Dec 12 2019

5 Reasons Biometrics Appeal to Financial Services Firms

Fingerprint and facial scans provide more security and speed transactions.

At the Money20/20 financial services conference in Las Vegas this fall, fingerprints and facial recognition were hot topics.

Biometric technologies have quickly made inroads in the sector, playing an increasingly important role in access and security for financial services organizations. One panel in Vegas focused on how biometrics may be able to make traditional passwords “disappear.” The industry was also still buzzing about a recent FindBiometrics feature on using biometrics for payments, as well as one vendor’s $30,000 “bounty” program for successful spoofs of its biometric authentication solution.

Here are some of the reasons industry insiders find biometrics so promising.

1. Authentication Tools Provide Improvements in Mobile Security

The rise in mobile banking, FindBiometrics notes, has conveniently coincided with widespread adoption of biometrics for use as authentication tools on mobile devices, with fingerprint recognition considered a standard feature and many devices incorporating facial recognition. As a result, mobile banking apps and mobile payments are more secure, to the point that some financial institutions allow customers to set up accounts using only their phones.

2. Regulations Increasingly Require Multifactor Authentication

While biometrics are often a preferred single point of authentication due to the difficulty of faking them, they are also useful as a quick, readily available second factor in multifactor authentication (MFA) environments. In some markets, emerging regulations (such as the European Union’s revised Payments Services Directive) require two-factor authentication, forcing financial institutions to enable forms of authentication other than personal identification numbers. “Europe’s open banking framework requires so-called strong customer authentication for banks to share customer data with other providers, with biometrics one of the options,” notes Toolbox.

3. Frictionless Payments Allow Shoppers to Ditch Cash

The use of cash, FindBiometrics reports, “continues to evaporate,” creating a danger for shoppers, whose card-based transactions are a prime target for fraudsters. Fingerprint-scanning payment cards are shaping up to be one of the biggest near-term trends in the payments industry, with institutions working with experts to develop market-ready solutions that may be deployed on a significant scale as soon as 2020, the publication adds.

MORE FROM BIZTECH: Read about what will win the next five years in financial services.

4. Naked Payments Become Most Convenient of All

Less scandalous than the name implies (but perhaps just as exciting), “naked” payments are those that don’t require a card — or even a mobile payment app — at all. Instead, a user’s credit or debit account could be linked to their biometric information, and customers would “pay” using nothing more than their fingerprints or facial scans. “It’s probably going to take a while for biometric POS terminals to make their way to a substantial number of merchants, and the idea of paying for something with a fingerprint or a face scan is going to take some getting used to for a lot of consumers, as well,” notes FindBiometrics. “But the convenience of such a system is, for many, an appealing prospect.”

5. Various Vendors Link Interactions Through Open Banking

Biometrics can be used to quickly facilitate users’ interactions between different apps or sites. Bank of America, for instance, allows customers to switch from their regular bank account to accounts associated with its multinational investment bank division, or its Bank of American Private Bank, using just a fingerprint scan. Even though these are all Bank of America operations, the setup shows how an open banking platform can link services from various vendors through a single interaction, Toolbox says.

“Some consumers consider biometric authentication invasive, or fear that fraudsters will find a way to access and use the stored data,” Toolbox adds. “But the arguments in favor of biometrics seem more compelling now to banks as they seek to make financial transactions more secure and convenient.”

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