Biometric in banking

Recent years have witnessed a significant increase in the level of banking inclusion.

In 2022, around 70% of the population had access to a bank account, up from ~40% a decade earlier, according to the World Bank. This expansion is primarily attributable to the digital revolution.

As of 2014, only 35% of the adult population worldwide could send or receive digital payments; Now this percentage has since risen to around 65%. 

Need for biometric security 

While remote banking provides numerous benefits for financial institutions and clients, it also presents a significant obstacle. Remote banking relies on a level of trust in the identity of the individual accessing the service. But that is also a challenge, as that trust is exploited by cyber-enabled crime. 

As banks expand remote access to digital services and make access more accessible for users, it becomes a way for fraudsters to steal data and engage in cyber-crimes. 

So, while on the one hand, for financial inclusion and the overall good of society, we need to extend the banking and financial services to each segment of society, we also need to put enough guardrails so that the data of these individuals is not stolen and no fraud happens. 

Indeed, financial institutions are under constant pressure from all directions; customers anticipate using their mobile devices to initiate bank accounts and conduct other transactions.

Concurrently, criminals carry out fraudulent activities and security breaches via digital platforms. Financial institutions confront the concurrent risk of incurring penalties for compliance with KYC and AML regulations.

As a reaction, many financial establishments are adopting sophisticated verification systems to register and authenticate the rapidly expanding group of online bank customers.

This necessitates substituting laborious manual procedures and antiquated authentication techniques, such as implementing passcodes and passwords.

By explicitly integrating biometric verification technology, financial institutions can optimize customer inclusion, reduce user frustration, ensure regulatory compliance, and proactively detect fraudulent activities. Conversely, only some solutions offer an equivalent degree of security.

Interesting Aspects of the Financial Industry's Biometric Security Function:

1. Biometrics addresses the shortcomings of conventional passwords by employing dynamic and one-of-a-kind authentication techniques that rely on intrinsic physical or behavioral characteristics.

One may contemplate the potential of employing a biometric scan to gain access to their bank account or authorizing a transaction via vocal command—substituting vulnerable character sequences with their unalterable identity.

2. By deterring unauthorized access and financial crime, biometric security improves fraud prevention measures. Multiple authentication factors effectively fortify security measures against fraudulent attempts to impersonate authorized users, protecting sensitive data and financial transactions.

3. User Experience Improvement: Biometric authentication ensures minimal disruption to the user's experience while providing an additional layer of security.

One could envision the feasibility of authorizing payments or accessing investment portfolios through a retinal scan or the flicker of an eye. This innovation would simplify financial transactions and eliminate the necessity for laborious passwords or security codes.

Role of Biometric Security in the Financial Sector:

Biometrics has the potential to serve as an alternative method of authentication, contributing to the efforts of financial institutions to prevent fraud and ensure regulatory compliance.

As a result, the financial sector is impacted by this technological innovation, which is replacing passwords and establishing itself as the leading technological solution for Know Your Customer (KYC) and fraud prevention owing to its intuitive interface. 

Biometrics in banking uses individuals' unique physiological or behavioral characteristics for authentication and security purposes in digital banking transactions and account access.

In addition to the abovementioned characteristics, biometric scanning, retinal recognition, facial recognition, and voice recognition may also be included.

Knowledge-based authentication methods, including one-time passwords  and PINs, are susceptible to theft and neglect. On the other hand, contemporary digital payment systems prioritize biometric verification methods to a considerable extent, enabling users to gain entry to their accounts solely based on their unique biological characteristics.

Face recognition is a technological process utilized to ascertain an individual's identity by analyzing facial characteristics. Institutions frequently obtain this data through the use of photographs or recordings. An individual is identified by comparing the information provided and a database comprising accumulated photographs.

Prominent illustrations of biometric payment systems are Apple Pay and Google Pay. They enable customers to utilize Touch ID or Face ID to finalize purchases.

In addition to enhancing identity assurance to comply with regulations, biometric identity verification acts as a formidable deterrent to fraudulent activities. Notably, it verifies the account holder's identity more effectively than conventional methods utilized by organizations to prevent fraudulent transactions. 

