Home Slider Biometrics Are Proving Increasingly Essential for Banking Security

Biometrics Are Proving Increasingly Essential for Banking Security

by internationalbanker

By Joseph Moss, International Banker

 

As of early 2024, fraud and cybercrime within the global banking system show little sign of abating. On the contrary, the comprehensive ongoing digital transformation undertaken by many of the world’s financial institutions is only further exposing the industry to key vulnerabilities that nefarious actors can exploit. With sizeable financial losses being racked up due to such attacks and customers increasingly mistrustful of the sector’s ability to guard against malicious forces, banks are spending more than ever on technologies that can capably counter the serious threats posed by cyberhackers. As customer authentication plays a central role in this process, biometrics are now emerging among the most popular, most effective and often most engaging cyber-defence mechanisms for ably protecting banking customers.

By utilising the physical and/or behavioural characteristics that uniquely identify each individual, biometric technology is ideal for security authentication, either as a standalone method or as part of a multi-factor authentication solution. Its popularity—and necessity—is being nowhere more keenly felt than within the banking sector, with lenders now dramatically boosting the robustness of their biometric capabilities to perform security checks across several relevant key areas, particularly via online- and mobile-banking applications.

“Just as we can identify our family and friends by simply seeing or hearing them, technology has managed to endow devices such as mobile phones, computers, tablets or video door phones with the same ability. This protects private data and physical and virtual facilities from access by third parties,” Santander Bank wrote in February 2022. “As we have said, biometrics uses those unique, non-transferable features of the human being, so the authentication of security systems consists in creating and saving a model or data map that represents the user exclusively and serves to confirm their identity when they request access, whether to physical or virtual spaces.”

Indeed, it is that exclusivity that biometrics enables for each customer that is fuelling rapid growth across many key areas of banking security, such as:

  • verifying customers’ identities before they can gain access to their sensitive personal and financial information,
  • onboarding and authenticating new customers,
  • authenticating existing customers when conducting transactions,
  • preventing fraud, including account takeovers, false new-account openings and synthetic identity frauds,
  • expanding financial services to underbanked and unbanked populations securely and conveniently.

Internally, meanwhile, biometric solutions are being leveraged to allow staff-member access—or, in some cases, prevent staff-member access—to sensitive areas within the bank. The technology is also essential for supporting banks in meeting regulatory and compliance requirements, with the growing need for banks to implement resolute know-your-customer (KYC) and anti-money-laundering (AML) controls being further augmented by biometric authentication tools.

“Banks across the world realise that failure to maintain tight anti-money laundering frameworks may result in potential regulatory action. Many need to take urgent steps toward securing their AML and financial crime management,” the UK biometrics firm iProov explained in August 2021. “Verifying the identity of a new remote customer is the first and most crucial step in a bank’s online anti-money laundering efforts. It’s how banks ensure that they’re engaging with a legitimate individual from the beginning, which enables you to filter out potential bad actors, bots, and fraudulent identities straight away.”

Today’s biometric solutions encompass a growing range of authentication tools—long gone are the days of fingerprints being the sole verification method. The likes of facial recognition, voice recognition, retina and iris recognition, and signature recognition are all garnering more attention from banks as they seek to deliver as seamless and effective an authentication method as possible. And with no need to input an alphanumeric password, answer a memorable question or (annoyingly) request a reset email for a forgotten password, the single recognition action required by biometric authentication is proving far more convenient.

Indeed, the sheer sophistication of smartphone camera sensors used for facial recognition, for example, makes “selfie identification” a virtually painless process. Voice verification, meanwhile, is gaining considerable traction as a way for customers to provide “audio fingerprints” to verify and secure their identities. The latest software can differentiate the tones and cadences of customer voices at an advanced level, eliminating the potential for human banking staff to determine customer access erroneously. Banks can save potentially substantial sums in the long run.

