The future of biometrics in banking
There’s no doubt that biometrics, such as fingerprint and facial biometrics, are taking customer experience into a new era. Today, different forms of biometrics are widely used to help businesses verify users for the purposes of both Know Your Customer (KYC), fraud detection, and prevention. With identity fraud rocketing 44% since 2019, biometrics are at the heart of keeping users’ identities safe in the digital world.
Many industries have already found utility for biometrics, but it’s the banking industry where adoption has truly taken off. This emerging technology is replacing passwords, passcodes, and knowledge-based authentication, and banks are increasingly using biometrics to facilitate fast secure account openings and transactions.
But, if that’s where we are now, what does the future hold?
The evolving use of biometrics in banking
Most people are familiar with biometric verification in banking as a way to access their mobile banking app. But the use of biometric systems in banking goes beyond this example.
Facial biometrics offer an easy, secure way for customers to open a bank account. To satisfy KYC and anti-money laundering (AML) compliance requirements, banks have to take certain risk assessments and security measures to verify customer identities at account opening. Historically, this has been done in person, via a branch. But a new wave of market players (the likes of Revolut, Monzo, and Chipper Cash) changed that. They introduced a 100% digital onboarding process, powered by new identity verification processes.
Not wanting to be left out, the wider financial services market has quickly followed suit, especially to stay competitive as customers adopt a new location-independent method of opening bank accounts. Today, customers can open an account purely online or via a mobile banking app. They simply take a photo of their government ID, analyze their biometrics to ensure they are the legitimate owner of the ID and are ready to start making payments in a matter of minutes.
But it’s not just in account opening that biometrics are deployed. Customers can now make payments directly from mobile phones, simply using a fingerprint or facial recognition. If they want to move large amounts of money, biometric verification again comes into its own. It’s a quick and easy way for businesses to confirm the rightful owner of that bank account is making a higher-risk transaction. The customer simply needs to re-perform a biometric check, and the bank can confirm that their identity matches that which is registered to the account (authentication).
But why does the future of banking rest upon biometrics?
There are several advantages to biometrics in banking. Firstly, they are excellent at preventing fraud. Biometric verification is much harder to defraud than document verification — as shown by the fact that in 2022, average ID fraud rates were 5.9% compared to average selfie fraud rates of 1.53% and 0.17% for video.
Strong fraud prevention technology in turn increases security. It means fewer fraudsters can gain access to online bank accounts, providing a more secure experience for customers. Their assets remain safe, while the bank is protected from the reputation and monetary cost that goes hand in hand with fraud.
Accurate identity verification also plays into a bank’s KYC, AML, and overall compliance processes. Banks must verify customer identities before they can sign up for a bank account and so biometric technology is one-way banks can satisfy this KYC requirement. And because biometrics are so secure, banks are better protected from the financial crime and money laundering risks that can accompany fraud.
Finally, biometrics offers banking customers an easy and fast way to not just sign up for, but re-access online bank accounts. Document verification combined with biometric verification removes the need for manual verification, such as filling in forms or heading to a branch in person to prove their identity. It means customers can access bank accounts, and start making payments, in minutes as opposed to days. This goes a long way to meeting customer expectations and providing them with a great experience, and can help increase a business’ customer acquisition. Research now finds that 8 in 10 customers find biometrics both convenient and secure.
This automated nature of biometric verification increases efficiency and cost savings for banks. Removing the need for manual verification frees up internal teams and reduces the need for resources.
In summary, biometric verification has, and will continue to, benefit customers and banks alike. It is a fast, accurate, and secure way to deter fraud and increase the speed a customer can make or access an account, lowering friction and reducing customer acquisition costs for banks. And that’s why it will be at the heart of the future of banking.