Viable Use Cases for Proximity Verification in Financial Transactions
As the world increasingly shifts towards digital payments, proximity payments are emerging as a central need to fuel the fintech evolution. The convenience, speed, and security of proximity-based financial transactions have made them a popular choice for consumers and merchants and the rapid market growth aptly reflects this.
With proximity payments predicted to surpass $6.5 trillion globally by 2025, fintech companies are accelerating the exploration and adoption of proximity verification technologies for on-prem and digital transactions.
For product leaders, payment innovators, and technology executives within fintech companies—particularly those managing digital wallets or rewards apps—proximity verification offers a way to satisfy the needs at every level in the org to enhance user experience and security. From understanding the benefits to weighing the challenges and opportunities surrounding proximity verification, what the future holds for fintech in this growing space is being rapidly defined.
TL;DR: Key Takeaways
- Proximity payments will be a $6.5 trillion market by 2025, with demand for secure, fast, and contactless options rising.
- Proximity verification ensures that transactions are validated based on user location, boosting security and trust.
- Fintech companies using proximity data powered by data-over-sound tech can more cohesively elevate loyalty programs, secure financial transactions, and protect users from fraud.
- Newer data modalities like ultrasonic technology offer more accurate, reliable, and flexible verification use cases than traditional methods like Bluetooth or NFC.
The Growing Importance of Proximity Verification
Proximity verification technology determines if a user’s identity, payment method, or account can be validated based on their physical location. In financial transactions, proximity verification facilitates a seamless and secure authentication process without direct user interaction, such as inputting passwords or scanning QR codes. This level of convenience and security is essential to fulfill the growing demand for contactless payments, especially post-pandemic.
A study conducted by McKinsey revealed that digital payment penetration already reached 89% of consumers, and that figure is expected to rise as digital wallets become the defacto standard for financial transactions. However, along with convenience comes the need for heightened security.
Fraud remains a major concern for digital transactions. Losses from fraud are projected to reach $343 billion between 2023 and 2027, even though 70% of businesses use at least three tools for fraud prevention. The race for fintech fraud prevention is on for solutions that can balance convenience with robust security—and ultrasonic-based proximity verification is at the heart of facilitating this balance.
Why Proximity Verification?
While proximity payment solutions are already becoming mainstream, particularly in retail, transportation, and hospitality sectors, proximity verification is still an untapped frontier with the potential to shift to real-time, secure financial transactions.
Traditional methods like passwords and biometrics (fingerprint, face ID) offer some level of security, but they have their limitations. Passwords can be forgotten or compromised, and biometric verification is limited by hardware compatibility and can sometimes fail in real-world conditions (e.g., a sweaty thumb, an unsteady hand, a smear on the camera lens, or poor lighting).
Inconsistent privacy laws also have a marked impact on where technologies like biometric authentication is allowed. For example, in the United States, privacy laws are set at the state level. This creates a significant barrier for wide-spread implementation and adoption.
In contrast, ultrasonic proximity verification works on a different principle—it verifies a user’s identity based on their physical proximity, creating a seamless user experience with fewer points of failure and without compromising existing data privacy laws in regions like the United States where they can vary quite a bit.
How Proximity Verification Works
In ultrasonic proximity verification, the user’s device (usually a smartphone) interacts with a nearby speaker, establishing their location or identity based on sonically delivered proximity detection signals.
Once the proximity is verified, the transaction can be completed without additional user intervention. This adds another layer of trust, determining that the person making the payment is actually physically present at the transaction point.
Ultrasonic Proximity Verification Benefits for Fintech Companies
For fintech companies, particularly those managing digital wallets, rewards apps, or loyalty programs, proximity verification offers several key benefits.
Proximity data can be used to unify customer payment experiences in-store and digitally–think “super app” functionality, powered by ultrasonic technology.
Imagine a user walking into a coffee shop, and their digital wallet automatically verifies their identity with the shop’s payment terminal. Without needing to unlock their phone or scan anything, they simply walk out with their purchase, which can be tracked and attributed in real time.
While grab-and-go experiences have been piloted with manual verification in the background, this level of frictionless interaction will become a key differentiator for digital wallets and payment apps in the future.
Convenience is king, and eliminating even a few extra steps in the payment process can lead to higher customer satisfaction and loyalty.
Proximity verification strengthens security by detecting a user’s presence at or near the point of sale (POS) when a transaction occurs. Merchants can use proximity services to significantly reduce the risk of card-not-present (CNP) fraud, which accounted for over $12 billion in losses globally in 2023 and is on pace to exceed $49 billion in losses by 2030.
When proximity is factored in as a required component for transaction validation, it becomes much harder for malicious actors to conduct fraudulent activities.
Proximity data can also be leveraged to create personalized experiences within loyalty and rewards apps.
Merchants can use proximity data for:
- customer presence detection
- delivery of personalized, location-based offers, such as targeted discounts when a user is near a participating store; and
- dynamic pricing models, adjusting pricing and rewards based on a user’s proximity to specific merchants.