“From the consumer perspective, it also allows all actions and transactions to be managed from any device, anywhere,” Edward Grant, chief financial officer and co-founder of Solgari—a cloud business-communications provider of biometric voice-verification services, wrote in a piece for Finance Digest. “Users don’t need to remember anything, they don’t require any special equipment, and their location isn’t important. All they need is any voice-enabled equipment, such as a phone, laptop or mobile device, and their voice for authentication.”

With robust cybersecurity defences more pressingly needed for the banking sector than ever, it should not be surprising that the biometrics industry is expected to grow rapidly over the coming years. Indeed, Allied Market Research projected that the global market for biometrics in banking, valued at $5 billion in 2022, will grow to $23.6 billion by 2032 at a stellar compound annual growth rate (CAGR) of 17.2 percent from 2023 to 2032. The research firm’s August 2023 report cited increased security and reduced identity fraud as key drivers for the growth of biometric solutions for the banking industry.

“For user authentication, this technology makes use of physical traits like facial recognition, fingerprint scanning, voice recognition, and retinal scanning. Moreover, biometric use in banking methods offers a great advantage to customers when compared to traditional banking processes in terms of time saved,” the report stated. “In addition, the increase in mobile banking and contactless payments and biometric authentication addresses consumers’ key requirements of convenience are the major driving factors for [the] biometric banking market.”

The report also cited several key trends and factors impacting the growth of the biometrics market for the banking industry over the coming years:

  1. An increase in mobile banking and contactless payments: Such changes in consumer banking behaviour increase the need for secure authentication methods that benefit the growth of biometrics in banking, which can provide higher levels of security than traditional PINs (personal identification number) or passwords.
  1. Greater need for customer security and protection against identity fraud: Biometric authentication offers more secure identity verification and saves time for banks by reducing the need for manual reviews. The real-time authentication offered by biometrics also allows banks to identify suspicious activities and potential fraud attempts as they occur, thus minimising financial losses.
  1. Rising demand for convenience: Customers do not need to memorise passwords or PINs when encountering biometric authentication. The uniqueness of human features also prevents imitation and thus boosts the security and integrity of biometric technology. And for those seeking more tech-savvy solutions as part of their banking experiences, biometric authentication can resonate significantly.
  1. Technological advancements: Growth in artificial intelligence (AI) and machine learning (ML) is dramatically upgrading the capabilities of biometric technology. Algorithms can now speedily adapt to user behaviours, thus improving accuracy and efficiency, while biometric sensors and algorithms are boosting the accuracy and reliability of biometric authentication.
  1. Growth in emerging economies: Regions with large unbanked populations present a significant opportunity for biometric technology, as it enables secure and accessible financial services for these individuals, many of whom lack traditional identification documentation. As such, biometric authentication can be crucial in boosting financial inclusion in emerging and developing economies.

The report also noted a potential limiting factor for the future growth of biometrics in banking—namely, the security concerns and high implementation costs associated with the technology. Specifically, biometric systems remain vulnerable to spoofing attacks through fake biometric samples used to gain unauthorised access. While anti-spoofing measures such as liveness detection and multimodal authentication mitigate this risk, the full integration of biometric solutions into existing banking infrastructure can be expensive and complex, ultimately proving challenging to implement for smaller financial institutions. “Moreover, biometric information is considered highly personal and sensitive,” the report added. “Ensuring compliance with data protection regulations and obtaining user consent for data collection and usage are vital to maintaining user trust.”

Nonetheless, the evolution of biometric solutions will be largely driven by the sheer scale of demand from the banking sector and will go a long way towards ironing out such issues. “One of the advantages of biometric security is its continuous innovation: as technology advances, so do authentication methods,” Santander noted, citing the example of advances in behavioural biometrics, which take “into account a combination of factors to identify the legitimacy of banking customers’ operations, such as how they type on the keyboard, the locations from which they frequently perform operations or their purchasing habits”. As such, the more granular the technology’s assessment capabilities become, the more assured banks can be that customers are sufficiently protected.

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