking at QSRs (quick-service restaurants), especially coffee shops.

Palm prints have several advantages over more popular mobile biometric methods, such as fingerprint (prescription drugs, cleaning chemicals, burns and various other things can interfere with fingerprint readings) and facial recognition (finicky method that requires the face to be a precise distance from the scanner — not an inch too close or too far — and can suffer from hair growth, lighting, cosmetic changes, some sunglasses, as well as giving false positives to close relatives). And unlike my favorite biometric for security (retina scan), it's far less invasive. It's fairly accurate, convenient and (other than forcing customers to remove gloves, which could be a problem with outdoor shops in the winter) should be well-received.

Opting for independent palm prints would run contrary to the industry trend to simply piggyback on whatever authentication a shopper's mobile device uses, but it's not that much of a stretch for Amazon and it has the potential to significantly expand the brand's presence outside of the relatively few stores it owns. More practically, it could sharply increase the data it holds on shoppers and could specifically look for single-view-of-the-customer information, where it could spy on (I'm sorry. I meant observe) Amazon customers and how they like their coffee, burgers, pizzas or scarves. If there's the possibility of an upsell somewhere on the planet, Amazon's on it.

"Amazon recently began working with Visa to test transactions on the terminals and is in discussions with Mastercard," The Wall Street Journal noted. "JPMorgan Chase & Co., Wells Fargo & Co. and Synchrony Financial have expressed interest in enabling consumers’ card accounts to work with these terminals."

Amazon has had its own credit card for years — along with the rarely used, in-store AmazonPay — but a palm approach would potentially expand its visibility (both for non-Amazon shoppers to see and reinforce the Amazon brand as well as for Amazon to see purchases made by folk outside Amazon's current universe) while also getting it a likely cut of those sales. Let's address the central brand issue. When the merchant is small and relatively unknown (Phil's House of Bait or Molly's House of Coffee that Isn't as Awful as Everyone Says), will customers be more comfortable seeing the Amazon brand that they know?

Sanjay Sakhrani, an analyst and managing director covering the payments space for investment banking firm Keefe, Bruyette & Woods, sent out a client advisory that the biggest obstacles in front of Amazon's palm effort are financial and pragmatic.

"For example, it is unclear if merchant acquirers will play a role or be bypassed in the process. How [will] the system detect and allay fraudulent transactions? Bottom Line: Although this seems to be an interesting innovation in the payments industry, it is still early in the process and the value proposition to consumers and merchants remains unclear. We believe adoption will ultimately depend on 1) the cost to merchants and whether there is an incentive for them to add this method of payment at the pointof-sale, 2) whether customers will find it useful, particularly with contactless payments becoming more widespread both in the U.S. and internationally, and 3) if merchants would want to promote Amazon at the point-of-sale and collect data on their behalf given competitive concerns," Sakhrani's advisory said. "Note that Amazon’s prior initiatives in payments, such as its digital wallet Amazon Pay, have thus far failed to gain traction given the perception of merchant conflicts, among other items. Although it’s too early to determine the impacts, at this point it appears potentially most disruptive to payment terminal manufacturers like Square. We will monitor developments to ascertain implications, if any, for the merchant acquirers and potentially V/MC and the card issuers to the extent the product becomes widely adopted."

In an interview with Computerworld, Sakhrani elaborated on some of his financial concerns. Will Amazon want to add its own fee on top of an existing interchange fee? Most merchants are already pushing back on what they see as a overly high fees already. "Where is the tradeoff?" Sakhrani asked. In other words, many merchants already see Amazon as a rival (because it is) so the argument is whether Amazon would help send customers to that local merchant. If Amazon's cut makes it worthwhile for Amazon to use its massive site to send, let's say, Cincinnati Amazon users to a Cincinnati coffee shop that uses Amazon's palm checkout system, this might have potential.

Note that this would be a radical change for Amazon. Sending customers away to anything it doesn't own sends chills up the Amazon marketing department's collective spines.

Another question that Sakhrani had: "Whether this terminal will accept everything or just Amazon?" In other words, if a shopper wants to pay with a debit card that has nothing to do with Amazon and avoids the palmswipe, will the terminal permit it? If not, does Amazon have in mind that these would supplemental terminals, sitting next to a POS that would accept everything else? If so, these machines had better be free or it's wacky to assume that any merchant would pay for the privilege. Certainly the merchant would pay an additional small processing fee for shoppers that Amazon sends to the store, but don't even think about a monthly fee for free advertising.

The most comforting detail here is that Visa and Mastercard are involved in discussions. Of course, those brands are involved in discussions about thousands of possibilities every day. How serious are the discussions? How senior are the people involved? If both are those brands get behind a palm-authentication approach — whether or not it's from Amazon — things could get very interesting very quickly.

Copyright © 2020 IDG Communications, Inc.

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