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By Paula Livingstone on March 20, 2019, 8:07 p.m.
Tagged with: Innovation Privacy Security Technology Authentication Biometrics Fraud Payments
Payments fraud remains a challenge, with credit and debit card fraud accounting for over 75% of total fraud losses in the US. As defenses against in-person card fraud improve (e.g. chip cards), criminals shift to attacking remote transactions like e-commerce. Authentication using "something you know" like passwords or "something you have" like tokens has weaknesses. Biometrics offers authentication via "something you are", like fingerprints or facial features.
Biometrics has advanced a lot recently thanks to better sensors, computing power, algorithms, etc. Fingerprint, facial recognition, iris scans, voice recognition, and behavioral biometrics are common modalities now. Each biometric modality has pros and cons across factors like accuracy, availability, acceptability, and cost. No single approach is perfect. Systems often combine multiple factors like biometrics plus a PIN or password for security.
Privacy is a concern with biometrics. Programs should be transparent, collect appropriate data, limit use to stated purposes, and secure the data. Spoofing attacks, false templates, and intercepted data are other risks. Biometrics is seeing growing use in government, law enforcement, border control, and consumer applications like unlocking mobile phones. Financial services is adopting biometrics more for authentication, especially for higher risk transactions.
The Growing Problem of Payments Fraud
Payments fraud has been an ongoing issue for many years, but the problem continues to evolve and grow over time. As new technologies emerge and consumer behaviour changes, criminals are quick to take advantage of any vulnerabilities or gaps in security. Some key trends that demonstrate the expanding threat of payments fraud include:
The continuing shift to digital payments and online transactions provides more opportunities for fraudsters to steal credentials, hack accounts, or use stolen card data for fraudulent purchases. E-commerce fraud rates have been rising steadily as more shopping moves online. Remote card payments like online purchases saw fraud rates increase from 15.45 basis points in 2015 to 18.71 basis points in 2016, a 21% jump.
As security improves in one area, criminals simply move to another weaker spot. For example, the rollout of EMV chip cards in the U.S. drove down counterfeit card fraud for in-person payments significantly. However, much of that fraud then migrated to card-not-present environments like online retailers. So while in-person fraud decreased, remote payment fraud continues to rise.
Organized criminal groups are growing more sophisticated and specialized.Fraud is increasingly perpetrated not by isolated individuals but by networks of criminals who are focused full-time on developing new scams and attacking emerging technologies before defenses can be built. The resources and expertise dedicated to committing fraud should not be underestimated.
Large-scale data breaches provide troves of information for committing identity fraud. From credit card numbers to social security numbers, the data exposed in corporate data breaches gives criminals rich data for impersonating consumers and perpetrating a wide range of fraudulent activities.
In summary, payments fraud is a constantly evolving threat that requires ongoing vigilance, adaptation, and advanced security tools to combat and minimize losses. Complacency is not an option, as criminals are focused on probing systems for any weak point they can exploit for financial gain.
Overview of Biometric Authentication
Biometric authentication utilizes unique biological characteristics to verify a person's identity. Some of the most common biometric modalities include:
Fingerprint recognition analyzes the unique patterns of ridges, valleys, and minutiae points on a person's fingertips. Fingerprints are collected by optical or capacitive sensors and matched against a database of stored fingerprint templates. Fingerprint authentication is one of the most prevalent and familiar biometric techniques.
Facial recognition uses special cameras and algorithms to map and measure facial features like the distances between eyes, shape of nose, chin contours, etc. These measurements create a biometric faceprint that can be compared to a stored template for authentication. Facial recognition can be done overtly, like for unlocking a smartphone, or covertly, like identifying persons of interest in a crowd.
Iris recognition scans the unique pattern of the coloured ring around the pupil of the eye. An infrared camera captures the iris image which generates a distinct digital template. Iris scanning is very fast and accurate but requires specialized cameras not yet widely deployed.
Voice recognition or speaker identification uses a person's unique vocal characteristics to create a voiceprint. The system is trained by sampling a person's spoken phrases and then matches against the voiceprint template for future authentication.
Behavioral biometrics look at patterns in how a user interacts with devices like keyboards, touchscreens, or mouse movements. The dynamics of how they type, swipe, and tap generate a distinctive biometric profile of that individual.
Multimodal systems combine two or more biometrics for enhanced accuracy. For example, facial recognition alongside iris or fingerprint scanning. Two matching biometrics provides better assurance of authenticity compared to a single type of match.
In summary, biometrics leverage unique human traits that are very difficult for fraudsters to copy or spoof. Advancing technology has made biometric sensors and matching algorithms far more accurate and reliable for authentication use cases.
Benefits of Biometrics for Payments
Implementing biometric authentication for payments and financial services provides a number of advantages compared to traditional authentication methods:
Greatly enhanced security - Biometrics offer a major improvement in security because an individual's biological or behavioral traits are unique and difficult to copy or spoof. Passwords can be guessed and tokens can be stolen, but mimicking fingerprints or iris scans is very challenging.
Convenience and ease of use - Users don't have to memorize passwords or carry separate tokens or devices. Their fingerprint or face is already with them, often able to authenticate simply by glancing at their phone. This improves the customer experience.
Omni-channel capability - Biometrics can authenticate across different channels seamlessly whether in-person, online, phone, etc. The same fingerprint works equally well across any touchpoint.
Deterrence of friendly fraud - Biometrics like fingerprints or voiceprints definitively tie a transaction to a specific customer, reducing the likelihood of false disputes of legitimate purchases.
Compliance with regulations - Authentication requirements for payments can be satisfied by advanced biometrics that offer superior security and non-repudiation.
