How Biometric Technology is Changing the Financial Industry
Digital and remote banking is on the rise, with Juniper Research estimating that the total number of online and mobile banking users will exceed 3.6 billion by 2024. Security threats are still unfortunately prevalent in the financial industry, and the need for security is even greater in light of digital banking. While customers agree that security is vital, they want it to be a frictionless experience.
Biometric technology offers a promising alternative to traditional PIN and password methods, allowing banks to verify customer identity quickly before processing transactions via mobile app, ATM, phone, or website.
Here’s a look into how biometric technology is changing the financial landscape.
What is Biometric Technology?
Biometric technology relies on markers in the body, like voice recognition or touch ID fingerprint, for authentication. The human characteristics it uses to verify identity are unique and distinctive for each person. Many of us already have experience with biometric technology via our mobile phones and their fingerprint and face recognition capabilities. Biometric technology is an excellent solution for the banking industry because of its security and simplicity. A 2018 survey from GlobalData revealed that 67 percent of global customers would be happy to see a form of biometric used to secure payment details.
In the financial industry, biometric technology can be used at any time you need to confirm a customer’s identity. For example, biometrics can be used when:
- Opening an account
- Making a transaction at an ATM
- Using mobile or online banking
Types of Biometrics in the Financial Industry
Here are some of the most common types of biometric identifiers that can be used with banking, along with their pros and cons.
Voice recognition relies on the unique characteristics of your voice. Right now, voice recognition is one of the most popular choices for biometric technology in banking. The bank passively captures your voice from a normal conversation, so you do not need to repeat any scripted phrases. You can use voice recognition anytime from any location, offering great convenience and security.
Mobile apps can scan and digitize a fingerprint within seconds, making it a frictionless choice. Mobile banking and branch banking heavily rely on fingerprint recognition because it only requires simple equipment and is a fast method for confirming identity.
Face recognition relies on 3D sensors and computer algorithms to recognize a person’s face based on the relative position of facial features. This method is growing in popularity, but it requires some technologies that are not universal. Apple’s iPhone X can use face recognition, but not every person has access to that phone. Another consideration is that this technology right now is quite sensitive to changes due to glasses, hairstyle, lighting, makeup, etc that can cause it to spit out authentication errors.
Finger/palm vein recognition
This modality relies on the unique pattern of veins in your palm or finger. Typically, you must visit in-person to enroll with a palm scan. The equipment used for this method is larger and tends to be used more for branch or ATM banking rather than mobile use.
Behavioral biometrics is a relatively new concept that relies on big data and machine learning to analyze personal behavior and the unique device characteristics to develop a user profile for each customer. This approach relies on user patterns, down to how you make keystrokes or use a mouse.
Using special lighting and scanners, retinal scanning identifies the pattern of blood vessels in the retina of the eye. This option is pretty expensive and generally not convenient enough for customer authentication. It could provide ultra-secure authentication for entry into a bank vault.
Iris scanners examine the complex color and line patterns of the iris in your eye. Some iris scanners are even available on mobile phones, and they’re easy to install at stationary sites like ATMs. Because iris scanning is a form of live detection, it is incredibly secure. Some newer ATMs and cash machines now require an iris scan before completing the transaction.
The Benefits of Biometrics in the Financial Sector
Biometrics has many key advantages for the financial industry. Some of the top benefits of biometrics in banking include:
- Fast and accurate identification. Biometric technology is an accurate and quick way to authenticate customers. Within seconds, the customer’s identification is confirmed, which is convenient for customers and banks.
- Incredibly secure. Documents can be forged or stolen, but biometric authentication relies on unique qualities. As biometric technology becomes more and more sophisticated, it’s a very secure way to identify banking customers.
- Lower operational costs. With biometric data, there’s no need for additional equipment or human operators, which allows financial institutions to reduce their operational costs significantly.
- Manage transactions from any device. Biometrics allows customers to manage their financial transactions on any device from any location, providing the ultimate convenience.
- Reduced fraud. Biometrics in banking helps protect against insider fraud and cyber attacks. Biometric technology helps banks establish secure employee authentication, which gives a concrete audit trail of every transaction. Additionally, it protects customers’ identities when using online banking.
The Security of Biometric Technology in the Financial Industry
It’s crucial for any authentication solution in banking to be both convenient and secure, and biometric technology ensures both. When examining the security of biometrics, it’s important to consider how it stacks up against two common methods: identity verification and EMV.
Biometrics vs ID Verification
ID verification is a common method currently used by many financial institutions. They scan a government-issued ID to automate authentication. It’s a very streamlined process that does help protect against fraud, and it’s commonly used for new account openings and transaction thresholds. However, ID verification is typically only able to be done in person, which means it’s not helpful for securing online or digital banking. Additionally, physically stealing an ID would allow an unauthorized person to pass verification. If someone steals your debit card, there’s a good chance they may have your entire wallet which would have a government ID, which is why biometric authentication comes out ahead. Even if someone had access to your ID, they would not have access to your unique biometric data, and biometrics can be used to confirm identity on many digital banking solutions as well.
Biometrics vs EMV
EMV card technology is commonly known as a smart card or chip, and it stores user data on integrated circuits to create a one-time code at the point of sale. EMV cards protect against tampered-with card readers or scanners that try to steal your information, and EMV has been proven to be a strong technology for fraud protection, and EMV cards typically require the use of a PIN or ID. However, when the card is not present (like with online banking) there’s still a security risk. For online payments, you must only enter the card number, expiration date, and security code which are all on the card. If someone physically steals your card, they can use it online. Biometrics can solve this problem by requiring biometric confirmation for online use, while also providing a more secure solution for in-person transactions as well.
The Future of Biometrics in Banking
As we continue to progress toward a heavily digital world, we will need a secure, fast way to prove our identity. Biometric technology offers an excellent solution for authentication in the financial industry, and it’s growing in popularity. One key for financial institutions moving forward will be to make sure they have accurate biometrics in place. While biometric technology is still growing, it is not perfect. Certain modalities, especially facial recognition, are not as consistent as they will need to be for convenient usage. To ensure customer satisfaction and security, financial institutions must partner with the market leader in biometric technologies. Overall, biometrics in banking is already an incredibly helpful authentication method that will continue to advance in the future.
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