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Biometric Technologies in the Financial Sector: How They Work Today

Apr 08, 2021
Blog

In the digital transformation era, companies are constantly looking for new FinTech solutions to make transactions more secure and convenient for customers. However, global digitalization gives impetus to the development of not only businesses but also cybercrime. Keylogger software (so-called keyboard spies), fake web pages, messages disguised as notifications from financial institutions – all these trick users into disclosing their confidential information. How to protect yourself from financial fraud? What does biometric authentication have to do with it?

The current situation

In 2020, the analytics company FICO conducted research in 10 countries to find out how clients prevent the leakage of their financial information online. It turned out that only 40% of people surveyed use different passwords for their accounts, and no more than 18% of respondents keep sensitive data in special applications. A distressing picture emerges – having received login information for at least one account, criminals can hack several of the user’s accounts. So it appears that users themselves compromise their private information.

Financial institutions typically use passphrases, social media authorization, or multi-factor authentication (which includes various combinations of these methods) to protect data. The introduction of biometrics became a turning point in the creation of new-generation identification tools.

Biometrics is a system for identifying a person by their unique behavioral or physiological characteristics. How does it fight fraud today? How does it improve the quality of customer service?

The solutions proposed

In 2013, Apple released the iPhone 5S with fingerprint unlocking. This launched the beginning of the widespread use of biometrics as a means of user authentication. Now, this technology is increasingly replacing typical passwords and access keys.

According to Global Markets Insights, by 2024, the global biometrics market will surpass $50 billion. What is more, the 2020 COVID-19 outbreak has redefined technology trends, making contactless biometric identification the most promising trend in the industry.

biometric authentication

Many organizations have already started modernizing their customer identification strategies by using financial software solutions. For example, HSBC launched the possibility to authorize via Voice ID in 2016. As a result, more than 29,000 fraudulent calls have been identified since the technology was introduced, preventing theft of around £400 million.

Barclays uses a unique finger vein scan system to verify corporate and business customers. For security purposes, the financial institution doesn’t store the received information on its servers.

How biometric authentication works

In financial software development, biometrics is used for quick and reliable identification of a client at different stages and in various scenarios of interactions (making payments and transfers, lending, insurance). Its second function is to ensure security when working with personal information and financial data.

Biometric authentication can be carried out according to static and dynamic parameters.

Static authentication is based on the physiological characteristics of a person, which remain unchanged throughout their life:

  • fingerprints
  • face geometry
  • iris
  • veinprint

Dynamic authentication relies on patterns of human behavior that can change over time:

  • voice
  • handwriting
  • manner of walking
  • lip movement
  • keystroke dynamics

In a simplified form, the operating principle of biometric authentication is as follows:

1. Using scanners or sensors, the system reads the data and creates a biometric model.

2. The information is converted into digital code and stored in the database.

3. Next time the data is scanned (fingerprints, voice, etc.), the program also converts it into code and compares it with an existing reference model.

Benefits of biometric authentication

The main benefits of such a personal identification system for the financial sector are listed below:

1. Fraud protection

Imitating or stealing biometric data is a more difficult task than obtaining other information, such as a PIN, by deceptive means. This makes the biometric authentication method highly reliable. The system can be used not only to protect the information of a company’s clients but also to securely identify employees. The latter will help to avoid cases of insider fraud.

2. Simplified registration process

As competition increases, one of the strategic advantages of companies is the speed and mobility of customer service. Biometric-based authentication allows financial institutions to quickly retrieve the client’s personal information. Thus, applicants can open accounts and perform other activities without visiting branch offices. The possibility to carry out financial transactions remotely makes them more accessible, primarily for people with limited mobility and residents of remote regions.

3. Resource-saving

Resetting passwords is a demanding task for any customer service department or IT specialist. Since forgetting or losing biometric data is almost impossible, this authentication method will save companies money and time.

4. Continuous authentication

Based on information about the client’s interaction with the device (the angle at which they hold the phone, typing rhythm, page scrolling speed, etc.), the system can create a unique user profile. If someone else logs into the account, the system will detect deviations from the typical pattern of behavior and alert the owner in real-time. Moreover, to collect and use a person’s behavioral characteristics, no additional action is required: their activity can be tracked in the background.

The future of biometric authentication

Biometric authentication plays an important role in the financial world. The number of authentication methods is growing, and new technologies and solutions are emerging. We are moving from scanning classic biometric data such as fingerprint and face geometry checking towards behavioral user authentication. Such systems are increasingly demanded to improve the security of payment systems, personal accounts, and user data.

At the same time, it should be remembered that convenience and a positive customer experience are key factors for platform users. Speed and simplicity of payment both in stores and online are the main criteria for the success of biometric solutions. Users will select biometric identification methods from a wide range of solutions, depending on the channel they use to make a transaction.

 

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