The emergence of biometric technology in FinTech
What are our Future FinTech Champions learning at the moment? And what are their thoughts on the current development of FinTech? Read through this submission from one of our FFCs, Chandrika Bhoobun, currently studying a BSc Hons Finance (Minor: Law) @ University of Mauritius [Submission made in June 2022].
What is biometric technology?
The use of financial technology (FinTech) in both peoples’ professional and private lives are altering the globe, as such, FinTech enables users to interact and engage globally (Milian et al. 2019).
Biometrics refer to physical traits or biological measures that can be used to identify people. Examples of physical characteristics in biometric technology include fingerprint mapping, facial recognition, DNA matching, retina scanning, voice recognition features such as Alexa, Siri, and Google, vein recognition, iris recognition, and digital signatures.
Biometric technology research has advanced tremendously in the last decades and is becoming a mainstream technology rather than just a rarity. Apple introduced fingerprint unlocking for the iPhone in 2013, kicking off the widespread adoption of biometrics as a form of authentication. A biometric authenticator is used by numerous apps and is available on the majority of modern mobile phones.
Biometric technology in the fintech industry – A boon or a bane?
Indubitably, the fintech sector is now growing incredibly at a quick pace. The 2 essential objectives for this sector are security as well as enhancing the effectiveness of the financial system or of individual firms. Concurrently, both of these criteria are satisfied by biometric technologies, which also seamlessly complement the most recent fintech innovations.
As per Ping’s 2018 State of Enterprise IT infrastructure & Security report, ‘92 percent of enterprises surveyed believed that biometric authentication was successful at securing on-premises information, while 86 percent felt that it was effective at protecting cloud-based data.’
Let’s explore some use cases together.
Money laundering and financial crimes
Identity verification solutions are becoming more widespread, reliable, and affordable due to constant advancements in biometric technology. Accordingly, biometric solutions are used by regulatory agencies as well as financial organisations to improve the precision, speed, and ease of consumer identification. Advances in the identification of people contribute to reducing financial crimes and money laundering, and they also enable financial sector companies operating online to achieve the security and Know Your Customer (KYC) requirements of the entire financial sector. These advancements are made possible by artificial intelligence, machine learning, and the development of recognition algorithms.
Data breaches and cyberattacks have been prevalent problems for a while now, damaging millions of people’s personal information and occasionally even their lives. To exemplify, in June 2022, 34.9 million data was breached in the UK. The data breaches were attributed to weak passwords and human error, and hence, biometric authentication should be used in line with the current traditional verification methods.
It is estimated that financial crime is on the rise as a result of insufficient controls over KYC standards and Anti-money Laundering (AML) compliance. Since cash transactions are an ongoing process, regulatory agencies and financial institutions would need biometric verification to combat money laundering. Henceforth, organisations may safeguard their operations and avoid financial crimes like money laundering and terrorism funding by using the specialised hardware, sensors, and detectors in mobile phones. Biometric verification has become a popular option across industries due to fingerprint scanners, AI-based face recognition systems, and iris scanners, notably when two-factor authentication is combined with facial recognition in online banking platforms. Also, in an effort to combat identity theft, Mauritius, amended its laws in 2009 such as requiring biometric information from ID card holders.
There is no doubt that the battle against climate change is one of the key goals of major organisations, even if digital transformation is now receiving the most attention. A major reduction in needless travel for clients is being made possible through expanded online service options. For instance, let’s take the case of Veridas digital onboarding, whereby the clients of Laboral Kutxa may create a bank account from the comfort of their homes. As an alternative, identity verification methods can be used for the registration or verification of personnel, as was the case with Grupo Catalana Occidente and the registration of mediators entirely online owing to Veridas technology. Therefore, it helps to reduce the digital footprint of customers.
Moreover, by converting plastic membership cards to a biometric check-in system, you may utilise biometrics to save the environment. Furthermore, what if the enterprises that provide plastic cards in the form of rewards, gifts or membership, or ID cards, all used biometric authentication for these initiatives rather than handing out plastic? There is little question that if this were to become a reality, countless millions of pounds of waste would be removed, and the environment would be greatly impacted.
