The benefits of passwordless authentication for retailers

Businesses need secure and user-friendly authentication methods to help prevent the risk of data breaches and fraud. Passwordless authentication — or the process of verifying a user’s identity without a password — is becoming an increasingly popular solution for today’s retailers.

According to Statista, more than 350 million people were impacted by data breaches in 2023.¹ Meanwhile, poorly chosen and protected passwords remain a major source of data breaches for web applications.²

That’s where passwordless authentication can help — allowing users to sign in with secure and convenient alternatives like biometrics, security tokens, and one-time codes.

Learn more about what passwordless authentication entails, how to implement this solution for your business, and future trends that are set to impact payment security.

What is passwordless authentication?

Passwordless authentication is the process of verifying a user’s identity with information other than a password. For example, a user might log in with a fingerprint, face scan, or one-time code sent to their mobile phone.

Compared to traditional authentication methods, passwordless authentication can be more secure and more convenient for both customers and retailers. After all, traditional passwords may be lengthy and difficult to remember. They can also be stolen and leaked, and then used by fraudsters to log into someone else’s account.

Breaking down popular passwordless authentication methods

Businesses can choose from a range of passwordless authentication methods to help enhance security and improve customer experiences.

Common methods include:

• Biometric authentication. Ask users to verify their identity with a fingerprint or facial recognition scan.
• One-time passwords. Send a one-time code to users via email or SMS text.
• Authentication tokens. Send a digital token to a user’s device or through a third-party authenticator app.

The benefits of passwordless authentication for retailers and merchants

Passwordless authentication offers many advantages for today’s retailers — from faster checkout experiences to reduced security risks.

Here's a closer look at the most notable benefits of passwordless authentication.

Reduced cart abandonment

Traditional login processes can be frustrating and complex, potentially leading customers to abandon carts mid-checkout.

Faster in-store transactions

For retailers with loyalty programs or mobile payment options, passwordless logins can expedite in-store transactions. Fingerprint or facial recognition can replace PINs or passwords, for example, helping lead to faster checkouts.

Improved customer experiences

Frictionless logins not only improve online checkout but also enhance customer experiences in the store. For instance, retailers can invite customers to access their loyalty program rewards and perks via a passwordless login process, further personalizing the shopper journey.

Enhanced security

Passwordless authentication can make it harder for fraudsters to gain access to accounts, protecting customer information and helping reduce the risk of fraudulent transactions. This can help businesses not only build trust without customers but also avoid the many potential costs of online fraud.

Upfront challenges with adopting user authentication methods

Implementing new authentication methods can present certain challenges for retailers, such as:

• Initial costs. Passwordless authentication solutions may come with upfront costs. However, they can lead to greater operational efficiency and increased revenue down the line.
• Compatibility issues. It may be difficult to sync passwordless authentication technologies with legacy systems. It’s important to find an end-to-end payments partner that offers a range of comprehensive solutions, including passwordless authentication.
• User resistance. There may be a learning curve for shoppers who are accustomed to using traditional password authentication methods. Once they adopt these new solutions, however, they can reap the benefits of enhanced security and smoother checkout processes.

Choosing the right passwordless authentication for your business

Take these steps to start implementing passwordless authentication for your business:

• Choose the right authentication methods. Take security requirements and user preferences into account when selecting the right authentication methods for your customers. If you know a lot of customers shop on your mobile app, for instance, you can send a one-time code to their phone to help them quickly verify their identity and complete their purchase.
• Use multi-factor authentication. Enhance security by building more than one authentication solution into your checkout process. For example, you might require shoppers to complete a facial recognition scan and provide a token.
• Maintain compliance. Make sure your passwordless authentication methods meet regulations and compliance standards, such as the Payment Card Industry Data Security Standard (PCI DSS) and General Data Protection Regulation (GDPR). You can also leverage 3DS 2.2 solutions for enhanced compliance.

Enable a frictionless checkout with passwordless technologies

Passwordless authentication is already revolutionizing online security and customer experiences. As this technology continues to evolve, businesses will need the right tools to seamlessly embed passwordless authentication into their checkout processes.

PayPal provides the innovative technology that today’s businesses need to make that happen — helping reduce the risk of fraudulent transactions and improve the shopper journey. Click here to learn more about PayPal’s authentication features.

Future trends in security and authentication

Passwordless technologies will continue to evolve, providing retailers with new and innovative ways to verify shoppers and streamline experiences.

That’s why it’s important to stay on top of emerging trends and developments in passwordless authentication technology, such as:

• Blockchain authentication. Businesses can leverage blockchain technology, which uses cryptography and decentralized identity platforms to securely verify users.
• Contextual authentication. Authentication tools can take each user’s context into account — such as device, location, and IP address — to assess potential risks and help prevent fraud.
• FIDO authentication standards. More businesses and platforms are expected to adopt standards set by the Fast Identity Online (FIDO) Alliance. These FIDO-led standards can help improve the security of passwordless authentication.

Enable a frictionless checkout with passwordless technologies

Passwordless authentication is already revolutionizing online security and customer experiences. As this technology continues to evolve, businesses will need the right tools to seamlessly embed passwordless authentication into their checkout processes.

PayPal provides the innovative technology that today’s businesses need to make that happen — helping reduce the risk of fraudulent transactions and improve the shopper journey. Click here to learn more about PayPal’s authentication features.