The Javelin Identity Fraud Report provides businesses, financial institutions, government agencies, and other organizations with an in-depth and comprehensive examination of identity fraud and the success rates of prevention, detection, and resolution methods.

It reveals that approximately 22% of U.S. adults, or 24 million households, have experienced account takeover (ATO) incidents.

To prevent and address such fraudulent activities and assaults, particularly those related to identity theft, financial institutions implement multi-factor authentication (MFA) systems. These systems integrate biometric verification with additional security measures like PINs or passwords. This dual-pronged security strategy enhances safeguards by necessitating user authentication via biometric attributes and user knowledge (e.g., password).

Biometric security is of the utmost importance in bolstering the digital defense of the financial sector as financial technology continues to evolve.

This state-of-the-art technology verifies and authenticates users' identities by utilizing distinct physiological or behavioral attributes, initiating a period characterized by enhanced security protocols and streamlined user interactions.

Globally, biometric banking systems possessed a market capitalization of $5 billion in 2022. The industry is projected to have a significant valuation of $23.6 billion by 2032, expanding at a compound annual growth rate (CAGR) of 17.2% between 2023 and 2032.

History:

Although biometric identification has been used for centuries, its widespread adoption in the financial sector signifies a substantial progression.

Citibank and other early advocates of biometric technology conducted experiments in the early 1990s using fingerprint scanners to authorize access to ATMs. These endeavors established the foundation for subsequent biometric applications.

To enhance security during the 2000s, HSBC and other financial institutions adopted iris recognition technology. Gemalto and Safran emerge as market champions in the biometric solutions sector.

Face recognition and voice authentication have experienced a notable surge in adoption within physical branch authentication, online transactions, and mobile banking since the 2010s. Integrating biometric security into mainstream operations has been advanced with the introduction of facial and fingerprint recognition for contactless transactions via Google Pay and Apple Pay.

How it Works:

Biometric security functions by employing individuals' identifier and verifier capabilities, which are determined by their distinct biological or behavioral attributes. The following is a concise overview of the operational mechanisms underlying biometric security in the financial industry:

1. Biometric data associated with users, including facial features, biometrics, and voice attributes, is stored securely in a database throughout the enrollment procedure.

2. Initiating a transaction or acquiring access to a financial system requires authentication; this is accomplished by the system retrieving the user's biometric information and comparing it to a template that was previously stored.

3. The matching algorithm, which is of an advanced nature, compares the biometric data that has been captured with the template that has been recorded. After evaluating the degree of similarity, the system produces a confidence score.

4. Whether Access Is Granted or Denied: The system determines access status based on the confidence score. The requested action is authorized, and the user is authenticated upon a successful match.

5. Ongoing Enhancement: Certain biometric systems integrate machine learning methodologies to guarantee a steady progression in precision. The system assures dependability through progressive learning and adaptation to changes in the biometric characteristics of the user.

As a result of the ongoing advancements in biometric technology, implementing multi-factor authentication, which incorporates multiple biometric modalities, is required to accommodate the growing prevalence of security measures.

The National Institute of Standards and Technology (NIST) concluded in a study conducted in 2023 that fingerprint recognition demonstrates exceptional accuracy and reliability, as evidenced by its 0.001% False Acceptance Rate (FAR).

The technological systems and methodologies employed may differ according to the biometric modality (e.g., voice, fingerprint, iris, etc.) and the intended degree of security. Nevertheless, the fundamental tenet remains unaltered: capitalizing on distinctive and unchangeable human attributes to facilitate secure and streamlined financial transactions.

Features of Biometric Authentication 

In addition to their inherent authentication capability, the integration of the following functionalities enhances the efficacy and desirability of biometric security solutions:

Multi-factor Authentication (MFA) enhances security measures beyond biometric verification, including passwords and one-time codes, to prevent unauthorized access. Implementing an additional layer of security for transactions of a crucial nature is recommended.

This process may involve initializing access via biometric authentication, which is then succeeded by transmitting a distinct code to the user's mobile device for ultimate authorization.