Consumer adoption and trust - Biometric unlock features on smartphones have started acclimating consumers to seamless biometric experiences. Trust in biometrics is rising.
In summary, biometrics deliver better security, convenience, and compliance while providing continuity across channels and devices. As consumers become accustomed to biometrics, it can enhance trust and loyalty in brands leveraging it.
Considerations for Implementing Biometrics
While biometrics provide many advantages, there are some important considerations when implementing a biometric authentication solution:
Accuracy - The false rejection rate and false acceptance rate vary across modalities. Factors like image quality, spoofing attacks, injuries, voice conditions etc. can affect accuracy. Choosing the right biometric(s) for the use case is crucial.
User population - Certain modalities like fingerprints work better for some demographics than others. The user population traits should factor into the biometric technique selected.
Privacy - Collecting and storing sensitive biometric data raises privacy concerns. Transparency, data minimization, access controls, and encryption should be part of a biometrics programme.
Enrollment process - Securely establishing identity and capturing high quality biometric data upfront is critical to the integrity of biometric authentication.
Cost - Deploying the sensors, databases, and analytics infrastructure for biometrics involves considerable upfront investment and ongoing costs.
User perception - Some consumers may harbour concerns about use of their biometric data or discomfort with certain modalities.
Spoofing attacks - No biometric is completely immune to spoofing so liveness detection and multi-factor authentication should be used to enhance security.
In summary, the advantages of biometrics are substantial but make sure to weigh accuracy factors, costs, user perceptions, privacy, security, and flexibility needs when planning a biometric authentication programme.
Use Cases in Financial Services
Biometric authentication is gaining traction across a range of financial services applications, including:
Mobile banking - Banks are incorporating fingerprint and facial recognition into their mobile apps for account access and transaction approval replacing PINs or passwords.
Card-present transactions - Payment terminals can capture fingerprints to verify identity and link the cardholder to the payment card used at point of sale.
Call centers - Voice biometrics are being used on phone-based interactions to passively confirm customers for high-risk transactions with banks and brokers.
Account origination - Facial recognition helps meet KYC requirements and ensure new accounts are properly matched to appropriate individuals.
Omni-channel commerce - Retailers are enabling fingerprint login for their mobile apps and websites for seamless biometric authentication across channels.
ATMs - Banks are piloting fingerprint readers on ATMs as a secure replacement for PIN entry to authorize cash withdrawals.
Behavioral biometrics - The way a user interacts with a phone or keyboard is analyzed behind the scenes to silently verify identity.
In summary, a host of financial services organizations are exploring innovative ways to apply biometrics to their most high-risk and frequent customer interactions to bolster security and convenience.
Future Outlook for Biometric Adoption
Biometric authentication has gained considerable traction already, but can be expected to play an even greater role in payments and financial services going forward. Several factors will drive further adoption:
Improving technology - Biometric sensors, algorithms and artificial intelligence will continue advancing, bringing higher accuracy rates and more use cases.
Regulations - Government and industry security regulations are increasingly recommending or requiring multi-factor biometrics for sensitive applications.
Mainstream familiarity - Broader consumer use of biometrics like fingerprint unlocking phones will remove barriers and increase comfort levels.
Hardware integration - More biometrics sensors will be built into devices like laptops, payment terminals, ATMs expanding capabilities.
New modalities - Innovative biometrics using vein, palm print, gait recognition or other technologies will emerge with niche advantages.
Push for convenience - Consumers and financial providers will seek even faster, seamless user experiences that biometrics helps enable.
Desire for omnichannel - Biometrics will allow organizations to bridge security and experience across online, mobile, call centre, and in-person channels.
In summary, the trajectory points clearly towards biometrics becoming a standard component of security and authentication programs in the finance and payments industry.
Key Takeaways
Some key points to recap about the role and value of biometrics for payments and financial services:
- Payments fraud is a complex and growing threat that requires advanced defenses like biometrics.
- Biometric modalities like fingerprints and facial recognition leverage unique physical or behavioral traits for authentication.
- Biometrics enhance security, convenience, and omni-channel capabilities compared to traditional methods.
- Accuracy, privacy, perception, spoofing attacks and other factors must be considered before implementation.
- Use cases are expanding across mobile banking, call centers, POS payments, and account opening.
- Ongoing technology advancements and regulation will drive further biometric adoption.
In summary, biometrics have substantial promise to help authenticate customers, reduce fraud, and provide a seamless experience across channels. As consumer familiarity grows, biometrics will likely become a standard component of security programs in the finance and payments sector.
Conclusion
In closing, it is clear biometrics are poised to transform customer authentication and security in the payments and financial services industries. The unique advantages of leveraging human physical and behavioral traits offers a major leap forward compared to legacy approaches like passwords and PINs that have become vulnerable.
However, careful consideration must be given to selection of the right biometric modalities, building robust and secure infrastructure, addressing privacy concerns, and choosing applications where biometrics can have high impact by reducing fraud and strengthening security. When implemented strategically, biometrics can significantly modernize and improve the customer experience.
As the technology, costs, and consumer familiarity continue to evolve, biometric authentication will inevitably become a standard feature that customers expect for convenience and security. Financial institutions and payments providers that are proactive in adopting biometrics will gain competitive advantage and greater fraud protection. In the future, biometrics are likely to be a routine component of the payment process just as passwords and PINs are today.
In closing, biometrics represent an exciting innovation that can bolster security while providing customers with an easier, omnichannel experience. The payments ecosystem must collaborate to tap into the potential of biometrics while navigating the complexity of new technologies and business processes. With smart implementation, the promise of biometrics can certainly be realized in the years ahead.
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