With smarter cybercriminals comes smarter cyberdefences, and banks are continuing to bolster their products with some of the most contemporary technologies to continue thwarting oncoming attacks.
But it appears that many institutions are embracing secure technology, such as biometrics, to thwart more than just cybercriminals, as Jan Lunter, CEO and CTO of Innovatrics, details in this guest post for The Fintech Times, the technology holds the potential to completely transform what we know and expect from financial services.
Jan graduated from the Télécom ParisTech University in France. He is the co-founder and CEO of Innovatrics, which has been developing and providing fingerprint recognition solutions since 2004. Jan is an author of the algorithm for fingerprint analysis and recognition, which regularly ranks among the top in prestigious comparison tests (NIST PFT II, NIST Minex). In recent years he is also dealing with image processing and the use of neural networks for face recognition.
The first noticed banking fraud ever occurred in 1968. Proto-hackers from Sweden could steal an authentication token from Barclay’s to withdraw money from various ATMs. Still, the scam affected a relatively low number of clients back then. Today, such fraud can cost financial institutions and their customers billions of dollars. Not only has the total sum of losses increased, but so has the frequency of attacks. It’s expected that payment fraud-associated costs from online payments will grow by approximately 52% by 2024.
Banks increasingly choose to double-protect themselves and their customers against fraud by using biometric authentication technologies, such as a fingerprint scan or a face ID. In addition, there are many other helpful applications of biometric technology in the financial sector, including fast and efficient digital onboarding.
Let’s look at what benefits biometrics offers payment service providers and how the technology improves financial inclusion for everyone.
Building Better Customer Experiences With Biometrics
Amid the Covid-19 crisis, the global market for biometrics for banking and financial services, estimated at $4.4 billion in 2020, is projected to reach a revised size of $8.9 billion by 2026, growing at a CAGR of 12.8%. The reason for this massive uptick in biometrics adoption is the immense improvement the technology offers in the realm of customer experience.
When digitally onboarding new customers, video-integrated optical character recognition (OCR) can automatically fill in text and numbers from passport photos, such as date of birth, address, and ID number. Then, face or fingerprint authentication helps ensure that the person creating a new payment account is really behind the camera during the onboarding process.
As all customer inquiries, onboarding, and other banking procedures can move online, banks and fintech worldwide could promptly provide people with access to financial services without the need for visiting a physical location.
Being entirely digital – or handling an increasing number of services online – is cost-efficient and saves time for both customers and personnel. The acquisition of a new client costs around $280 in the US, while remote onboarding cuts these costs to as little as $120.
And according to some other surveys, acquisition costs are much lower, as low as $5. The final expense depends on the abandonment rate, hence the number of customers who do not complete onboarding. With a well-designed setup, the abandonment rate can be kept very low, which lowers the cost significantly – and vice versa.
Paving the Way to Safe Digital Payments
According to PYMNTS research, 66% of millennial banking consumers want more authentication control to feel safer. Safety is a priority for the payment industry, as, with it, banks’ reputation stands or falls.
Whether we get cash out of an ATM or authorise online payments, we usually use knowledge-based methods and tokens such as PINs and passcodes.
However, these operations have not always been secure due to human error (forgetting, sharing, noting down, hacking), and with increasing cyberattacks, security is becoming even less so.
With the help of fingerprint scanners or facial recognition, users don’t have to carry PINs or sensitive information around. Simple motions such as placing a thumb on a sensor or glancing into a camera can unlock unlimited access to banking apps. When shopping in stores, many people prefer to use a debit or credit card and mobile wallets. Biometric authentication can work with a payment card or NFC-enabled wallet (like Apple Pay) and reduce the risk of fraud to zero. Banks can even use two authentication methods, such as a combination of facial and voice recognition to double secure transactions.
Biometrics can use liveness detection algorithms to distinguish between a real person and their digital or physical imprint. Therefore, no one will access a biometrically secured bank account with a picture from social media. The characteristics of a face or fingerprint must be presented at the time of a transaction to authorise it, making transactions double secure against fraud.
Many companies rely on a server-centric approach when implementing biometrics in their online and mobile banking applications. This means that the data necessary for verification are stored on servers and mobile devices must communicate with them. However, new approaches allow us to store data locally, make comparisons on devices and only send results to the central servers.
This has several advantages: personal data never leaves the device, the servers have a lower processing load and the demands for data connection are less demanding. This is important in countries with patchy networks or a lack of bandwidth.
Biometrics Boosting Financial Inclusion
Over the world, 2 billion people are unbanked, lacking access to financial services. The reasons for this low adoption rate are manifold: traditional banks working only with national ID documents, long distances to bank institutions for people in rural areas, or the inability to write and read, making onboarding a nightmare.
However, fintech and digital banks that secure their systems with biometrics can help enhance inclusivity for the populations traditionally excluded. Even though many people don’t have a bank account, they often use a mobile phone. According to the Gallup World Poll 2017, 93% of adults in high-income economies have their own mobile phones, compared to 79% in developing economies.
Access to cell phones allows banks to onboard and verify customers through their smartphones. For example, Home Credit Philippines, a global consumer loan provider, uses biometric authentication to approve and grant loans to its customers in the Philippines remotely through its app or website.
Inclusion in the financial world allows people greater economic freedom, such as purchasing goods remotely over the internet or tracking business transactions and stock market trades. It also brings better management of their finances, a better overview of income and spending, and access to consumer finance and credit, helping people invest in themselves. In short, it will bring a better banking future for all.
Although there are still political hurdles and a lack of technological infrastructure to overcome before biometric identification can reach its full potential, the expected benefits are enormous. Once biometric technology is commonplace, we can look forward to a more just and equal world.