Amazon’s palm-print payments face big hurdles — and that's OK

By experimenting with palm-print hand wave transactions, Amazon is putting its resources behind another work-in-progress technology that traditional retailers will almost certainly have to invest in just to keep pace.

Just as Amazon Go’s checkout-free concept sparked billions in investments into technology companies that are racing to design the same technology for traditional retailers, Amazon’s biometric payment option — which today amounts to little more than a patent application and reports of internal testing — will weigh on merchants that are already grappling with omnichannel shopping, mobile commerce and data breaches.

The fact that there’s still only about a dozen Amazon Go stores in existence, and checkout-free technology is still an incomplete idea, hasn’t stopped a rush to follow by other retailers in the U.S., U.K. and Europe.

Amazon’s ability to use its enrolled base to combine granular and dynamic user data with new and easier ways to transact automatically puts other stores on the defensive. “It all started with One-Click. Since they changed the commerce game with that innovation, Amazon has been an ‘alpha innovator’ in the payment space,” said Thad Peterson, a senior analyst at Aite Group.

Amazon’s biometric system, which is still in the planning stages, would be a fit for merchants that serve the same consumers over and over, such as coffee shops. Consumers would link their palm print to a card for an initial payment, which would be stored for repeat visits.

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It could also work at Amazon Go, where customers scan a QR code at a turnstile to gain access to the store. If Amazon supported handprint authentication, it would remove the friction of asking customers to unlock their phones and open the Amazon Go app.

Handprint-supporting point of sale systems would produce shopping and payment data that would feed Amazon's cloud. That's the key element, since most of Amazon's new payment innovations, such as Amazon Go or Alexa, require some form of check-in. In the case of "palm pay," an initial link to a card would be all that's needed to tie the transaction to an existing account. That allows Amazon to accumulate more actionable data.

The Wall Street Journal reports Amazon may sell the technology to other retailers, while CNBC says Amazon has engaged Visa, Mastercard and other financial institutions to discuss the project. The MIT Technology Review reports Amazon has been running internal tests since September. Amazon did not provide comment for this story and Visa and Mastercard did not return requests for comment.

Amazon has a couple of challenges in deploying hand-wave payments. Since Amazon is primarily an e-commerce marketplace it lacks the retail scale to enroll consumers in new shopping or payment technologies. One of Alexa’s largest checkout deployments, for example, has been outside its network at ExxonMobil.

Amazon has not used its Whole Foods network to deploy checkout-free technology, but has used Whole Foods to extend its delivery and order/pickup franchise. Amazon has also used incentive marketing to drive traffic at Whole Foods, making the supermarket a venue to run more internal tests to determine consumer comfort with using palm prints or other biometric options for checkout.

“Until recently, Amazon didn’t have a lot of locations where they could test physical world payment solutions, but now they have Whole Foods where they can trial new solutions,” Peterson said.

The second challenge is that biometric “hand” or palm print payment is not a new idea, and thus far it’s been limited in its success. Biometric ATMs have seen some adoption, but the concept has sputtered in stores for a variety of reasons, ranging from security to germs.

Projects such as Solidus Networks Inc.'s Pay by Touch rose and fell before the era of the smartphone took off, and the modern-day prevalence of mobile apps — often supported by the security of a phone's built-in fingerprint or facial recognition system — has made it even harder for standalone biometric payment systems to gain a foothold.

Amazon’s patent application describes a system that uses infrared cameras and machine learning, so the consumer would not have to physically touch the point of sale, making it similar to a contactless payment with no card or connected device. Most hand or finger biometric payments require some form of contact.

But there’s still potential problems.

“How effective is it against a damp or wet hand?,” said Tim Sloane, vice president of payments innovation at Mercator. “This approach will use a significant amount of machine learning, and operational performance may be difficult to achieve.”

Wall Street analysts raised questions about how the system would work at a scale. Keefe, Bruyette & Woods said there were concerns about how merchants would adopt the supporting hardware, and if merchants and acquirers would be willing to support an Amazon-branded payment terminal. But the firm also said that if a deployment at scale is successful, the target market could extend well beyond the quick-serve establishments floated in the original media reports.

Unlike NFC or QR code payments, there will probably be dissonance connected to linking a palm to a payment, and it’s not likely to be compatible with existing point of sale terminals, Peterson said.

“It’s an additive solution — nothing will go away in the payment space if this is adopted at scale,” Peterson said. “That means it adds complexity and friction to the merchant’s payment capabilities, so if it is to succeed, it must create sufficient value to drive consumer usage.”