I recently heard a podcast (HBR IdeaCast) where Jerry Seinfeld shared his insights into innovation. One of his comments stuck with me: “it’s very important to know what you don’t like. It’s good to have an idea, but a big part, I find, of a lot of innovation starts with someone saying: ‘you know what I am really sick of?’ That’s where innovation begins.”
I love the convenience of doing things online. But I hate to have to manage many passwords and ids. And I am particularly worried about online financial transactions (accessing bank accounts online, shopping online, paying bills online). Why? Well, credit and debit card fraud worldwide resulted in losses totaling US$21.84 billion in 2015; and in 2016, 30% of all cardholders worldwide (debit, credit, and prepaid) had experience card fraud in the past five years. México and Brazil are among the countries with the highest rate of credit card fraud―51 and 46 percent, respectively―so no wonder people in the region are so distrustful of financial institutions―Mexico and Brazil are the only Latin American countries included in the study. Which shows the need of financial institutions to increase the levels of security. But there must be a balance between usability and security: if the levels of security are too high, people either don’t use the cards (it is too onerous for users in terms of effort) or engage in risky behavior (like writing down PINs and passwords). This distrust has important consequences for financial institutions in terms of lost revenue.
Finconecta, our 10-month program in partnership with a&b, just selected the 48 FinTechs that will integrate to the platform forward, as part of this pilot partially financed by Fomin/IDB. Among the selected FinTechs is Touchtech Payments, a Dublin-based startup. Which brings me back to Seinfeld. Touchtech specializes in online authentication for financial institutions using biometrics (fingerprints and retinal scanning). Its solution offers MasterCard and Visa certified payment authentication and is designed to reduce card fraud, increase the number of transactions completed online, and make it easier for people to use their cards online―in its webpage, Touchtech mentions that about 33% of online transactions are abandoned when they require a 3D-Secure password.
TouchTech’s product, TAP (for transaction authentication platform), uses several technologies available in your smartphone: NFC technology and the capacitance fingerprint scanner. The NFC technology, which evolved from radio-frequency identification (RFID), safely transfers data from your card, located within four inches of your smartphone, to the merchant. Customers follow three simple steps without the need to manually enter card details: touch their card (with their phone), use their fingerprint (to authenticate the transaction), and pay. Touchtech also offers software (SDK for Windows, iOS, and Android) that allows financial service customers to log in into their accounts using fingerprint scanners on their smartphones and an e-signature system that allow users to identify themselves online for legal purposes.
Touchtech currently has clients in Europe and the Middle East. Hopefully financial institutions in the region will like the idea and get on board. We’ll get a peek at these Fintechs in Foromic, later in October, in Buenos Aires.