Biometric Authentication is gaining tremendous interest from banks and Fintech

Amit-GoelAuthor


 

Amit Goel

Co-Founder at LetsTalkPayments.com

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As

smartphones become the most powerful tool for delivering financial services, its use in authentication is bound to increase. Smartphone and related technologies have a lot to offer in that area. Apart from increasing payment options, one can also see that there is an increase in fraud rates in payments (CNP Fraud is expected to grow at CAGR of 22%, 2014-18) and providers are exploring new methods to enhance security measures.

Banks and service providers are investing and experimenting with various technologies to improve security. The use of biometrics for authentication of transactions is one area which has seen a rapid increase in adoption and different models are being developed around biometrics. Gartner predicts that 30% of mobile devices will use biometric authentication by 2016. The initial use cases for a biometric authenticated payment product can be seen in ATMs, retail POS and smartphone purchase.

Biometric authentication involves the use of personally identifiable information like fingerprints, iris scan, voice recognition, etc. However, recent technology innovation, like powerful smartphones and enhanced storage systems (cloud storage), have especially made fingerprint authentication a viable and low cost method for providing biometric security. Recently at a conference, a payments expert explained that over-reliance on fingerprints for authentication might not be a good idea. In the case of Apple’s fingerprint system, there is no central repository or clearinghouse of Touch IDs. The ability to quickly touch a finger on the button and take an action that is relatively hard (not impossible) for someone else to replicate provides enough assurance to the average consumer that it’s “good enough.” Neither Apple nor the banks supporting Apple Pay pitch it as more secure, but consumers might have understandably assumed that to be the case. Note that Apple requires the actual (alphanumeric) password to be entered when the phone is turned off and on. And for these reasons two or more biometric authentication (in combination) methods are being tested.

Currently, with other biometric payment systems having not yet achieved the required levels of adoption, the use of fingerprint is gaining a lot of prominence. Especially with the introduction of TouchID fingerprint biometrics into Apple iPhone 5S and above, along with the introduction of Apple Pay in 2014, Apple has launched fingerprinting into mainstream.

However, research predicts that as Apple Pay and fingerprint authentication is a recent trend, the scope for fraud still needs to be studied and at the current stage, it is advisable to have a second level of protection (pin, password, etc.)

In any case, Biometrics is seen as a high growth industry with mobile biometric revenues expected to grow at over CAGR 100% between 2014-20. While various research predict the overall biometrics market to be around $22 B, with financial sector alone valued at around $ 8 B by 2020.

Though challenges are still many, the convergence of payment trends and biometric trends is leading to development of biometrically authenticated payment products. The high growth predictions and revived interest in this technology could potentially create new business models and disrupt the existing structure while lowering cost and enhance customer experience.

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