The PSD2 and Open Banking Biometric Authentication Market size was valued at USD 1.5 Billion in 2022 and is projected to reach USD 5.8 Billion by 2030, growing at a CAGR of 18.5% from 2024 to 2030.
The PSD2 (Payment Services Directive 2) and Open Banking regulations have significantly impacted the payment and financial services landscape. PSD2 aims to foster innovation, competition, and security within the payment industry by mandating stronger customer authentication processes. Open Banking complements this initiative by enabling third-party financial services providers to access bank data with customer consent, creating an interconnected financial ecosystem. Biometric authentication, as part of these regulatory requirements, has emerged as a key technology to enhance security while improving customer experience. This section discusses the biometric authentication market within the scope of PSD2 and Open Banking by its applications in different sectors, including banks, customers, merchants, payment service providers (PSPs), and others.
Banks are a primary application sector for biometric authentication under PSD2 and Open Banking regulations. With the growing threat of cybercrime and the need to comply with strict security requirements, banks are increasingly investing in biometric technologies to ensure secure access to customer accounts and facilitate seamless transactions. Biometric authentication methods such as fingerprint scanning, facial recognition, and voice recognition are used to authenticate customers at various stages, including login, transaction approval, and account management. The adoption of biometrics not only enhances security but also helps banks comply with the Regulatory Technical Standards (RTS) under PSD2, which require strong customer authentication (SCA) to prevent fraud and unauthorized access.
Additionally, biometric authentication helps banks streamline their digital transformation efforts by offering a more convenient, user-friendly alternative to traditional password-based systems. As the financial sector shifts towards mobile-first and online platforms, biometrics serve as an essential tool for verifying user identities across multiple channels. By eliminating the need for passwords and PINs, banks can reduce friction in the customer experience while maintaining the highest security standards. With biometrics, banks can also implement continuous authentication for real-time fraud detection and prevention, ensuring that only authorized users can initiate payments and access sensitive financial data.
For customers, biometric authentication offers an enhanced and secure method to interact with financial services under the PSD2 and Open Banking frameworks. As customers increasingly demand convenience, biometric methods such as fingerprint scanning and facial recognition provide a fast, secure, and frictionless way to authenticate transactions and access banking services. These authentication systems ensure that only the rightful account holder can initiate payments or manage their financial information, significantly reducing the risk of fraud and identity theft. Customers benefit from the improved security offered by biometrics while enjoying a smoother user experience compared to traditional authentication methods.
Moreover, biometric authentication allows customers to enjoy a personalized experience that is tailored to their specific preferences. This level of personalization extends to the ease of accessing banking services via mobile devices or ATMs, where biometric recognition methods replace the need for physical cards, PINs, or passwords. As the demand for more secure and efficient authentication systems grows, customers are more likely to embrace biometrics as a solution that not only meets regulatory requirements but also enhances overall satisfaction with their banking experience. As biometrics become more integrated into everyday transactions, customer trust in the security of their financial interactions will continue to rise.
Merchants are another key segment benefiting from biometric authentication in the context of PSD2 and Open Banking. The rise of e-commerce and digital payments has necessitated a shift towards secure, frictionless payment processing solutions. Biometric authentication enables merchants to verify customer identities quickly, ensuring secure transactions without compromising the customer experience. With PSD2's Strong Customer Authentication (SCA) requirements, merchants must implement robust mechanisms for confirming the identity of consumers. Biometric methods provide an ideal solution, as they can seamlessly integrate into online payment gateways, point-of-sale (POS) systems, and mobile applications to authenticate buyers effectively.
Beyond simply complying with regulatory requirements, biometric authentication allows merchants to reduce cart abandonment rates and improve customer retention by offering a faster, more convenient checkout process. By eliminating the need for multiple-step authentication, such as entering a password or PIN, merchants can significantly streamline the purchase experience. Furthermore, biometric data can be used to enhance fraud prevention by ensuring that the user attempting to make a payment is indeed the legitimate account holder. As the adoption of biometric solutions grows, merchants can further improve their operational efficiency, minimize fraud risks, and build trust with their customers.