For example, if a customer frequently visits a particular retail location, the app could push rewards or bonuses when they are within a certain range of that store, incentivizing continued patronage.
When it Comes to Proximity Technology, Ultrasonic Leads the Way
Contactless payment solutions today rely on either Bluetooth/BLE, NFC, QR Codes, or Ultrasonic for data transmission. However, these data modality capabilities can vary quite a bit; it’s essential to consider the benefits and limitations of all modern standards for upgrading to proximity verification & payment solutions so that you get the accurate location detection you need.
From accessibility to scalability, the ultrasonic data modality fills numerous critical voids where other modalities fall short. With ultrasonic technology, precise location accuracy is achieved without the signal bleed and security issues seen in Bluetooth, range restrictions of NFC, or accessibility limitations and rampant fraud with QR Codes.
Bluetooth (BLE)
While widely used, Bluetooth’s signal range can be unpredictable, with “signal bleed” through walls or other barriers potentially allowing unintended verification outside of the designated area. This lack of control over range makes Bluetooth less ideal for secure proximity verification in financial transactions.
NFC
NFC is more precise than Bluetooth, requiring close physical contact for transactions (typically within 4 centimeters). However, NFC’s short range can also be limiting, as it requires users to physically tap or hold their device near a terminal—adding an extra step that proximity verification aims to eliminate.
QR Codes
QR codes function as a 1:1 solution, requiring users to scan a code displayed on a terminal or screen. While widely adopted in some regions, consumer sentiment is rapidly declining, as this method introduces multiple points of friction, requires perfect lighting, camera stability, and continuous online connectivity. Additionally, QR codes are so highly vulnerable to fraud, that the FTC, FBI, BBB, and Consumer Reports have issued warnings for use in financial transactions.
Ultrasonic
By using sound waves outside the range of human hearing, ultrasonic tech can verify proximity with a high degree of accuracy. Operating without requiring line-of-sight, users don’t need to position their phones in specific ways for verification to work, making it ideal for real-world scenarios like crowded retail environments or transit stations.
Unlike Bluetooth, ultrasonic signals don’t bleed through walls, offering more controlled and secure proximity verification. And unlike NFC, it doesn’t require users to tap their devices, preserving the seamless experience. This makes it an increasingly attractive option for fintech companies looking to secure proximity payments at scale.
Ultrasonic Proximity Use Cases and Real-World Applications
Ultrasonic solutions are ideal for frictionless, reliable, and secure data exchange in a variety of applications. Digital payments powered by ultrasonic tech can be used a wide variety of industries around the world, including mobility, retail, hospitality, finance, events, and more.
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Public Transportation
The Be-In, Be-Out (BIBO) dynamic fare system, implemented with ultrasonic technology, eliminates the need for passengers to physically interact with transit systems. As they enter or exit public transit, the ultrasonic signals automatically validate their presence, calculating fares dynamically. This solution is in high demand for major public transit operators around the world like India, where mass validation capabilities reduce congestion and fraud and make throughput more efficient.
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Retail and Loyalty Programs
Using ultrasonic data to unify the on prem and digital payments experience is a common use case for ultrasonic proximity technology. Imagine walking into a retail store and being automatically as a customer and having a personalized experience. Ultrasonic proximity verification can enhance shopping experiences initiated by proximity detection, automatically authenticating smart carts, processing payments for BOPIS transactions, and even serving personalized ads and rewards to customers' mobile devices based on their proximity to specific products within the store.
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Drive-Thru Experiences
What if you drove your spouse’s car through a drive-thru, only to have the system mistakenly prepare your spouse’s usual order? With ultrasonic proximity technology, this doesn’t happen because it can be used to verify the actual person in the car, not the vehicle. It accurately identifies the right customer through proximity detection, even in situations where biometric systems or OTPs might fail due to misidentification or accessibility issues.
Promises Made. Promises Delivered. Is The Time for Ultrasonic Proximity Verification Now?
With competition intensifying and consumer expectations rising, fintech companies face growing pressure to build secure, seamless payment experiences. Proximity verification represents a crucial advance, offering fintech providers the opportunity to address this demand with a faster, more secure alternative to traditional contactless methods.
LISNR’s ultrasonic proximity technology, for instance, is gaining traction in high-traffic environments like transportation hubs, public spaces, and retail, setting a new standard for secure, contactless interactions that extend beyond small, everyday transactions to larger, higher-stakes payments. By embedding proximity verification into these transactions, companies can streamline customer interactions while reinforcing trust and security in an era of evolving digital risks.
For fintech leaders, the time to act is now. Early adopters who integrate proximity verification with enhanced security layers, like multi-factor authentication or digital IDs, will attract a discerning customer base while setting themselves apart in the crowded fintech landscape, ensuring that security and convenience stay at the forefront of the customer experience.