Finding the Bounty in Biometrics

According to the Association of Certified Fraud Examiners (ACFE), U.S. organizations lose an estimated 5 percent revenue to fraud every year

Five cents on every dollar has a way of really adding up.  Based on projected U.S. Gross World Product, fraud costs will enter the trillions* for US businesses, with no signs of stopping.  As millions of customers migrate onto digital infrastructures for their shopping and banking needs, fraud and cyber-crime have officially become a major concern for financial services institutions.  

In a recent global study by FIS*, findings show that safety and security are the top priority for bank customers, including protecting their personal identities.  Currently, the survey results indicate, that financial services consumers feel banks are failing slightly in this area.  If cyber-security slips, it could become a key differentiator in deciding customer loyalty and continued business.  When The Wall Street journal reports a 10% annual increase in cyber-security by “critical infrastructure industries”*, people sit up and listen.  This folks, is big business.  Can biometrics save the day?


Will biometrics return banks billions?

Biometrics is the science and technology of measuring and analyzing biological data. Data encompasses things such as DNA, fingerprints, eye retinas and irises, voice patterns, facial patterns, hand measurements and more.  The data, or combinations of the data, uniquely identify an individual for authentication purposes.  Automatic recognition of an individual through their behavioral or physical characteristics is not new technology. Facial recognition technology has been used for over 20 years.  Yet, with the screaming pace of technological advancement, biometric uses and systems have been improving.  At lightening speeds.  Fraudulent access, and the unauthorized usage of bank accounts by international crime syndicates, is robbing unprecedented amounts from banks.  Unique authentication methods through the use of biometrics have therefore become a prominent agenda item for institutions looking to take an innovative, and defensive, strategy against white-collar, financial criminals. 


Government leading banks in biometrics?

Banks, however, are lagging behind other industries in developing biometric solutions, while governments are already adopting biometric technology on a large scale. The US, UK and Canadian governments presently use biometrics at their border entry and exit points. The Unique Identification Authority of India is in the process of issuing everyone in that country (1.3bn people) biometric registered ID cards, and exposing APIs to this data. Not only will this help the government identify people, but it will also help provide banking services to the unbanked, by enabling verification for each and every individual user on the system.


From concept to customer

The widespread use of biometrics by governments will accelerate the use of this technology by other industries, including financial services.  Banks are already rolling out fingerprint, voice and facial recognition methods for authenticating users.  As the technology improves and adoption increases, we expect to see biometric authentication become the industry norm for the authorization of banking services.  FIS, the industry’s largest financial technology provider, announced that it would be providing biometric access to its more than 30 million mobile banking users, via Apple’s touch ID.  With this innovation, FIS was the first provider to offer fingerprint access and “Cardless Cash” to banks and their customers when the ATM authentication went live in April of this year*.  The use of this two-factor authentication – your mobile device and your fingerprint – combines to confirm identities with far superior results than historically possible.  And from there, the possibilities seem endless.


Facing the rising threat

Unauthorized access to online information has become increasingly common over the past decade, and is a major concern for both banks, and their customers.  The US Navy alone maintains a network of over 800,000 men and women at 2,000 locations around the world to protect against of 110,000 cyber-attacks every hour.  That’s 30 every second! * Experts are hoping that the introduction of biometric technology will become a major help in ensuring security.


How does it work?

While it’s been proven that fingerprints can be spoofed, it’s not easy – certainly not as easy as peeping over someone’s shoulder to get their pin or password. Voice, facial and iris recognition are even more difficult to fake and would require significant skill and determination to fraudulently overcome. Future biometric technologies – such as electrocardiogram (ECG) recognition, which measures and records your heart beat pattern – will be nearly impossible to fool. Combining more than one of these methods together will lead to an almost fool proof approach to correctly identifying and authenticating individual users.  Biometric technology will drastically decrease the chances of someone fraudulently accessing a customer’s bank account, and could eliminate identity theft altogether.


Improving odds overall

Biometrics can’t stop the proverbial, ‘holding a gun to someone’s head and forcing them to log onto an account’ scenario, but what it can do is prevent fraud caused by millions of criminals stealing credit cards, pin numbers and passwords. That alone will dramatically reduce cases of on-line fraud.  To really prevent identity fraud however, biometrics need to be integrated into all aspects of banking – not just access to online and mobile accounts. That means biometric authentication should also be used when a customer walks into a branch, when they use their credit cards in a store and even when they make payments on retail websites. That way, a fraudster can never pretend to be you or spend your money in any instance without a detailed, biometric signature.  The sooner banks sign on, the better.  Providing security in an ever-expanding cyber world will not be a small responsibility.

Stay tuned for Part II of “Biometrics: The Good, The Bad and the Ugly”.  Next we will assess the possible dangers of a biometric world in Considering the Cons – Biometrics in Financial Services.