Bala Kumar, Chief Product Officer, Jumio
In today’s digital landscape, where data breaches and cyber threats are rampant, the financial services sector must review its current customer verification processes and technologies for better protection against modern cybersecurity challenges.
According to IBM, the global average cost of a data breach in 2023 was $4.45 million, 15% more than in 2020. For the financial services industry, however, global statistics don’t tell the whole story. Finance firms lose approximately $5.9 million per data breach, 28% higher than the global average, underscoring the urgency for enhanced security measures in the sector.
With the rise of advanced transactional technologies to combat fraud, conventional security measures such as passwords and PINs are no longer adequate as they’re vulnerable to hacking. Integrating biometric technology into banking systems is now paramount for protecting against data breaches and other security threats as it offers an effective measure for banks to fulfil their Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. Biometrics also help the financial services industry provide customers with secure, convenient, and user-friendly banking services.
Navigating the new age of cyber threats
As digital banking has become the norm, fraudsters are continually evolving their tactics, turning cybercrime into an arms race against financial institutions. For example, sophisticated phishing attacks, which often involve fake banking websites or emails that mimic legitimate communications, have become a common method for fraudsters to deceive consumers into revealing sensitive information.
Financial institutions bear the mantle of protecting not just cash deposits and investments, but also customer identity. In this arena, biometric authentication is a game changer. It enhances security by pairing a user’s knowledge, like a password or PIN, with their unique biological traits, significantly strengthening the barrier against unauthorised access. Implementing these technologies doesn’t just enhance security; it redefines it, reducing the risk of breaches and the costs associated with them. Technologies including biometric-based identity verification solutions are already used by neobanks such as Monzo, offering a glimpse into the future of secure banking.
Along with end users enjoying a simple, more personalised user experience, the widespread adoption of biometric authentication could not only streamline transaction processes but also significantly tighten security. This could lead to a more resilient financial ecosystem where the reduction in fraud has a domino effect, strengthening the trust and stability across the entire sector.
A double-edged sword in artificial intelligence
The complexity of fraud demands that we not only understand the tactics but think about how they might evolve. Strategies employed by scammers are only getting more pernicious with the widespread availability of generative AI. From phishing scams to deepfakes, a robust defence is no longer a luxury — it’s a necessity.
The omnipresent force of generative AI is, however, a consideration for biometric defences to contend with. AI holds the potential to revolutionise financial security, yet it presents a paradox. The very technology that can predict and prevent fraud is also at the fraudsters’ disposal, enabling them to outsmart traditional security measures. It’s a digital game of cat and mouse, and the financial sector must leverage AI with urgency and precision to tip the scales in their favour.
Currently, the quality and sophistication of deepfakes pose questions for identity providers at financial institutions seeking to accurately ascertain that their customer is a real person corresponding to a genuine identity, and not simply a generated replica.
Using AI to detect fraud in finance
Advanced AI techniques are now being employed in liveness detection — a method to ensure that the biometric traits being checked are real and belong to the person present at the time of the transaction. These techniques include analysing the texture and depth of the skin, detecting subtle movements like blinking or smiling, and responding to interactive prompts, all of which are challenging to replicate with synthetic means. This guards against the use of deepfakes or other synthetic reproductions.
Moreover, AI can help compliance teams within financial institutions finely tune risk detection. Algorithms analyse vast amounts of transactions to identify possible fraud, and the emergence of graph technology to visualise and analyse complex relationships between data points is a compelling development. This technology enables a comprehensive view of an individual’s risk profile by connecting disparate pieces of data, which can illuminate hidden risks and interconnections that might signify fraudulent intentions. This approach turns a potential threat into a powerful shield against fraud, enhancing the institution’s ability to pre-emptively identify and mitigate risks.
The future of a safe financial ecosystem
The financial services sector is at a critical juncture, facing increasing challenges in protecting consumer data against a surge of cybercrime, and it’s clear that a transforming verification is not just beneficial but necessary. With 80% of consumers willing to spend more time on identity verification measures when accessing online financial services accounts for enhanced security, the message is clear: it’s time for a change. The transformation from traditional methods to biometric authentication spells out distinct benefits for all parties involved: institutions, users, and the broader ecosystem.
