Any banking customer has used a password or a PIN code at least once. However, these methods of verification are steadily giving way to the next generation of authorization tools. Innovative and transformational, biometric technologies are actively reshaping FinTech by being highly accessible and safe.
Biometric authentication is based on one-of-a-kind biological characteristics of a client, which include fingerprints, facial traits, and more. Its application helps alleviate fraud risks when logging in, expanding the general security of financial products.
Unlike traditional methods, biometrics are much simpler and don’t require memorizing complex passwords. They are inherent and readily available in most scenarios where a person needs to access their account.
Statistically, the worldwide biometric systems market is set to double its value by 2027, constituting $82.9B. An increasing number of banking firms and their customers are opting to have audience-driven, time-saving authorization. Biometrics are vital in establishing new, high standards of UX for various financial platforms.
This article will review the key advantages and challenges of biometric authentication that are relevant in the modern-day banking industry.
The importance of protected transactions in fintech
We’ve already mentioned that biometrics are gradually replacing the more conventional – and less expedient – authorization types.
Yes, the good old passwords or codes are more well-known to clients, but they have the shortcomings that biometrics don’t have. The financial sector is shifting towards safer, more customer-friendly verification – and improving along the way.
Let’s look at the main challenges of conventional authentication and what makes it potentially vulnerable:
Complex passwords
As data safety demands grow stricter with time, FinTech clients are asked to create progressively complex and sophisticated passwords.
While suitable for their purpose, such passwords are often difficult to memorize, which is the flip side of their complexity. Written down or saved on a portable device, they run the risk of being stolen or replicated for identity hijacking goals.
Unlike this method, biometric authentication technologies require no extra steps or extra effort. Distinctively specific to each and every individual, biometrics are quite hard to fabricate or duplicate. Such identity verification protects financial accounts from unauthorized entry in a simple and hassle-free way that has earned its popularity.
Lost or stolen devices
Modern authentication techniques that depend on devices can result in the necessity for clients to carry around several such devices. What adds to the inconvenience is that it’s possible to lose them or fall victim to a theft. Mobile phones, smart rings, keycards, etc., can be left behind, whereas inherent features always accompany an individual.
Facial, eye, or fingerprint recognition easily resolves the problem of lost or lifted smart keys. Biometric authentication methods can be utilized virtually anywhere and anytime, which makes them truly versatile. They don’t face the same logistic obstacles as material objects, elevating financial data safety to an entirely new level.
Refined hacking methods
Many financial platforms enhance login protection by adding certain security questions. Unfortunately, there are several factors that could limit their effectiveness in the era of big data analysis. Personal information (mother’s maiden name, etc.) can be obtained online with relative ease.
Likewise, hackers can acquire the correct answers to questions by analyzing the client’s online presence, including their social media activity.
Biometrics in FinTech don’t require any additional information on behalf of the client. Moreover, they make memorizing the correct answers to the questions a thing of the past. Biometric characteristics can vary over time, resulting in them being less static.
What is biometric authentication – and how does it operate?
First, let’s start with the term itself so as to make it clear. What does biometric authentication mean in FinTech? It stands for a security procedure utilizing the individual physical traits or behavioral patterns with the end goal of verifying one’s identity.
The most widespread sources of biometric data are fingerprints, iris recognition, facial features, voice prints, and behavioral habits. The latter may include such factors as keystroke rate, cursor movement, touchscreen patterns, motion analysis, and more.
When the system receives such information, it compares the data to the samples that are pre-stored within it and identifies a match. The important factor here is to go over the preset threshold of correspondence. When verification is complete, authentication is considered to be successful, and authorized clients are given access to the services. The high level of precision in such processes is based on the enhanced algorithms of pattern and machine learning analysis.
Biometric authentication in banking has arisen as an innovative remedy to common security issues. As online hazards evolved, the need for more reliable and safer authorization systems came forward. The embracing of biometric security was facilitated by the wide adoption of mobile phones with integrated sensors.
