Last updated: 22 May 2018
In little more than five years, the financial services industry has went through a great transformation. Driving the breakneck pace of change is an ambitious new breed of fintechs, but also well-established tech companies and banks with histories stretching back centuries. Commercial success has gone hand in hand with fundamental changes to consumer behaviour – from paying for something with a wave of our phone to immediately transferring funds to a friend via an app.
But the elephant in the room is security – which in the rush to innovate, has occasionally been overlooked. But with cyber-attacks making the headlines on a daily basis, maintaining customer confidence and trust is critical to long-term success. What’s more, the latest open banking initiatives and new regulations like PSD2 will further increase the pressure to ensure robust protection of customer data and funds. Biometrics can play a central role in the quest to address these challenges, by combining security with usability, but it’s not a magic bullet. Unleashing its full potential demands careful consideration of a range of different factors.
Security vs convenience?
24/7 connectivity has brought with it a step change in customer expectations. Unfortunately, this realignment has also led to increased attention from cyber criminals. As the scale and sophistication of cyber-crime has grown, so has customers’ need for reassurance. A survey we commissioned found that 44% would switch banks in the event of a security breach. But does strengthening protection against threats mean compromising the user experience? It’s a critical question: the same survey also found that 38% would switch to a bank offering a better service. Success depends on marrying convenience and security – by strongly identifying users to facilitate safe access to an array of services.
Biometrics are already here
Biometric technology can provide an answer to this paradox, and is already being used. The use of fingerprint and facial recognition to unlock smartphones led the charge, but it’s not the whole story – biometric identification is increasingly commonplace at ePassport gates, and some forward-thinking banks are enabling customers to authorize transfers via a selfie, or withdraw cash from an ATM with a palm scan. For banks and merchants, biometrics provides a truly unique means of identification as well as authentication. For consumers, it offers the ultimate in convenience – something they always have with them, which can’t be forgotten or lost.
But despite this, a ‘one size fits all’ approach won’t work. Today’s consumer values choice and individuality as highly as security and convenience; therefore, successful adoption is dependent on creating a digital journey that customers are immediately comfortable with.
Integration is the key
To be implemented effectively, biometrics requires integration with strong authentication and fraud detection solutions. Crucially, authentication provides the link between a local biometric check (such as a fingerprint scan on a smartphone) and the bank or merchant’s own system. Fraud detection, meanwhile, based on user’s behaviour and device profiling technologies, should deliver the instant, real-time analysis necessary for the provider to either approve or block a transaction, or seek further authentication. Significantly, this approach also matches one of the key principles of the PSD2 directive.
Applying AI to fraud detection
The good news is that banks are now able to deploy a new generation of platforms to meet these requirements. For example, our Assurance Hub uses Artificial Intelligence to determine the potential for fraud in any transaction by assessing a vast array of signals and behaviour – from the user’s location and device preferences to the way they interact with their mouse or keyboard. Anything out of the ordinary can be identified and assessed to determine whether additional authentication – such as a PIN code or fingerprint scan – is needed, or if the transaction can proceed without further intervention. The system also guarantees privacy since the data analytics is anonymous.
Extending the appeal of contactless payment
Biometric technologies are also having a positive impact on the way we pay. Contactless payments have been another defining characteristic of the past decade, but an innovative new payment card promises to combine the ease of contactless transactions with equally effortless biometric authentication. A fingerprint scanner built into the EMV biometric card enables the holder to authorize payments with nothing more than a finger scan. There’s no need to enter a PIN code, and no need to set a contactless payment limit.
Learning from the public sector
The benefits of biometrics extend well beyond the banking domain, and particularly in the public sector for law enforcement. Since the early 1980s, AFIS (Automated Fingerprint Identification System) has been steadily replacing the laborious task of manually searching for fingerprint matches. Now it is being replaced by the ABIS (Automated Biometric Identification System) which uses a richer array of information to identify suspects. Government bodies are also starting to employ biometric technologies to tackle problems such as voting and benefit fraud, and to help secure national borders and citizens’ identities.
Financial service providers will reap the benefits of government investment
As adoption of biometrics by governments gathers pace, banks will have opportunities to use national identity schemes in the quest to combine convenience and security. With full end-user permission and the proper privacy safeguards in place, providers could facilitate swift and safe access not only to banking services, but also social and welfare benefits, or even in-store payments on a merchant’s phone that do away with the need for the customer to use either a phone or card of their own. As a result, government investment in biometrics can stimulate growth and innovation in the private sector too, and help citizens complete numerous day-to-day tasks with far greater ease and efficiency.
Biometrics has quickly captured the world’s imagination. Given the sheer speed of change in the financial services sector, future growth here is likely to be swift. There can be little doubt that it represents a vital tool for all those providers – banks, fintechs and merchants – that understand that innovation can only flourish if it is underpinned by credibility and confidence among end users.
The real key, though, is to see biometrics as part of a much bigger picture. Realizing its full potential and meeting the expectations of customers and regulators alike demands a genuinely holistic approach. Enterprises need to tailor biometric techniques to the preferences of individual customers, and successful deployment invariably involves integration with equally sophisticated authentication and risk assessment solutions. The good news for providers is that technology which ticks all these boxes – and many more – is now readily available. As a result, the digital banking revolution can finally look forward to a future in which trade-offs between security and convenience are well and truly a thing of the past.