Benefits of Passwordless Authentication for Payments

Modern businesses need to accept payments that are secure, user-friendly, and affordable. Passwordless authentication is a familiar, frictionless way to verify a user’s identity for payment without a password. 

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Digital passwords have been around for over 60 years, but more recently a fact has become clear:

Remembering a password isn’t convenient or secure.

Verizon recently found nearly 80% of data breaches involve phishing attacks and the misuse of credentials. Hackers and bad actors are more likely to gain access to personal information when consumers rely on a password. 

Passwordless authentication is already used by over 130 million Americans every day — we all unlock our phones and computers using authentication factors like faces and fingerprints. 

Now, emerging payments systems like pay by bank are adding passwordless solutions to help businesses reduce the risk of fraudulent transactions and improve the customer experience.

This post explains passwordless authentication, its impact on payments and how businesses can implement this solution.

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What is passwordless authentication?

Passwordless authentication verifies a user’s identity with secure information like facial recognition, fingerprint scans, or one-time passcodes sent to their mobile device. This process eliminates the need for passwords and is often safer, faster, and more convenient for users.

Passwordless authentication methods 

There’s a range of passwordless authentication methods available, including: 

• Biometric authentication. User identity verification happens with physical traits like fingerprints or facial recognition.
• One-time passwords. A temporary passcode is sent to a user via email or SMS text.
• Authentication tokens. A digital token is sent to a user's device or through a third-party authenticator app.

As the U.S. moves away from the vulnerabilities of passwords, more businesses and platforms are expected to adopt standards set by the Fast Identity Online (FIDO) Alliance. FIDO2 standards use standard public key cryptography techniques to provide phishing-resistant authentication with cryptographic key pairs called passkeys.

What are passkeys?

Passkeys are a technology recently added to all major devices and operating systems that use cryptography to generate a unique code so websites can tap into the device unlock (eg Face ID on Apple iPhones) and use it to authenticate the user. 

It’s worth noting that passkeys, thanks to FIDO-certified authentication, work with any device or application, giving businesses flexibility in how they authenticate customers.

Banks don’t need to mail hardware tokens or require mobile app downloads. FIDO is built into operating systems like Android, iOS, and Microsoft.

Biometric authentication vs. other passwordless options 

Biometric authentication ( fingerprints or facial recognition) is much faster than other passwordless methods. 

One-time passwords (OTPs) and authentication tokens may remove the need for traditional passwords, but there’s still an added step where a code or authentication request must be sent and acknowledged. 

Biometrics verify identity instantly with a user’s physical traits. This makes the user experience more convenient, especially in high-speed environments like payments. 

Since the user's device is already linked to their biometric data, there’s no password management needed like remembering or entering anything—just a quick scan and the transaction is secure and processed.

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How passwordless authentication works for payments

There’s a reason everyone unlocks their iPhone with Face ID — it’s much faster and safer than a password. 

That same speed and security can now be applied to the checkout process. Here’s an example of how it works with Aeropay: 

1. A user selects "pay by bank" on a merchant's checkout page.
2. The user’s phone number is passed to Aeropay, which prompts the system to request fingerprint or facial authentication. 
3. Depending on the conditions, the user may receive a one-time password for additional confirmation.
4. When authentication is completed successfully, the transaction is processed.

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For returning users, this authentication process takes only a few seconds. It’s also a multi-factor authentication method that doesn’t require added steps. 

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Benefits of passwordless authentication for payments

Passwordless authentication solutions remove many of the pain points associated with modern payments in the U.S.— especially in the case of biometric payments.

The benefits are considerable and add up quickly to result in tangible results like improved conversion rates, lower churn, and higher revenue.

Here are the specific (data-backed) benefits of passwordless payments:

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60% less cart abandonment

Nearly 60% of consumers said they have abandoned their carts due to a forgotten password in the past six months. Password resets are huge pain point, especially as consumers are forced to remember a growing, more complex list. 

A low-friction passwordless login process like biometric authentication means users never have to remember a password. It also simplifies the checkout process and removes added steps where customers may drop off.

25% higher conversion rates

Passkeys demonstrate higher login conversion rates—around 90%, compared to the average of just 65% for passwords. Many users abandon authentication attempts before even entering their passwords because of the hassle. 

This means passwordless payments successfully onboard 9 out of every 10 customers. That’s a steep advantage in the checkout process. 

93% faster checkout experiences

Biometric authentication is much faster than traditional MFA methods. Instead of waiting for a code via text or email, users complete payment using their mobile phone’s Face ID or biometrics.

Internal testing from Aeropay found biometric payments are up to 93% faster than traditional two-factor authentication. 

80% reduction in fraud

Passwords simply cannot keep up with a digitally connected world. The average internet user has 240 online accounts that require a password — and most people use the same password for multiple accounts. 

According to the Verizon 2024 DBIR, nearly 80% of data breaches involve password credentials — and 86% of breaches involve stolen, weak, or default passwords. 

The best way to protect user data is to eliminate passwords, especially when it pertains to payment details where scammers are more likely to target users. 

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Passwordless payments are the future

U.S. payments are evolving. Many businesses are turning to solutions use cases like pay by bank as an alternative to the high processing costs of cards. 

Businesses are already on board with pay by bank because of its low cost and high approval rates, but consumers have been slower to adopt.  

Now companies like Aeropay are implementing passwordless authentication so pay by bank becomes faster, safer, and more convenient for consumers. 

In fact, biometrics are the preferred login method for consumers. They’re already familiar with the process and understand its security.  

With biometric bank payments, businesses get the low cost of ACH, plus a familiar onboarding process for consumers that’s as fast as unlocking their phone. 

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Aeropay + OwnID for passwordless authentication payments

Aeropay and OwnID partnered to simplify and secure the payment process. 

What is OwnID?

OwnID is a passwordless authentication platform that drives users to register & login earlier and more often—anywhere along the digital journey.

What is Aeropay? 

Aeropay is the money movement network for modern ACH payments and real-time payouts. We help U.S. businesses accept and send funds on the fastest possible rail, for the lowest possible cost.

Our in-house bank linking technology, Aerosync, interconnects businesses, consumers, and 12k+ financial institutions for data-backed transactions. 

The benefit for businesses

Using OwnID's platform to authenticate Aeropay users for payment creates a faster, more secure process that's up to 93% faster. Learn more about this partnership.