As of now, 81% of clients prefer choosing companies that offer simpler, quicker, and safer user verification. Biometrics are the present – and future – answer to their needs.
Types of biometric identifiers in fintech
Biometric authorization relies on a broad scope of modalities that encompass distinctive features of each individual. As digital security becomes pivotal, such methods provide advanced and increasingly dependable means of protecting important data.
Let’s examine the most widespread types of biometric authentication in finance and banking:
Fingerprint scanning
This authentication type has been around for quite a while and is perhaps the most familiar one. It relies on the examination of the unique patterns of a fingertip. Such patterns stay largely unchanged during one’s lifetime.
The benefit of this authorization type lies in its simplicity and safety. Fingerprints are hard to fabricate, and their use requires only a touch or swipe. Scanners can be effortlessly utilized in various scenarios, including financial solutions.
Eye scanning
Another example of biometric authentication, ocular recognition relies on distinctive iris structures. A special camera captures the iris in high definition, and the resulting image is matched up with the pre-existing framework. If they are mostly identical, the client is allowed onto the application.
What makes eye scanning so reliable is that the data is hard to fabricate. Moreover, this authorization type is quick and unobtrusive. The entire process can be completed in just a few seconds and in versatile lighting situations.
Facial recognition
This type utilizes algorithms for capturing the facial traits (interocular distance, nasal structure, etc.). The traits are then transformed into a template for subsequent authorization. If the features are nearly identical, the admission is authorized.
Facial recognition is renowned for being client-centric and contactless. What’s more, it is compatible with built-in cameras in mobile phones and laptops. It normally takes only a few seconds to finalize the task.
Voice recognition
This method is based on the vocal traits of users. The pitch of voice modulation, as well as speaking habits, help create a voiceprint for further verification. Authorization systems can adapt to different speech variations (language, accent, ambient noise), for maintaining accuracy in various environments.
Voice biometrics in banking are non-obtrusive and don’t require any contact with the scanner. All that is needed is to speak into a microphone, which makes it a great asset for multiple apps and voice-controlled assistants.
Palm scanning
Similar to fingerprint scanning, this verification type relies on capturing the individual traits of the client’s palm. It embraces patterns, ridges, loops, and other modalities. Rich in detail and complex, these contribute to the successful identification.
A non-invasive method, palm scanning is performed without direct interaction with the scanner’s surface. It can be integrated into both physical and digital systems, such as attendance tracking or financial apps.
Behavioral recognition
A client’s behavior patterns have unique dynamics online, including typing rhythm, mouse/touchscreen use, speech, or walking. Unlike the other biometric authentication examples, this one takes into consideration the interaction with versatile systems and devices. A behavioral profile is established and then utilized for authorization.
Behavioral recognition is non-disruptive and highly secure because of its resistance to forgery. Persistent observation of actions ensures additional protection, making it more difficult to fabricate such information.
5 Advantages of biometric authentication compared to the traditional methods
Biometric authentication has shown to be more safe and user-centric than the older methods. The foundation of contemporary safety practices, it provides multiple benefits over the passwords or codes. As cyber hazards grow rampant and client expectations become higher, it combines enhanced security with elevated UX.
Below are the core advantages of biometrics in banking:
Enhanced security
Passwords can be misused, keycards lost, and mobile devices stolen, but biometric parameters are always with the client. They are much more challenging to replicate, as such characteristics are extremely unique. Hacking methods become more refined, and this authorization type offers extra layers of security.
Moreover, biometric technology in banking can become part of multi-factor verification. As an example, after typing in a password, the client may proceed with an SMS check or a quick biometric scan. This approach further reinforces the safety of financial applications and accounts.
Scam prevention
Verification systems that rely on biometrics are equipped with cutting-edge anti-spoofing precautions to avoid dishonest practices. Fake facial captures or fingerprints can become a pathway to compromising client data. The main goal of anti-fraud precautions is to discover and block these attempts.
