7 Uses Cases Of Biometrics In Banking & Why Banks Need It
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Imagine reviewing your bank statement and noticing an unexpected charge. Upon investigation, you find that someone has accessed your account and made an unauthorized purchase. This situation exemplifies account takeover fraud, where a third party compromises a user’s account to make unauthorized transactions. In some cases, however, the account holder themselves may intentionally carry out fraudulent activities and later claim the transactions were unauthorized, a tactic known as First Party Fraud. This type of fraud is increasing and can severely impact both the victim and the financial institution. Biometrics in banking can be an effective solution to combat this issue.
This article will explore how biometric technology can help prevent fraud in banking and financial services. Anonybit’s technology allows organizations to understand more about the users accessing accounts and detect suspicious behavior before it becomes a severe problem.
What are Biometrics?
Biometrics are technologies that identify individuals based on unique physical or behavioral characteristics. These traits are typically distinctive and difficult to replicate, making biometrics a popular choice for secure identification and authentication. Common biometrics used in security include:
Physical Biometrics
These physical features set us apart from each other. Here are a few key examples:
Facial Recognition
This tech looks at your face, focusing on things like the space between your eyes, the shape of your nose, and the curve of your jaw. Cameras capture these details and compare them to stored images to confirm who you are.
Fingerprint Recognition
This method uses the distinct patterns of ridges and valleys on your fingertips. Scanners capture and check these patterns against a database to verify your identity.
Palm Patterns
This involves analyzing the unique patterns on your palm. By scanning the lines and shapes, this method can confirm your identity based on these patterns.
Behavioral Biometrics
These focus on how we behave, which is just as unique. Here are some examples:
Voice Recognition
This examines your voice’s pitch, tone, and rhythm. It’s commonly used in phone-based systems where your voice is the key to accessing your account.
Keystroke Dynamics
This measures how you type—how fast you type and the pressure you use. Your typing style can be a unique identifier.
The need for biometrics in banking has become increasingly critical as remote banking services grow and evolve. With the convenience of accessing financial services from anywhere comes the challenge of ensuring that the person accessing them is who they claim to be. This is where biometric security steps in.
Cybersecurity Risks in Remote Banking
As banks make digital services more accessible, they inadvertently open doors for cybercriminals looking to exploit vulnerabilities. Remote banking can be a double-edged sword, while it promotes financial inclusion and convenience, it also increases the risk of fraud and data breaches. Criminals can exploit these digital platforms to steal personal information and commit various forms of cybercrime.
Regulatory Challenges for Banks in Digital Transformation
Financial institutions face immense pressure to balance expanding their services with maintaining robust security measures. Customers now expect to manage their bank accounts, transact, and perform other financial activities through mobile devices.
This shift to digital services also exposes banks to compliance risks related to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Evaluating Biometric Solutions for Effective Security and Compliance
Integrating biometrics helps banks:
Streamline customer onboarding
Enhance security
Ensure regulatory compliance
It also aids in proactively detecting and preventing fraudulent activities. Not all biometric solutions provide the same level of security. Banks need to choose solutions that offer robust protection while meeting the needs of their expanding digital customer base.
The Role of Biometric Technology in Modern Banking Security
Biometrics are becoming an essential component of modern banking security. They provide a practical solution to the challenges posed by remote banking and help financial institutions safeguard their customers’ data and trust.
7 Common Use Cases of Biometrics in Banking
1. Customer Onboarding: The Smart Way to Verify New Accounts
When new customers open an account, banks must thoroughly verify their identity. Biometrics streamlines this process by allowing users to scan a trusted identity document and complete a facial scan.
This ensures that only legitimate individuals can access banking services while adhering to KYC/AML regulations. Using biometrics at this stage helps prevent fraud and builds a secure foundation.
Another unique use case for biometrics in customer onboarding is checking for duplicates, synthetics and blocked identities. With growing threats coming from deepfakes and farmed identities, doing this type of check at the customer onboarding stage can prevent major losses downstream.
2. Customer Re-Authentication: Easy Identity Verification for Online Banking
Biometrics makes it easy for banks to verify a customer’s identity without relying on traditional passwords. Facial recognition can confirm that the person accessing the account is the same one who created it.
This is especially useful when customers request significant changes, such as a large transfer or a password reset. It helps balance convenience with security, particularly for high-risk transactions.
3. Mobile Banking: Securing Transactions with Biometrics
As mobile banking grows, biometrics plays a crucial role in securing transactions. Using fingerprints or facial recognition for authentication, banks can provide secure access to accounts and reduce the risk of fraud.