Payment Service Providers (PSPs) play a crucial role in facilitating payments between consumers, merchants, and financial institutions. With the introduction of PSD2 and Open Banking, PSPs are required to implement strong customer authentication (SCA) mechanisms to comply with regulations and prevent fraud. Biometric authentication serves as a secure and efficient means for PSPs to validate user identities during payment transactions. By integrating biometric verification, PSPs can offer seamless, real-time authentication that minimizes friction during payments while maintaining high levels of security. Biometrics also help PSPs comply with regulatory frameworks by ensuring that customer authentication is robust and meets the necessary standards set by PSD2.
Additionally, the adoption of biometric authentication enables PSPs to enhance their offerings and differentiate themselves in a competitive market. By providing a secure, frictionless payment experience, PSPs can attract and retain customers who prioritize convenience and safety. Biometric verification can also streamline the customer onboarding process, allowing PSPs to verify identities without the need for lengthy document checks or manual interventions. This reduces operational costs while improving customer satisfaction. As the industry continues to evolve and digital payments become more prevalent, biometric authentication offers PSPs an essential tool to stay ahead of regulatory changes and meet the growing demand for secure payment solutions.
The "Others" segment in the PSD2 and Open Banking biometric authentication market encompasses various other applications beyond banks, customers, merchants, and payment service providers. This includes fintech companies, regulatory bodies, insurance companies, and other sectors where secure and seamless customer authentication is required. For instance, fintech companies leveraging Open Banking can integrate biometric authentication to enable secure access to a range of financial services, such as investment platforms, lending applications, and insurance portals. Similarly, regulatory bodies may mandate the use of biometrics for enhanced fraud prevention and compliance with PSD2's strong customer authentication requirements.
Biometric authentication is also increasingly being adopted in the insurance sector, where it can be used to authenticate policyholders and verify claims. In government services and healthcare, biometric identification offers a secure method for authenticating citizens and patients in digital systems, enhancing privacy protection while streamlining processes. The widespread use of biometrics across diverse industries ensures that both businesses and customers can rely on highly secure, user-friendly authentication methods to safeguard sensitive information and comply with evolving regulations. This diverse adoption further underscores the growing significance of biometric authentication in the overall PSD2 and Open Banking landscape.
Download In depth Research Report of PSD2 and Open Banking Biometric Authentication Market
By combining cutting-edge technology with conventional knowledge, the PSD2 and Open Banking Biometric Authentication market is well known for its creative approach. Major participants prioritize high production standards, frequently highlighting energy efficiency and sustainability. Through innovative research, strategic alliances, and ongoing product development, these businesses control both domestic and foreign markets. Prominent manufacturers ensure regulatory compliance while giving priority to changing trends and customer requests. Their competitive advantage is frequently preserved by significant R&D expenditures and a strong emphasis on selling high-end goods worldwide.
Accenture PLC
Aldermore Group PLC
VoiceVault
Apple
BehavioSec
CardinalCommerce Corporation
ClearBank
Danal
Diamond Fortress Technologies
Enfuce Financial Services
Fulcrum Biometrics
Incode Technologies
iProov
IriTech
Mastercard
Metro Bank
Monzo Bank
Nok Nok Labs
NXT-ID
OakNorth Bank PLC
Okta
Samsung Electronics
North America (United States, Canada, and Mexico, etc.)
Asia-Pacific (China, India, Japan, South Korea, and Australia, etc.)
Europe (Germany, United Kingdom, France, Italy, and Spain, etc.)
Latin America (Brazil, Argentina, and Colombia, etc.)
Middle East & Africa (Saudi Arabia, UAE, South Africa, and Egypt, etc.)