Biometrics in banking security can trace aberrations in behavior or presented data which may indicate fraud. If a client’s behavioral patterns suddenly change or do not resemble prior records, the system may suggest additional verification steps. Consequently, FinTech applications and operations are shielded from malicious activities.
Boosted client experience
Traditional authorization often requires extra effort (typing in strings of characters, answering questions, etc.). Banking biometrics enable a smooth experience with fast and unobtrusive verification; a simple scan is quite sufficient for logging in.
Another positive side of the use of biometrics in banking is that they allow authorization to be tailored to client’s choices. Customers can opt for various methods as their preferred modality. Overall, 2/3 users who have tried biometrics view them as a more convenient and less time-consuming method than the conventional ones.
Regulatory compliance
Financial institutions must comply with regulatory standards and legal norms. Biometrics can facilitate adherence to such norms as GDPR or KYC. In fact, a fully digitalized KYC model could save banks around $460M in onboarding costs alone.
It is quite typical for legal structures to mandate strong authorization methods. Biometrics can offer increased security, surpassing conventional techniques. Moreover, they often incorporate features that support confidentiality compliance (encryption, pseudonymization, and more).
Adaptability and flexibility
Biometric authentication in financial services can be applied to multiple platforms, including mobile apps, online services, and ATMs. Its superiority lies in providing consistency for different touchpoints. Besides that, biometric authentication can be scaled and integrated efficiently into established setups.
Speaking of applications, biometrics enable unified access to services from portable devices. Instead of typing in a password or verification code each time, users can effortlessly access their account. Consequently, mobile banking and transactions become less obtrusive and more secure.
Challenges in biometric authentication implementation
No authorization method is without its issues, and that includes biometrics as well. One of the critical elements that make or break its success is balancing data protection with client expectations. Adding to the problem is the fact that biometric solutions must remain confidential, accurate, and feasible to the provider.
Let’s review the most typical challenges for biometric systems and strategies for addressing them:
User privacy
Whenever biometrics are used to verify an identity, highly sensible private data gets involved. To retain and utilize it in a correct fashion, the provider must adhere to safety protocols to avoid disclosure or abuse. What’s more, financial institutions have a moral obligation to always be upfront and honest about the use and protection of such data.
This challenge can be tackled with the help of such processes as data encryption. Both static and dynamic data should be used in this process to prevent breaches. Biometric profiles and data transmission channels need strong encryption, as they can be compromised by hackers.
Mobile security
As an increasing number of financial services move online, safe mobile authentication becomes crucial. Mobile devices are vulnerable to various security issues, such as spyware, malware, or unauthorized entry. Biometric data saved on a portable device can be hacked or captured, which raises safety hazards.
Strong encryption and multi-factor systems can be deployed against these issues. Additionally, periodic updates to device software can assist in reducing vulnerabilities. Technical progress and vigilance are paramount to ensuring the safety of biometric data on mobile devices.
Feasibility concerns
Biometric implementation can be quite costly, especially in popular applications with many users. Moreover, there may be situations where certain methods may not be feasible.
As an illustration, fingerprint scanning might be challenging for specific types of manual labor. Adherence to regulations and privacy laws may also call for additional resources.
To avoid exceeding the budget, financial institutions must conduct comprehensive feasibility assessments before utilizing biometric solutions. This would entail evaluating the engineering aspects, expandability, and affordability of such systems. Ongoing optimization and monitoring can also assist in maintaining feasibility.
Accuracy and dependability
Biometric systems, advanced as they may be, still have false match and non-match rates. If one wants to minimize authentication errors, this can be achieved by using refined algorithms along with extensive testing. It’s also important to remember that biometric characteristics can have potential natural variations, such as advancing in years or sustaining an injury.
How do you overcome these issues? The primary strategy in this case would be rigorous testing combined with ongoing enhancement.
Authorization algorithms are trained on biometric datasets, which can be quite extensive; stress testing and safety screenings also make the list of potential measures. As a result, authentication processes become more dependable while delivering a smoother experience.
