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The New Bank of You – How Biometrics is Transforming the Bank-Customer Connection

By August 22, 2018

Banks are increasingly adopting biometric technology across a wide variety of banking channels; from the physical branch to the latest digital platforms. They are turning to biometric technology to enable them to better identify new customers, securely authenticate existing ones, verify identity for high-value transactions and to combat fraud.

My recent research into the adoption of biometric technology for banking uncovered an extremely diverse mixture of applications and use cases that are benefiting from biometrics. This article provides the reader with a summary of this research and highlights the rich diversity of banks using of biometric technology.

Millions of bank customers in countries such as Brazil and Japan are eliminating the use of a PIN, and often the card, when they access banking services at ATMs and other unattended banking terminals. Banks with the assistance of their ATM hardware providers have integrated biometric sensors including fingerprint readers, finger and palm vein sensors, cameras for facial recognition and iris scanners to enable their customers to securely and conveniently withdraw cash and gain access to other banking services from these unattended bank terminals. With so many branches under rapid automation, biometrics enables branches to transform themselves and stay relevant. An emerging technology that will have more impact on in-store payments, less so for ATMs, is biometric bank cards. Dual-interface (contact and contactless) bank cards where a user leverages an integrated biometric sensor (almost exclusively fingerprint sensors) to replace or augment the use of a PIN is one of the technologies to watch for 2018 and 2019. I expect payment pilots to be quickly turned into production services and Goode Intelligence will cover the market for biometric payment cards in a forthcoming report – biometrics for payments.

Fraudulent access to bank services via contact centres using a mixture of social engineering and the use of stolen bank credentials, including knowledge-based authentication credentials, is an ongoing problem for banks. Voice biometric solutions have the ability to identity these fraudsters and also passively recognise authorised customers.

Behavioural biometrics for both online (web) and mobile banking is becoming a trusted signal for identifying both authorised customers and criminals. Behavioural biometrics has been proved to improve a banks’ risk score and to reduce the risk of false positives in fraud and risk management solutions. It can help eliminate account takeover attempts from both human and automated (Bot) attacks.

Mobile banking is a real growth area and banks are moving away from legacy authentication technology, including passwords and hardware tokens, to more agile and convenient methods more suited to the mobile device. Biometrics is one technology that is seeing rapid growth as a password and token replacement. A mixture of on-device (local authentication) and in-cloud biometric technologies are being utilised to enable banks to comply with strict financial regulations and reduce the friction of identifying and authenticating their customers through the mobile channel.

An area of incredible growth is the use of biometrics for identity verification. Biometrics is increasingly being used to aid online identity verification especially to facilitate digital on-boarding for new bank account opening. In accordance with AML and KYC regulation, a bank needs to verify the identity of people wanting to open up a new account or banking service. Traditionally, you needed to physically present trusted identity documentation such as a passport, driver’s licence or national identity documents, alongside proof of address – usually in the shape of a utility bill. For banks wanting to streamline this process and move the identity verification online (digitally), the AML and KYC regulations proved problematic.

To enable digital customer on-boarding and to comply with AML and KYC regulations, banks are turning to a combination of electronic document and identity verification (eIDV) and biometric identification. Improvements in face recognition technology – a mixture of hardware improvements and the use of machine learning (both on-chip and in-cloud) – is eliminating historical issues with consumer facial recognition that include the ability to spoof the system and poor performance.

Mobile has eaten the world of commerce and this trend will continue to dominate the financial services market for many years but I am seeing signs that banks are beginning to explore new channels. Biometric technology offers banks a realistic solution for consumer security in some of these emerging bank channels. The emergence of new channels is being driven by the Internet of Things (IoT) and we are only at the beginning of a movement that allows bank customers to access banking services from a wide range of intelligent connected devices that include the smart home, smart car and smart city. The availability of secure banking APIs, partly driven by the Open Banking movement, is allowing third parties to integrate banking services into their devices and services allowing bank customers to better manage their day-to-day finances.

Biometrics for banking is increasingly a vital part of a bank’s toolkit in the never-ending task of reducing financial fraud and ensuring that their customers can conveniently identify and authenticate when accessing bank services across a complex mixture of physical and digital channels – smarter identity verification, authentication and fraud management for the new bank of you.

Alan Goode August 2018.

This article references material from the 253 page analyst report – Biometrics for Banking; Market & Technology Analysis, Adoption Strategies & Forecasts 2018-2023. Published June 12, 2018 by Goode Intelligence.

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