Liveness Detection: Sophisticated algorithms guarantee that user interactions occur in real-time, effectively thwarting spoofing endeavors that utilize inert images or counterfeit biometrics.

Comparable to the "blink test" used in iris scans, subtle head movements are employed in the facial recognition function to verify the identity of the access requester instead of relying on a photograph.

Specific systems provide the functionality for ongoing monitoring, allowing user behavior detection after the initial registration procedure. This functionality enables the detection of any atypical or dubious behavioral patterns that may suggest compromised accounts.

One could conceptualize an artificial intelligence system capable of perpetually overseeing an individual's financial activities, promptly initiating intervention in case of suspicious transactions or abrupt alterations in access attempts.

Encryption and Data Security: In the event of a system compromise, biometric information is stored securely with robust access controls and encryption to prevent unauthorized access or misuse. Let us contemplate a hypothetical situation in which one's biometric data undergoes a multi-tiered encryption process, resulting in a conversion from a simple fingerprint image to a complex mathematical representation.

Advantages:

This revolutionary technology offers an inexhaustible list of advantages to financial institutions and their clients:

With respect to financial institutions:

By safeguarding consumer assets and sensitive data, biometric security substantially reduces the probability of unauthorized access and financial fraud. Consequently, these factors contribute to a decrease in fraudulent transactions, an increase in brand trust, and a reduction in operational expenditures.

Numerous financial regulations stipulate that the deployment of robust authentication protocols is required. Biometric security provides a dependable solution that streamlines the processes necessary to comply with these regulations.

It safeguards your financial domicile's organization and is comparable to a fortified barrier that adheres to the latest security protocols.

An Enhanced Customer Experience: Incorporating biometric verification technology obviates customers' need to remember and re-enter passwords, facilitating more streamlined and practical account access and transaction processes. As a result, there is an increase in consumer satisfaction and loyalty, as well as a competitive advantage in the era of digitalization.

Concerning the clientele:

Enhanced Security and Trustworthiness: By employing biometric signatures to protect your accounts, the likelihood of fraudulent financial losses is diminished, and you gain a sense of assurance that inspires confidence.

One can envision the serenity from the realization that their key is composed of their fingerprint or retinal scan, thereby rendering any endeavor to imitate or misappropriate it ineffective.

The ability to perform financial transactions and gain account access without the need for security codes or passwords significantly improves the overall efficiency and efficacy of the financial experience. An individual might consider the potential for conducting transactions by visually inspecting or manipulating their smartphone via a sensor.

Implementing biometric security measures grants customers enhanced authority and visibility regarding their financial data and entry.

Users can identify which transactions require biometric verification and identify any potentially suspicious activity by monitoring their account activity. Envision possessing unambiguous and absolute authority, control over your financial affairs, and a readily accessible additional layer of protection.

Related technologies 

Several auxiliary technologies operate in conjunction with biometric security to enhance its efficacy:

Applying algorithms powered by artificial intelligence  is of the utmost importance when analyzing biometric data, detecting spoofing attempts, and continuously monitoring user activity to detect anomalies. Consider an imperceptible artificial intelligence assistant who diligently oversees your financial transactions and protects your accounts in a manner analogous to that of an undetectable guardian.

By storing and processing biometric data on a centralized, secure infrastructure, cloud computing guarantees adherence to data privacy regulations while assuring the system's availability and scalability. Envision oneself within a digital environment where a secure and fortified repository retains and administers an individual's unique biometric signature.

The decentralized ledger system of blockchain technology, whose implementation is still in its infancy, can potentially increase the security and transparency of biometric data administration.

One could conceptualize a decentralized ledger that stores the individual's biometric information, restricting access to users solely with explicit authorization and ensuring resistance to manipulation.

These technologies create a reinforced and secure environment to protect biometric data in the financial sector.

Financial institutions can enhance their resistance against fraudulent activities and unauthorized entrance by utilizing their specialized knowledge to fortify security protocols and guarantee a smooth transaction process for their clientele.

