The era of passwords, PINs, and security questions is drawing to a close. At least, as far as banking and other financial services are concerned. With one major institution after another reporting that their customers’ information has been compromised, and with customers growing increasingly weary of remembering security credentials, institutions are turning to biometrics to authenticate customers. The growth of biometrics in banking is not only important to banks and their customers, it should be a top consideration for any fintech startup entering the financial sector.
Why Fintechs Should Care
Fintech startups have a lot to feel good about. The first quarter of 2016 showed a global investment in fintech ventures to the tune of $5.3 billion — a 67% increase over the same period a year earlier.
Moreover, fintechs’ competitors are seeing partnerships with innovative fintech startups. JPMorgan Chase is but one traditional financial institution that has subscribed to the old adage: if you can’t beat them, join them. And they are wise to do so. The fresh ideas upon which fintech startups are built can bring some much needed agility to the rigid ways in which traditional institutions have done business for the last 100 years.
Despite the promising future of the fintech sector, individual companies would do well to beware. Along with the innovative ideas that are sure to disrupt the banking industry, fintech startups are going to have to deliver on security if they want to avoid repeating the mistakes of the banking industry, and if they want to survive. That means not only replicating banks’ adoption of biometric technology, not only partnering with them on biometric initiatives, but spearheading the biometric revolution through the kind of innovation for which startups are known.
With banks and leading technology companies such as Intel willing to partner with the burgeoning fintech industry, there is no excuse for fintech companies not leading the way in disruptive biometric technologies for the financial sector.
The good news is, fintech companies have a notable advantage in this regard. While banks spent a whopping $50 billion in 2015 upgrading outmoded systems to be compatible with recent technological advances, startups are already there. Those that have not yet tapped into the great biometric revolution do not, at least, have to revamp old systems and old ways of doing business. For the fintech startup, investment dollars usually go directly to onboarding the latest technologies, rather than retrofitting existing ones. For those who want to succeed, they will make it so.
The Biometric Boom
Biometric technology is ideally suited to the financial sector. It satisfies institutions’ ever-increasing need to protect their customers’ information, and it makes conducting transactions more convenient for the customer. You might say, its time has come, and not a moment too soon.
The well-worn adage that necessity is the mother of invention still rings true when we consider the massive security breaches experienced by the financial service industry in recent years. But the threat to account information does not rest solely on the banks. Popular smartphone apps open the doorway for hackers to capture bank login credentials at a frightening rate. Further, the potential for computer viruses to forward online banking login credentials to unknown vandals remains great.
By adopting biometric technology for user authentication, institutions can come as close as ever to putting hackers out of business.
The success of biometrics has long proven its value in government and business. It is the financial sector that is late adopting. But that is quickly changing. In fact, 50% of banks increasing their digital banking budgets for 2016, with much of those funds going toward giving customers the biometric option.
Biometric Technology Demystified
Biometric technology is no longer a buzzword. It is now a breakthrough in data Security. Each of the following technologies are currently being used, or experimented with, by financial institutions. The ability of fintech companies to extend the application of these biometric systems to secure customer data will be key to their success.
Iris Scan
The unique pattern of an individual’s iris’s is as unique as one’s fingertips. By storing a customer’s iris scan, more than 200 unique points of data are stored in the institution’s database. Authenticating the customer for future transactions is simply a matter of comparing the stored data with the real-time scan that occurs at the time of the transaction. Some experts believe the iris scan to be the most reliable way of authenticating a user’s Identity. Several major banking institutions are experimenting with ATMs equipped with iris scanners. In some cases, iris scanners replace card readers entirely.
Voice Recognition
Barclays is just one institution that is already using voice recognition to eliminate passwords and security questions for telephone banking customers. HSBC bank announced that it will introduce voice recognition mobile apps and ATMs to allow customers to bank locally and online without requiring passwords or card Swipes.
Banks have have used word-recognition for a few years to automate telephone banking. Coupled with user authentication voice recognition, users may actually enjoy banking, again.
Face Recognition
Face recognition can authenticate users at ATMs and when using online or mobile Banking. Many banks are investing R&D dollars to add face recognition to their stock of user-authentication tools.
However, the fintech startup that plans to provide offerings in this area should be aware of some Inherent issues that affect this form of biometric authentication. First, in order for facial recognition to work, the user’s face must not be partially obscured by clothing, eye glasses, or shadows. Such factors can provide false rejections and user frustration. Further, as a person ages, certain facial features may no longer match the stored data points, affecting the ability of the system to reliably authenticate the user.
For companies that must include facial recognition in their offerings, a means must be incorporated to detect the difference between a live person and a life-size photo. The technique most often used is to prompt the user to blink at a designated time, which authenticates the image as live rather than as a photo.
Fingerprint scans
Fingerprints scans are nothing new. Scanners have been available for smart phones as far back as since 2011.
Although fingerprint scans continue to be used, this form of biometrics is, perhaps, the least reliable. It has been proven that, by using simple techniques, fingerprint scanners can be fooled. For this reason, the forward-thinking fintech startup will not invest in this ill-fated biometrics technology without a plan to resolve the reliability issue.
Vein Pattern Authentication
Vein pattern authentication relies on the unique pattern of veins in the palm, finger, or eye ball to recognize an individual. The vein patterns of the individual are as unique as his or her fingerprints, but not as easy replicable.
The reliability of vein pattern recognition has lead to its use in government and certain business applications, but the cost of implementation has made it unattractive to other sectors. However, as tech startups begin to innovate in this area, price points are sure to drop and the attraction for fintech companies will increase.
Internet Of Things
The truly innovative fintech startup will embrace the technologies of IoT in order to devise yet-unfathomed biometric technologies. The marriage of IoT and biometrics offers fintechs the potential to disrupt multiple markets within the financial sector. Here, like nowhere else, the sky’s the limit.
How Ignite Can Help
Whether your fintech startup is still a concept or already making waves in the financial industry, your long-term success depends on two things: how well you innovate and how well you integrate. Ignite can help you do both exceedingly well.
We understand that innovation sometimes requires a partner who knows technology better than you do. Having a unique idea is one thing; knowing how to apply the latest technology in the right way to make that idea a marketable product or service is another. With six software R&D development teams throughout Europe, we have the experience and resources to turn your vision into a technological Solution that works for you and works for your customers.
But the best idea in the world is useless if you don’t know how to integrate it with existing systems. Our developers are experienced in all levels of technology, from legacy systems to cutting-edge advancements. Whatever it takes to make your product or service integrate with those of your customers, we can make it happen.
The experience base of our developers includes mobile app development, Internet of Things (IoT), biometrics, and custom software development. Our capabilities are not limited to these areas, of course. They are limited only by your imagination.
Why not contact us today for a free consultation? It could be the next best decision you will ever make.