The last few years has seen a tremendous increase in online banking transactions including mobile-based payment technologies. This technology has brought great convenience and efficiency for customers conducting everyday monetary transactions in a location-independent and multi-device environment. Customers can now use various mobile devices such as notebooks, tablets and smartphones to pay their utility bills or do online shopping from anywhere in the world. Mobility is causing a wave of digital disruptions across various industry verticals. It provides excellent benefits to the banking and financial services sector in terms of driving customer engagement, improving convenience and creating competitive advantage for various services such as investment portfolio, accounts servicing etc.
Current threats in online banking
Online banking is thus changing the way people shop and how retailers operate. There is a steep decline in traditional payment methods such as cash and cheque and people are choosing the emerging digital payment technologies as they render convenient and flexible methods for conducting cashless financial transactions. Retailers are also keen on investing in e-commerce platforms as compared to traditional in-store IT system upgrades because they anticipate rise in sales from mobile and online shoppers. Therefore online banking is reshaping the financial services ecosystem and more consumers are using their mobile devices for payment-related transactions as well as for accessing sensitive personal information.
However, this technology and digital convergence has also attracted the threat of cyber-attacks and made banks and financial institutions more vulnerable to fraud. It has led to a new breed of fraud perpetrators that use sophisticated technologies to hack into personal devices and corporate networks. Traditional techniques such as password or tokens are no match to their attacks. Research studies estimate the total fraud revenue loss in e-commerce sales in North America to be more than $3.4 billion.
Factors attributing to the rise of biometrics in online banking
More than half of the global population have access to mobile devices. Brick and mortar banking has been revolutionized by online services and customers now have several options to access their bank accounts – either through a web browser or through mobile apps. However, this trend has also increased the vulnerability of customer accounts. Criminals are targeting the online and mobile banking platforms to commit transaction frauds and identity theft. Moreover, security measures that rely heavily on passwords and PINs not only make online banking inconvenient but are also not foolproof and easy to hack.
Banks and financial institutions are continuously looking to improve their security beyond the traditional username and password protocols. The traditional security methods have failed to decrease the vulnerability of customer accounts. Furthermore, it has created trust issues and distress for customers who have been victims of security breaches and identity theft. The success of online banking now lies on robust measures that can detect fraud and prevent cyber-criminals from hacking into customer’s accounts.
Cyber criminals are a threat to e-commerce and the online banking sector hampering growth opportunities in this industry. Fraud and payment card theft continue to be the top data breaches committed by hackers. The root cause behind this issue is that the actual identity of customers making the purchase is unknown as that individual is making the payment on a remote computer. As passwords and PINs can be stolen and used without the permission of the owner, it is not an effective way to stop data breaches thus resulting in loss of customers and increased expenses for the banking and financial services industry.
The need for a high-tech and reliable authentication technique that can combat savvy hackers has given rise to biometric security in the online banking arena. Unlike passwords or tokens, biometric technology authenticates transactions based on something inherent to the user. It is an approach to positively identify users based on their unique physiological or behavioral characteristics like fingerprints, retina, gait, face, voice etc. These biometric identifiers are virtually impossible to replicate nor can be shared.
Hence biometric solutions are gaining momentum in the financial services sector due to their exclusive features and the ability to provide greater security in comparison to other traditional user authentication methods. The deployment of fast and efficient online services that will allow users to make mobile payments across all channels is an important pre-requisite to enhancing the customer experience. And biometrics can enable financial institutions to achieve this goal by providing a secure, hassle-free and easy to use payment approach for the next-generation online shoppers.
Biometrics adding value to online banking
Banking has become more digitized nowadays and biometrics can help banks to provide customers with enhanced security and cutting-edge technology while performing online transactions. As biometrics is based on identifying an individual as opposed to simply identifying a device or a piece of information, the biometric identifier can never be forgotten or shared. Moreover, it is very difficult to steal biometric data as long as the biometric vendor uses appropriate architecture and security methods.
Most smartphones now come with built-in biometrics support that helps to verify the buyer’s identity and prevent payment fraud. This simplifies the process of making payments with fingerprint or facial recognition technology. Major financial organizations are starting to leverage biometric technologies and have introduced biometrics-enabled smart cards. These cards are compliant with various standards such as MasterCard, Visa etc. and are being increasingly used to make online payments. These smart cards are embedded with sensors that get activated at the time of purchase by using the owner’s fingerprints. Leading smartphone manufactures have also equipped their phone with fingerprint sensors that can be used not only for unlocking the phone but for authenticating online purchases.
Thus biometrics is revolutionizing the online payment system by using the customer’s inherent traits to verify his or her identity. It is like an individual’s personal password that cannot be lost, forgotten or stolen. The speed and agility of transactions are significantly enhanced as users do not need to remember answers to security questions nor do they need to carry a separate hardware-token. Thus it provides ease of use and helps to enhance customer trust in the bank.
How biometrics can be used to make a positive impact in banking
In addition to fingerprints and facial recognition, keystroke biometrics i.e. a person’s typing pattern can be deployed to automate the process of verifying online banking customers. For example, the keystroke rhythms of an individual lead to a unique biometric template. This keystroke timing data can be recorded, stored and matched for future comparisons. As keystroke biometric authentication is not capital intensive it can be readily deployed and used for authenticating internet banking customers. This is an example of second generation biometric authentication.
There may be a percentage of the population who are not educated enough to sign and transact on their own or those who do not meet the identification requirements of financial institutions. In such cases, voice biometrics can play an important role by simplifying the authentication process. A voice or speech recognition system can be used to perform bank transactions and customer service where customers verify their identity using the microphone in their phones.
Banks are embracing biometric technology to realize greater business benefits by improving their sales and services function. The convenient and reliable authentication that biometric technology provides has helped to delight customers as well as offer a superior banking experience through personalized and need based engagement.