The emergence of biometric technology in the banking industry
With voice recognition and touch ID fingerprint readers, mobile phone manufacturers have popularised biometric technology, placing highly potent and disruptive technology in the hands of millions of people. Worldwide businesses are now attempting to benefit, and recent reports that HSBC and First Direct launched voice and touch-based biometric banking in the UK indicate that the technology will have a significant influence on the banking industry in the years to come.
In order to identify clients, stop identity theft and internet banking fraud, several banks are now adopting physical fingerprint readers. Customers may access their bank accounts online with this technology by just scanning their fingerprints, providing a more secure banking environment. Those who opt to do their banking online are further protected since only the individual with the right fingerprint is permitted access to the account.
Consumers are also concerned about someone snatching their debit cards and withdrawing funds from their accounts. To accomplish this at a standard cash machine, all that is required is a card and pin code. Machines that employ iris or face recognition technology have been developed using new biometric technology; these machines scan your iris in addition to your debit card before enabling you to finish the transaction.
Besides, unlike documents that can be fabricated and passwords that can be hacked, the most security-conscious businesses, like banking, may benefit greatly from the advancement of voice recognition technology. Your voice is unique to you, therefore, the ability of modern technologies to recognise not only the words being uttered but also their tone and cadence creates an audio fingerprint that may be used to establish beyond a reasonable doubt the identity of the speaker.
In conclusion, biometric technology has revolutionised the way the fintech industry operates, offering a secure and efficient means of identification and verification for users. As the banking industry continues to adopt biometric technology, it will indeed significantly influence the way banking is conducted in the future. Overall, the incorporation of biometric technology in the fintech industry has proven to be a boon, providing an effective and reliable means of identification and verification, therefore enhancing the efficiency and security of financial systems. However, it is crucial to strike a balance between convenience and privacy, and ensure that biometric data is collected, stored, and used in a transparent and ethical manner.
REFERENCES - PART 1
RecFaces. (2020). Biometric technologies in FINTECH and banking. [online] Available at: https://recfaces.com/articles/biometricheskie-tehnologii-v-fintehe-i-bankinge
Electronic IDentification – IDentity Verification Solutions. (n.d.). Electronic IDentification – IDentity Verification Solutions. [online] Available at: https://www.electronicid.eu/en/blog/post/role-biometric-technology-fintech-revolution/en
Irwin, L. (2022). June 2022 List of Data Breaches and Cyber Attacks | IT Governance Blog. [online] IT Governance UK Blog. Available at: https://www.itgovernance.co.uk/blog/list-of-data-breaches-and-cyber-attacks-in-june-2022-34-9-million-records-breached
REFERENCES - PART 2
Morrás, M. (2022). 5 Advantages of biometric authentication in banking | Veridas”. [online] Veridas. Available at: https://veridas.com/en/5-benefits-that-biometrics-brings-to-the-financial-sector/.
Solgari. (2016). The Rise of Biometric Technology in Banking. [online] Available at: https://solgari.com/rise-biometric-technology-banking/#:~:text=With%20this%20technology%2C%20customers%20simply
Trader, J. (2010). The Top 15 Reasons To Use Biometric Technology In Workforce Management And Retail Point Of Sale – Reason #5 – ‘Going Green’. [online] M2SYS Blog On Biometric Technology. Available at: https://www.m2sys.com/blog/others/the-top-15-reasons-to-use-biometric-technology-in-workforce-management-and-retail-point-of-service-reaon-5-going-green/#:~:text=One%20way%20to%20reduce%20the
Hersey, F. (2021). UN finds storing biometric data on Mauritius ID cards violates privacy | Biometric Update. [online] www.biometricupdate.com. Available at: https://www.biometricupdate.com/202107/un-finds-storing-biometric-data-on-mauritius-id-cards-violates-privacy
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