The Rise of Biometric Security in Banking

Inspired by their use in the tech industry, financial firms are embracing biometric banking security as a way of improving security, easing the customer experience and catering to growing consumer demand. The growing familiarity that consumers have with biometrics is driving this, with fingerprint scans or facial recognition becoming the norm for logging onto devices. On the financial side, this has massive applications in terms of opening accounts, logging into online banking interfaces and making payments, all areas that would benefit from an easier customer experience.

Improvements in artificial intelligence (AI), along with its growing acceptance, have driven the adoption of biometric security, which fundamentally relies on pattern recognition technology. This involves machine learning-driven algorithms that can identify unique features in individuals and then reliably and consistently identify them.

This in turn has facilitated the emergence of numerous ‘Challenger Banks’ along with foreign banks, such as Goldman Sachs and JP Morgan Chase, all launching an online-only presence in the UK. Sophisticated biometric security ensures that customers can open accounts, obtain credit and manage their banking on demand from their devices without compromising on security.

Passwords are often difficult for consumers to remember. Biometric authentication is a great solution for consumers not able to recollect multiple passwords that are required to access various accounts. Types of biometrics include:

• Fingerprint – It is the most well-known and traditional biometric method. Most smartphones currently have a fingerprint reader, so it is possible to use it to perform day-to-day operations such as activating your mobile phone to make a payment or accessing digital banking. The banking app can invoke the usage of biometrics to perform a transaction thereby securing the transaction.
• Facial recognition – Using the device’s camera (such as a mobile phone, computer or tablet), the image is captured and a mathematical pattern is created to associate it with an identity, taking into account aspects such as distance between the eyes, the position of the nose, size of forehead, etc.
• Voice recognition – Telephone banking prompts security questions that they struggle to remember. Voice verification easily circumvents this obstacle and provides total assurance that the person on the line is who they say they are. The use of voice recognition allows the call to proceed as it should, without being hindered or delayed by security questions. Unlike documents that can be forged and passwords that can be cracked, a person’s voice is unique.
• Iris Recognition – Similar to facial it scans the eye and matches the iris pattern unique to every individual. A highly secure biometric technique, this can be invoked for high-value transactions between banks.

Banks seek to reduce costs without compromising on customer satisfaction and security, which will be facilitated by ever-improving AI and biometric security technology. The progress in biometrics coupled with AI allowing banks to automatically process banking requests/applications online allows for a consolidation of physical and personal interactions. This trend has been accelerated by Covid, as lockdowns drove financial services to find solutions in order to keep selling their products to consumers unable to leave their homes.

The widespread use of biometrics on devices has also spurred the massive growth in mobile payments, as it allows for ease of use without compromising on security. Companies like Apple have now truly entered the world of consumer banking, launching products such as Apple Card, issued by Goldman Sachs. The product is being advertised to consumers as providing superior privacy and security due to its full suite of biometric security products.

Use cases of biometrics in banking security:

1. Mobile payments – Biometric banking facilitates payments in online shops or to retailers by simply using fingerprint/facial/voice recognition.
2. Cash withdrawals at ATMs – Like in-store payments, biometric facial authentication can be applied for cash withdrawals at ATMs. This provides greater security over the conventional ATM PIN we use.
3. KYC completion – Using facial biometric recognition it is possible to open a bank account with a smartphone. Biometrics can capture our facial features, scan the identity card, compare the two images and verify the data.
4. Protection Against Insider Fraud – Identification of employees performing transactions on the back end is critical ensuring identity protection and reducing fraud. Biometrics in banking will help prevent insider fraud by establishing secure employee authentication, accountability and concrete audit trail of each transaction.
5. Less use of office space – Immediate customer care service by biometrics through mobile applications or computers help banks reduce branches. This helps banks to focus on cheaper biometrics technology rather than investing in brick-and-mortar office space to serve customers.

As is clear, financial institutions are already facilitating the adoption of biometric-based banking services, both in terms of improving the consumer experience and providing them reassurance about their security. Hence, it would be unsurprising to see their continued growth and adoption in banking worldwide, especially in parts of the world that are currently in the process of adopting widespread digitisation and lack access to traditional banking services.