This is especially important given the prevalence of attacks like credential stuffing, where hackers use stolen credentials to access accounts. Biometrics offers a strong defense against such threats.
4. Branch Banking: Using Biometrics to Speed Up In-Person Transactions
Biometrics, such as fingerprint or facial recognition, can speed up authentication processes in physical bank branches. This is useful for preventing check deposit fraud, accessing safe deposit boxes or verifying customers at service counters.
5. ATMs: Enhancing Security with Biometric Authentication
Some banks are integrating biometrics into ATMs, allowing customers to use fingerprint recognition instead of cards or PINs. This makes transactions faster and more secure, as the ATM scans and verifies the fingerprint against the stored data. This method enhances convenience and reduces the need for physical cards, which can be lost or stolen.
6. Employee Authentication: Reducing Inside Jobs with Biometrics
Nearly 50% of fraud schemes in banking and financial services are attributed to inside corruption. It’s critical to have strong authentication for bank employee access. Biometric authentication, using fingerprints or facial recognition, can be easily incorporated into a bank’s single sign-on (SSO) or multi-factor authentication (MFA) strategy to create robust, secure access for bank employees.
7. Fraud Prevention and Detection: Biometric Authentication for Safer Banking
Beyond just verifying identities, biometrics also play a role in detecting and preventing fraudulent activities. By analyzing biometric data patterns and comparing them with known fraud indicators, banks can identify suspicious behavior and take action before a crime occurs. This proactive approach helps safeguard customer accounts and reduces overall fraud risk.
Preventing Data Breaches and Account Takeover Fraud with Anonybit
At Anonybit, we help companies prevent data breaches and account takeover fraud with our decentralized biometrics features and first-party fraud prevention software. With a decentralized biometrics solution, companies can enable passwordless login, wire verification, step-up authentication, and help desk authentication. We aim to protect companies from data breaches, account takeover, and synthetic identity fraud.
To achieve this goal, we offer security solutions that cover the user lifecycle such as:
1:N deduplication, synthetic and blocklist checks upon account origination
Passwordless login
Step up authentication
Account recovery
Secure storage of biometrics and other PII data
Anonybit eliminates the tradeoffs between privacy and security. Prevent data breaches, enable strong authentication to eliminate account takeovers, and enhance the user experience across the enterprise using Anonybit.
Banks need biometrics more than ever, especially with fraud’s growing sophistication and the rise of digital banking. Traditional security measures aren’t cutting it anymore, and that’s where biometrics come into play.
Regulatory compliance is a major driver for adopting biometrics. Financial institutions must meet Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, which involve verifying the identities of their users.
Mitigating Financial Crimes with Biometric Security
Biometric technology offers a secure way to ensure that the person opening an account or accessing services is who they say they are. This high level of security helps banks mitigate risks associated with financial crimes and money laundering.
Preventing fraud is another crucial reason for banks to integrate biometrics. According to the 2024 Identity Fraud Study by Javelin Strategy & Research, identity fraud continues to be a significant concern for consumers and financial institutions. The study found that the average time consumers spent resolving identity fraud issues skyrocketed to nearly 10 hours in 2023, up from 6 hours in 2022. Additionally, the average out-of-pocket expenses for victims increased by 70% to $202, compared to $119 in 2022.
Enhancing Security with Multi-Factor Authentication
Biometric identity verification acts as a strong defense against such attacks. It’s more efficient and reliable than traditional methods, which often fall short in preventing sophisticated fraud schemes.
Banks create a multi-factor authentication system that significantly enhances security by combining biometrics with other authentication methods, such as PINs or passwords. Convenience is also a key factor.
Streamlining Customer Experience Through Biometric Technology
Customers expect fast, seamless banking experiences and delays in identity verification can lead to frustration and abandonment of the process. Biometrics streamline this process by providing quick and easy identity verification, improving the user experience.
Juniper Research highlights this trend, projecting that mobile biometrics will facilitate around $2 trillion in payments by the end of 2023. This uptick reflects the growing popularity of biometrics for making transactions smoother and more efficient.
The Essential Role of Biometric Technology in Modern Banking
Biometrics are essential for modern banking. They help banks comply with regulations, prevent fraud, and enhance customer convenience, all while keeping up with the increasing demands of digital and mobile banking.
5 Key Trends and Factors Impacting The Growth of Biometrics in Banking
1. Mobile Banking and Contactless Payments: The Path to Secure Authentication
More people than ever are using mobile banking and contactless payments to manage their finances. Criminals are taking notice. As the 2024 Identity Fraud Study from Javelin Strategy & Research pointed out, mobile banking and contactless payments are two of the fraudsters’ favorite targets.
