US Payments Forum Spring Market Snapshot: AI and Biometrics at Odds, Overcoming Online Fraud and the End of Magstripe

/EIN News/ -- REDWOOD CITY, Calif., April 02, 2025 (GLOBE NEWSWIRE) -- The U.S. Payments Forum is tapping into industry trends in its spring market snapshot. It’s an amalgamation of insights from top payment organizations gathered during the Forum’s Spring Member Meeting in San Diego, California. The meeting was held in conjunction with the Identity & Payments Summit, which brought together more than 400 stakeholders across the identity, payments, access control and broader technology sectors. This market snapshot explores biometrics and generative AI’s profound impact on payments, the pros and cons of EMV 3-D Secure and updates on plans to phase out magstripes, among other key topics.

GenAI and biometric risks and rewards
Generative AI (GenAI) and biometrics are reshaping the payments industry, driving innovation while introducing new security challenges. At the Forum member meeting, keynote speaker Allen Ganz of HID explored the growing role of facial recognition in frictionless transactions and its potential to revolutionize payment authentication – reducing reliance on physical cards and digital wallets.

Globally, facial recognition is streamlining transactions, reducing checkout times by up to 90 seconds, and increasing customer engagement with loyalty programs by two to three times. However, as adoption expands, ensuring accuracy across diverse demographics and safeguarding against fraud remain top priorities.

Ganz also highlighted the impact of GenAI on biometric security. Deepfake technology and synthetic identities make biometric identity more crucial than ever, Ganz emphasized, highlighting the need for reliable identity verification. In addition, advanced facial liveness detection will be critical in distinguishing real users from AI-generated fakes, ensuring secure and seamless biometric transactions.

As the industry continues to evolve, businesses must balance innovation with security, ensuring facial recognition remains a trusted and efficient payment method.

Discussions on secure authentication emphasized the growing phishing threats fueled by GenAI, with FIDO Alliance noting a 4,151% increase in malicious emails and an 856% rise in phishing attacks since the release of Chat GPT. Passkeys, which use public key cryptography for phishing-resistant authentication, were positioned as a solution to counter automated fraud attempts. Mastercard detailed its plans to scale passkeys by 2030, integrating strong multi-factor authentication (MFA) and tokenization to reduce fraud and operational costs. The company also announced a 2025 initiative to enhance data sharing across token and EMV 3-D Secure (3DS) programs to address U.S. payment fraud.

EMV 3DS beyond high-risk transactions
Despite its role in the online fraud prevention process, EMV 3DS has limited usage in the U.S. These challenges were addressed during a panel at the Forum member meeting. Speakers noted that EMV 3DS has developed a reputation as a tool used mainly for risky transactions. This has led to hesitancy among stakeholders who don’t realize it can be used more broadly. For example, many merchants only use EMV 3DS protocols for transactions deemed high-risk, which prevents authentication systems from analyzing a representative data set. This can introduce biases in fraud detection models. Additionally, issuers and merchants have varying approaches to authentication, creating a fragmented experience across the industry. There are many methods available to share valuable data. For example, EMV 3DS facilitates the sharing of over 100 data elements between merchants and issuers, encompassing details about the cardholder, their device, transaction specifics and more.

To drive broader adoption of EMV 3DS, the payments industry is enhancing data sharing and refining authentication processes. Visa shared that it is working on integrating more EMV 3DS data directly into the authorization process, allowing issuers to make real-time decisions rather than relying on a separate authentication step. The company is also launching its EMV 3DS information-only solution, enabling merchants to share enhanced checkout and cardholder data without triggering full authentication with step-up, as a tool to help improve approval rates. Industry leaders agree that rigorous testing and collaboration among issuers, merchants and payment networks are essential to optimizing EMV 3DS and ensuring its role in reducing fraud and false declines while maintaining a seamless user experience.

A magstripe-free future
Four years after Mastercard announced its plans and timeline to retire magnetic stripe, the payments industry continues to familiarize itself with a more secure, fully chip and contactless future for cards. During a session on the topic, Mastercard shared that its phased magstripe retirement plan will extend through 2033. In the U.S., Mastercard issuers will have the option to remove magstripes from cards by 2027, aligning with a broader global shift that began in April 2024. This decision was driven by data predicting that magstripe transactions would be nearly nonexistent by 2028 and by the significantly higher fraud rates associated with fallback transactions—ten times higher than those using EMV chip technology. Despite this momentum, certain industries, such as healthcare and prepaid, still rely on magstripe-only systems, posing challenges to full adoption.

To support a smooth transition, issuers are implementing strategies that encourage contactless payments and digital-first solutions. Banks have seen rapid adoption of digital payment solutions. Jack Henry is focused on helping regional and community financial institutions minimize card waste and reissuance costs as magstripe technology is phased out. On the merchant side, several retailers are working to ensure awareness of key transition dates while preparing for the shift in fraud patterns once magstripe skimming is no longer a factor. With contactless transaction penetration well over 50% presently and continued collaboration across the ecosystem, the industry is positioned for a future where magstripe may prove to no longer be needed.

Forum priorities
The U.S. Payments Forum’s primary focus is to provide a platform for solving cross-industry challenges and promoting innovation. This is achieved through collaborative discussion, networking events and educational resources. At present, the Forum is working on projects on the following topics:

• Contextual payments considering AI, 5G, IoT
• Importance of utilizing correct data elements, including Merchant category codes (MCC), Employment Cost Index (ECI) and POS entry mode
• Emerging fraud vectors and mitigation techniques
• Capturing/displaying EV charging payment methods
• Securing mobile and touchless payments
• Secure Remote Commerce
• Leveraging fare programs for expanding open payments
• Machine learning for fraud practitioners

Resource recap 
Over the past few months, the Forum’s working committees leveraged their expertise to publish the following educational resources:

• Contactless Form Factor Test Considerations Infographic: A visual aid to help merchants, acquirers and other payment stakeholders identify the best testing approach for confidently accepting EMV contactless payments across smart devices.
• Webinar: Secure Remote Commerce (SRC) Part 2: A continuation of the Forum’s SRC webinar series exploring consumer experiences and the latest advancements in EMVCo’s Click to Pay for minimizing fraud, friction and optimizing payments.
• Role of Payment Account Reference (PAR) Within the Payments Lifecycle: A resource that takes an in-depth look at how PAR can benefit the full scope of payment ecosystem participants.
  

Organizations, associations, government agencies and individuals interested in participating in upcoming Forum projects can visit the Secure Technology Alliance’s website to learn how to become a member. By joining the Secure Technology Alliance, members will have access to activities within the U.S. Payments Forum, the Identity and Access Forum and additional Alliance working committees. 

About the U.S. Payments Forum 
The U.S. Payments Forum is a cross-industry body that brings stakeholders together on neutral ground to enable efficient, timely and effective implementation of emerging and existing payment technologies. This is achieved through education, guidance and alternative paths to adoption. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on and have a voice in the future of the U.S. payments industry. The organization operates within the Secure Technology Alliance, an association that encompasses all aspects of secure digital technologies.

About the Secure Technology Alliance
The Secure Technology Alliance is the digital security industry’s premier association. Through its U.S. Payments Forum, Identity and Access Forum and its collaborative working groups, the Alliance fosters open dialogue among industry stakeholders to explore and develop secure technology innovations in the payments, identity and access markets. By collaborating on education and guidance, the Alliance helps enable efficient, timely and effective implementation of large-scale, disruptive technologies. For more information, please visit https://www.securetechalliance.org. 

Contact 
Sherlyn Rijos-Altman
Montner Tech PR
203-226-9290
srijos@montner.com