Use cases of biometrics in banking
What exactly makes biometric technologies so popular with services providers and individual customers? First and foremost, they offer superior security without compromising on customer comfort.
Biometrics have found their use in client onboarding and re-validation, but not only in that; they can be helpful in digital banking, even ATMs. It’s no surprise that financial solutions are expected to be safe and convenient; the use of biometrics in FinTech is set to achieve this goal.
Below you will find some of the most typical use cases of biometrics in banking:
Client onboarding
If there is a pivotal stage in onboarding, verification is the one, and it must be both straightforward and safe. Preventing risks and following industry regulations in ID verification is as important to financial institutions as it ever was.
Previously, clients had to visit a local banking branch to have their identity checked by a manager. Today, to ensure verification, it is typically done with the help of an ID scan plus a facial scan.
Biometrics in onboarding help address and curb the cases of fraudulence or misuse. New cyber threats such as deepfakes or synthetic ID thefts are on the rise, and biometrics are an effective remedy against them. Protecting banks and their digital platforms from ill intent is easier when backed with new technologies.
Mobile banking
Expanding rapidly across the globe, mobile banking is preferred by the majority of Gen Z and Y clients. Biometrics have a pivotal role in boosting user satisfaction regarding authorization and transaction safety. Combined with effective anti-fraud measures, they help provide top security for clients.
Biometric verification has shown to be productive in preventing identity hijacking. The latter involves stealing one’s identity for account takeovers or fraudulent activities. Biometrics ensure that the account user is its rightful owner.
As a result, financial entities can strengthen their cybersecurity and mitigate financial and reputational losses.
Re-authentication
The safety of subsequent engagement after logging in is no less important than authorization itself. Biometric re-validation prevents account abuse throughout its cycle. It continuously confirms that the correct person is performing account-related actions.
Transaction approval, session continuation, and access to personal information all benefit from identification procedures. Biometric re-confirmation can additionally function as a secondary step in multi-factor authorization, boosting its effectiveness. This helps foster trust and dedication in banking clients.
Biometrics in fintech: In conclusion
Biometric authentication has arisen as an answer to the outdated and more easily compromised traditional techniques. Passwords, codes, and safety questions have shown to be less dependable when used against modern cybersecurity threats.
Biometrics, which rely on individual physical patterns such as fingerprints or facial features, help address and mitigate such risks. Moreover, this innovation is increasingly customer-centric, time-efficient, and can be used across a broad scope of financial products.
The core biometric authentication advantages include:
- enhanced security,
- scam prevention,
- boosted client experience,
- compliance management, and
- adaptability and flexibility.
Planning to incorporate biometric verification into your banking solutions? Our expert developers can create an innovative and fully functional authorization system that will meet your expectations and business goals. Contact us for more details – and prepare to embrace the next generation of fintech security!
Frequently Asked Questions
What is biometric verification?
Biometric authorization stands for affirming one’s identity through one-of-a-kind physical or behavioral patterns that are intrinsic to a person.
What are the 5 main types of biometric authentication?
They are fingerprint, eye, facial, voice, and behavioral recognition.
Is biometric authentication safe?
Biometric verification is considered to be mostly safe; the reason for this is that it relies on peculiar human traits, duplicating or fabricating which is not easily done.
What is the future of biometrics in banking?
It lies in developing more advanced and safe technologies that allow financial entities to streamline user experience, reduce the risk of account hijacking, and make sure that their digital solution adheres to the industry norms and regulations.
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About the author:
Alexey Shalimov, CEO at Eastern Peak
As CEO at Eastern Peak, a professional software consulting and development company, Alexey ensures top quality and cost-effective services to clients from all over the world. Alexey is also a founder and technology evangelist at several technology companies. Previously, as a CEO of the Gett (GetTaxi) technology company, Alexey was in charge of developing the revolutionary Gett service from ground up and deploying the operation across the globe from New York to London and Tel Aviv.