As more people embrace mobile banking and contactless payments, the demand for secure authentication methods has skyrocketed. Traditional PINs and passwords don’t cut it anymore when safeguarding financial transactions. Biometrics provides a higher level of security by verifying users through unique physical traits, like fingerprints or facial recognition, which are much harder to fake or steal than a simple code.
2. Protecting Customers from Identity Fraud with Biometric Authentication
With identity theft and fraud rising, banks are under immense pressure to protect their customers. Biometric authentication offers a robust solution by providing a higher level of security and enabling real-time fraud detection. Banks can quickly spot and address suspicious activities, reducing the risk of financial losses and enhancing overall security.
3. Convenience Is Key: Simplifying the User Experience with Biometric Authentication
In today’s fast-paced world, convenience is king. Customers appreciate not having to remember multiple passwords or PINs, and biometrics offers exactly that by using unique personal features for authentication.
This simplifies the user experience and enhances security, as it’s nearly impossible to replicate someone’s biometric data. For tech-savvy users, biometric solutions align perfectly with their expectations for modern banking.
4. Technological Advancements: The Role of AI and Machine Learning in Biometrics
The advancement of AI and machine learning is supercharging biometric technology. These innovations allow quicker and more accurate user identification by adapting to behavioral patterns and improving sensor reliability. AI-powered algorithms can precisely analyze biometric data, making biometric systems more efficient and effective.
5. Biometric Authentication Benefits Emerging Economies and The Unbanked
In many developing regions, large portions of the population are unbanked and lack traditional forms of identification. Biometrics offers a game-changing solution by accessing secure financial services without needing physical ID documents. This can significantly boost financial inclusion, opening up banking services to people who otherwise might be excluded.
What’s Most Important When Implementing Biometric Authentication in Banking?
Implementing biometric authentication in banking requires a multi-factor approach to ensure the highest level of security. While mobile biometric authentication is a popular method of confirming identity, other methods should be used.
Problems with scanning may occur, requiring users to use alternative methods. Multi-factor authentication ensures that users can use different methods to confirm their identity.
Biometrics and Regulatory Compliance
Adhering to industry regulations and standards like those set by NIST, PSD2, FFIEC and others is crucial. These standards ensure that biometric authentication methods meet required accuracy levels and other security and privacy guidelines. Compliance helps avoid legal troubles and builds trust with customers by demonstrating a commitment to protecting their data. Under GDPR, biometric data is classified as a “special category” of personal data, requiring stricter protection. Organizations must obtain explicit consent for processing this data and implement appropriate security measures, such as encryption. Additionally, they are required to conduct Data Protection Impact Assessments (DPIAs) for large-scale biometric systems. GDPR also grants individuals rights regarding their biometric data, including the right to erasure. Non-compliance can result in significant fines of up to €20 million or 4% of global annual turnover, making adherence essential for organizations operating within the European Union.
Data Storage Approaches for Biometrics in Banking
Another critical consideration is how biometric data is stored. Traditional centralized storage can be vulnerable in the event of a data breach. A decentralized approach, such as the one offered by Anonybit, can be a more secure alternative. This method ensures that biometric data is not stored in a single location, reducing the risk of large-scale data breaches and enhancing overall security.
User Experience of Biometric Authentication in Banking
While security is paramount, it’s also important to consider the user experience. Biometric authentication should be intuitive and quick, minimizing user friction while maintaining robust security. A smooth and efficient authentication process contributes to user satisfaction and encourages adoption.
Book a Free Demo to Learn More About Our First-Party Fraud Prevention Software
At Anonybit, we help companies prevent data breaches and account takeover fraud with our decentralized biometrics technology. With our decentralized biometrics framework, companies can enable passwordless login, wire verification, step-up authentication, help desk authentication, and more.
Comprehensive Security Solutions for Companies
We aim to protect companies from data breaches, account takeovers and synthetic identity on the rise, privacy regulations, and digital transformation. To achieve this goal, we offer security solutions that cover the user lifecycle such as:
1:N deduplication, synthetic and blocklist checks upon account origination
Passwordless login
Step up authentication
Account recovery
Secure storage of biometrics and other PII data
Balancing Privacy and Security with Anonybit’s Integrated Platform
Anonybit eliminates the tradeoffs between privacy and security. Prevent data breaches, reduce account takeover fraud, and enhance the user experience across the enterprise using Anonybit. Book a free demo today to learn more about our integrated identity management platform.
Anonybit Team
