The Rise of Biometrics in Finance

Out of 2.4 billion poor people worldwide, about 1.5 billion are not able to prove their identity to formal economies.

Globalization and population growth increase the pressure to find cost-effective solutions to prove identity. Recent advances in biometrics, from iris scanning to DNA analysis and voice pattern recognition, are likely to play an important technical role in fixing this, yet identity is not necessarily something that is fixed. – Michael Mainelli, Executive Chairman, Z/Yen Group

In response to the necessity for new ways to shed light on massive invisible population globally, the biometrics market is expected to experience a substantial growth over the coming years. In fact, some estimates suggest that by 2021, the market will reach a value of $30 billion with its primary revenues shifting from the government sector to banking and consumer electronics.

Fingerprint sensors, in particular, are expected to be a major force with shipments forecast to approach 2 billion by 2021, reflecting an overall growth rate of 44%.

The use of biometrics by government entities is well-established. What’s new in just the past few years is the explosive growth of biometrics outside the governmental realm. Apple’s Touch ID feature (more recently superseded by Face ID) was merely the beginning; now, companies are rolling out biometric solutions for payments, healthcare, communications, and other commercial purposes. When it comes to applying biometrics, the sky’s the limit. – International Biometrics Identity Association (IBIA)

Biometrics found the most immediate adoption in the financial services industry, with fingerprint logins becoming a commonsense way to access one’s mobile banking account. Taking things a notch further, Samsung and BBVA, for example, presented an iris scanning feature at the end of 2016, allowing BBVA customers with Samsung-compatible smartphones to log on to the bank’s Spanish mobile banking app just by looking at their displays. With this development, BBVA became the first Spanish bank to deploy Samsung’s biometric authentication technology, Samsung Pass, allowing customers to bypass cumbersome login/password authentication methods. Samsung Pass, based on FIDO (Fast Identity Online) technology, frees the user from having to write identifiers and passwords to start each session.

Another major institution – Visa – put biometrics at the center its security roadmap. Joe Cunningham, Head of Risk for APAC at Visa, emphasized that the technology has an important place in the future of payments, and that biometrics are now at a point where Visa and its ecosystem of banks, merchants, FinTech firms, service providers, law enforcement, and cardholders feel comfortable supporting it.

We always expected biometrics to get to a point where they would play an important role in payments; in fact, we expected biometrics to play an important role in our lives as we go about our day-to-day business whether it’s accessing buildings, our car, or an online service. So there’s no surprise that payments have been front and center when it comes to biometric adoption. Everyone thinks of biometrics when they think about payments in the future. – Joe Cunningham, Visa

Another big processor – Mastercard has committed to guaranteeing that every one of its customers will have access to biometric authentication services by April 2019. Banks that accept Mastercard payments will have to support fingerprint and facial recognition identification mechanisms, in addition to PINs and passwords, to allow customers to make payments remotely.

Mobile is not the only vehicle to drive the adoption of biometrics. An interesting development happened with the Bank of Cyprus, which in partnership with technology firms Gemalto and Zwipe, will introduce the first-ever biometric payment card using fingerprint authentication.

Speaking of cards, FICO reported that there was a 10% increase in the number of payment cards compromised at US ATMs and merchants in 2017. In light of increasing unreliability, biometric ATMs have been a subject of interest and experiments. By implementing biometric authentication instead of using cards, banks can cut down on this fraud, therefore limiting costs.

As biometric technology is believed to be the most convenient method of identification/authentication, the technology is rapidly gaining popularity in the financial services industry and beyond. Certain regions are already exploring the inclusive effect of biometric identification, while other markets are more focused on the other hallmark of the technology – convenience in the digital era.

Nonetheless, there is a single overarching aspect of biometric technology regardless of the use case and purpose. IBM Security’s Future of Identity Study of nearly 4,000 adults around the globe found that security is beginning to outweigh convenience. People ranked security as the highest priority, over convenience and privacy, for logging in to the majority of applications, particularly when it comes to money-related apps. The study also revealed that biometric technology is becoming mainstream. About 67% of respondents are comfortable using biometric authentication today, while 87% say they’ll be comfortable with these technologies in the near future.

Millennials, in particular, are moving beyond passwords. While 75% of millennials are comfortable using biometrics today, less than half are using complex passwords and 41% reuse passwords to access numerous accounts. Older generations showed more care with password creation but were less inclined to adopt biometrics and multi-factor authentication.

Biometric systems should be designed and evaluated relative to their specific intended purposes and contexts rather than generically. Their effectiveness depends as much on the social context as it does on the underlying technology, operational environment, systems engineering, and testing regimes. – IBIA