For More Information or Query, Visit @ PSD2 and Open Banking Biometric Authentication Market Size And Forecast 2024-2030
One of the key trends in the PSD2 and Open Banking biometric authentication market is the increasing adoption of multi-factor authentication (MFA) systems that integrate biometric methods with other security measures such as device fingerprinting or behavioral biometrics. This approach strengthens security while reducing the likelihood of fraud and unauthorized access. Furthermore, advancements in artificial intelligence and machine learning are enabling more accurate and real-time biometric authentication, enhancing user experience while minimizing false positives or negatives. As consumer demand for seamless, secure authentication grows, companies are investing in innovative biometric solutions to stay competitive in an increasingly complex regulatory environment.
Another significant trend is the shift towards mobile and contactless payments, particularly in the wake of the COVID-19 pandemic, which has accelerated digital and contactless payment methods. Biometric authentication, integrated into smartphones and wearable devices, is becoming the preferred method for securing transactions. This shift has led to increased investments in biometrics by financial institutions, merchants, and payment providers to meet consumer expectations for speed, security, and convenience. As biometric technologies continue to evolve, there is also a growing focus on privacy concerns, prompting companies to invest in privacy-preserving biometric solutions that protect user data while ensuring regulatory compliance.
The PSD2 and Open Banking biometric authentication market presents a range of opportunities for businesses and technology providers. As financial institutions, merchants, and PSPs seek to comply with regulatory requirements and enhance security, there is a growing demand for biometric solutions that offer both convenience and high levels of security. This presents opportunities for companies specializing in biometric technologies, including those offering fingerprint, facial recognition, and voice authentication solutions. Furthermore, as consumer awareness of the benefits of biometric authentication rises, there is potential for widespread adoption across diverse industries beyond financial services, including retail, healthcare, and government sectors.
Moreover, as technology advances, there are numerous opportunities for innovation in the biometric space, particularly in the integration of AI and machine learning for real-time fraud detection and adaptive authentication. Companies can also leverage opportunities in mobile biometrics, providing solutions for consumers who prefer to authenticate payments and access services via smartphones or wearable devices. The increasing global emphasis on cybersecurity and data privacy further supports the demand for biometric authentication, creating a favorable environment for growth and innovation in the biometric solutions market.
What is PSD2 and how does it relate to biometric authentication?
PSD2 is the European Union's directive for payment services that mandates stronger security for online payments, which includes the use of biometric authentication for customer identification.
How does biometric authentication enhance security in Open Banking?
Biometric authentication improves security in Open Banking by providing a unique and highly secure method to verify customer identities during transactions.
What are the main biometric methods used in PSD2 compliance?
The main biometric methods used in PSD2 compliance include fingerprint recognition, facial recognition, and voice recognition.
Why are banks adopting biometric authentication solutions?
Banks are adopting biometric authentication to enhance security, reduce fraud, and provide a smoother, more convenient customer experience.
Can biometric authentication be used for online payments?
Yes, biometric authentication is increasingly being used for online payments to verify user identities securely and efficiently.
What are the benefits of biometric authentication for customers?
For customers, biometric authentication offers a faster, more secure, and user-friendly method for accessing banking services and making transactions.
How does biometric authentication comply with PSD2 regulations?
Biometric authentication complies with PSD2 by fulfilling the Strong Customer Authentication (SCA) requirements, ensuring secure customer verification during transactions.
What are the potential risks of biometric authentication?
Potential risks of biometric authentication include privacy concerns, data breaches, and the potential for misuse of biometric data if not properly secured.
Is biometric authentication cost-effective for merchants?
While the initial investment in biometric systems may be high, biometric authentication can reduce fraud and improve customer satisfaction, offering long-term cost benefits for merchants.
How can merchants implement biometric authentication in their payment systems?
Merchants can implement biometric authentication by integrating biometric verification into their online payment gateways or point-of-sale systems using compatible hardware and software solutions.