The financial sector biometric security market on a global scale is anticipated to reach $7.7 billion in 2028, according to a report published in 2023. This forecast reflects the ongoing integration of these complementary technologies and the consistent growth of the industry.

Use Cases of the Role of Biometric Security in the Financial Sector:

Customer Onboarding

Identity verification is the initial and pivotal phase in the registration procedure for a remote consumer. Financial institutions employ this method to verify that they deal with legitimate consumers at the outset. This enables them to promptly identify and exclude potential fraudulent identities, algorithms, and malicious actors, in addition to assisting compliance efforts (by demonstrating that they "know" their consumers).

Financial institutions can eliminate the necessity for in-person interaction with clients by employing a brief biometric facial scan after digitizing a trusted identity document, such as a driver's license, to verify client identity.

The onboarding phase is considered the most vulnerable because information about the user or their risk is inaccessible after enrollment.

As a result, it is critical to implement the highest standards of identity verification to protect against risks like synthetic identity fraud. Recruiting fosters the development of enduring trust that remains throughout the customer's lifecycle.

Customer Authentication

Legitimate onboarding does not preclude the possibility of account acquisition fraud, identity theft, phishing, or any other fraudulent activity gaining access to the account. Using biometric facial authentication, it is possible to verify that the user  persistently attempting to access an account is, in fact, the same person who created the account.

Re-authentication is feasible after an individual's identity has been verified with the utmost certainty through a relatively lax process and a straightforward liveness check, provided that no modifications have transpired that would increase the risk.

This occurs when an authorized user is added to a consumer's account, a new line of credit is requested, a password reset is requested, a new device is configured, or an existing device is returned.

Following this, a financial institution may choose to enhance the level of authentication by requiring an additional biometric scan to verify the consumer's identity, performing the abovementioned changes. This capability empowers financial institutions to provide consumers with the necessary flexibility and convenience.

By drawing a comparison to how biometric security protects users' banking information (similar to the process used to access a smartphone using fingerprint or facial recognition) in the financial industry, this technology provides a combination of security and convenience.

One could establish a parallel between how biometrics optimize airport security protocols and how they enable timely and secure access to financial accounts, reducing the likelihood of illicit entry.

Vault Access Scenario: Imagining a financial account as a vault, biometric security functions as a personalized key, allowing only the account owner to access and manage their financial assets securely.

Companies Using the Role of Biometric Security in the Financial Sector:

While the list is extensive, let's highlight some prominent players making waves in the financial security landscape:

1. Daon: This global leader specializes in multi-factor authentication solutions, seamlessly integrating mobile biometrics like fingerprint and facial recognition into financial transactions. Imagine paying your bills just by looking at your phone, with Daon's technology verifying your identity in real time, adding a layer of security to every interaction.

2. Gemalto (Thales Group): A trusted name in digital security, Gemalto, now part of the Thales Group, offers comprehensive biometric solutions tailored to financial institutions.

They focus on secure identity verification through fingerprint, iris, and voice recognition, ensuring only authorized individuals can access sensitive accounts and transactions. Think of Gemalto as the digital gatekeeper, carefully verifying your identity with advanced sensors and algorithms.

3. Fujitsu: A pioneer in technological innovation, Fujitsu actively develops cutting-edge biometric solutions for the financial sector.

Their research focuses on next-generation technologies like liveness detection and behavioral analysis, constantly pushing the boundaries of security and convenience.

Imagine a future where your financial interactions adapt to your unique behavior patterns, made possible by Fujitsu's advancements in biometric technology.

These are just a few examples of innovators driving the adoption of biometric security in finance. From established giants to nimble startups, companies worldwide recognize this technology's immense potential to revolutionize security and empower customers.

Conclusion 

In light of the swift digital transformation occurring in the financial sector, biometric security is essential in protecting sensitive data and verifying the authenticity of financial transactions.

Biometric security is critical in the ever-evolving financial technology sector due to its effective integration with associated technologies, advanced capabilities, and favorable security ramifications.

Through adopting these advancements, users not only strengthen the safeguards against cyber threats but also improve the overall user experience, thereby establishing a foundation for a future in finance that is more secure and interconnected.