Connect with us

Technology

FINGERPRINT BIOMETRIC TECHNOLOGY – THE KEY TO GETTING TO ‘KNOW YOUR CUSTOMER’

David Orme, Senior Vice President at IDEX Biometrics

With cybercriminals becoming ever-more sophisticated, and identity fraud reaching epidemic levels in the UK[1], the need for strict customer identification procedures has never been greater for banks and financial institutions.

Know Your Customer, or KYC as it is commonly known, is a mandatory framework currently in place to protect financial institutions from fraudulent activities, such as identity fraud and money laundering. KYC, reinforced by the fourth Anti-Money Laundering (AML4) directive , requires banks to verify a customer’s identity before an account can be set up in their name. This due diligence includes obtaining the customer’s name, an official headshot and an official document to confirm their identity, as well as a residential address and date of birth. By following the requirements, banks can be confident the customer is exactly who they say they are and have insight into vital customer information, including any potential risks associated with accepting them as a customer.

Inaccurately identifying customers not only leaves the bank vulnerable to fraudulent activity, but also causes serious regulatory headaches, often resulting in a hefty fine. In fact, according to research, global financial institutions were fined $26 billion for AML sanctions and KYC non-compliance since the 2008 financial crisis[2].

Whilst the KYC framework is designed to provide banks with accurate identification information, current paper-based forms of identification such as passports, driving licences or birth certificates can be easily forged, and are timely and expensive to gather.

Bringing KYC processes into the digital age

As banks continue to move away from traditional branches and face-to-face meetings to online channels of customer communication, financial institutions are under increasing pressure to find digital alternatives to fulfil the KYC process. Fingerprint biometric authentication, which is being increasingly accepted into today’s payments’ ecosystem, could be the much-needed solution to this problem. By integrating a thin and flexible biometric fingerprint sensor into existing ID and payment cards, identity authentication can be obtained at the touch of a finger. Thanks to such advances in fingerprint biometric technology, and the effective use of enrolment guides, this innovative method of identification can be set-up remotely without the need for consumers to visit a bank branch.

Due to its completely unique nature, the fingerprint is highly accurate and virtually impossible for fraudsters to replicate. When compared with other methods of biometric authentication the characteristics of a fingerprint is far more exclusive to an individual and therefore more effective in accurately identifying customers for this purpose.

Whilst accuracy is vital, the cost of compliance is an issue that is continuing to grow for financial institutions – according to research, the average bank spends £40m a year on KYC compliance[3]. In order to keep up with regulations, banks are forced to employ and train thousands of extra employees to manage this process. Here too fingerprint biometrics can provide the perfect solution. Going through countless identification documents can take up a lot of time for an employee and it is inevitable that errors are made. By obtaining fingerprint biometric data, which is highly accurate and reliable, the need for human approval will be minimal, therefore boosting efficiency and effectively eliminating ‘human error’.

Balancing security with convenience

Fingerprint biometrics to facilitate identity technology is set to become a key enabler for improving not only security surrounding KYC requirements, but also reduce time investment from consumers and businesses alike.  Finding multiple pieces of identification, for example, a birth certificate, passport, utility bill can often be challenging for customers to gather. Paper documents such as these can be lost, or hard to access when needed, and can actually become a barrier to financial inclusion.

As 1.1 billion people worldwide are currently without official identification, KYC requirements mean that a huge proportion of people are unable to provide the identity documents needed to comply with these policies. By introducing fingerprint biometrics as a method of identification, individuals in developing countries, where access to formal identification is scarce, or those who have simply misplaced their formal identification, will be able to prove who they are using their fingerprint alone.

There is no denying that as we continue to move toward an increasingly digital age, fraud will continue to grow in both aggressiveness and complexity. The only way for banks and financial institutions to stay ahead and protect consumers from fraudulent activity is to transition from traditional paper-based identification and embrace fingerprint biometrics as a new digital identity.

//

[1] https://www.theguardian.com/money/2017/aug/23/identity-fraud-figures-cifas-theft

https://thefintechtimes.com/institutions-fined-26-billion-non-compliance-since-2008/

https://www.thomsonreuters.com/en/press-releases/2016/may/thomson-reuters-2016-know-your-customer-surveys.html

//

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Banking

BANKING’S SECOND WAVE OF TRANSFORMATION: INTEGRATING THE CLOUD-ENABLED FUTURE BANK

Keith Pearson, Head of Financial Services EMEA, ServiceNow

 

The last six months have seen significant changes to the financial services landscape, with operational resilience, economic recovery, cost reduction and an acceleration of digital transformation key themes emerging from the industry.

At the start of this crisis, much of the banking industry was in a different position to many businesses. The 2008 recession spurred a need for improvements and combined with the emergence of tech-savvy fintechs, the industry has seen a major shift as customer expectations have adapted. The pandemic has forced organisations to accelerate innovation already part-underway in the banking industry.

As banking experienced its first wave of transformation, institutions focussed on customer engagement, uniting physical and digital channels for an improved customer experience. Banks invested heavily in front office digital technology, creating visually appealing mobile apps, engaging online banking experiences and technologies for bankers to personalise customer engagement.

However, this digital engagement layer is not enough. Regulations like PSD2 reinforce the necessity to remain compliant, adding additional pressure to the digital transformation process which in turn has been accelerated by COVID-19. Banking is therefore in the midst of its second wave of transformation, where financial institutions are creating and seeking out critical infrastructure to better connect underlying middle and back office operations with the front office, and ultimately, with customers.

 

Keith Pearson

A disconnected operation

Many financial organisations are still struggling because they have yet to streamline, automate and connect the underlying processes that are enabling customer experiences. Which poses the question: why is connecting operations so difficult?

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status. Around 80% of a middle office employee’s time is spent gathering data from systems to make a decision, with only 20% spent actually analysing and making the decision.

The disconnect negatively impacts customers. For many, experiences like opening a bank account or getting a mortgage involve clunky, manual processes riddled with paperwork and delays. When front and back office employees lack the ability to seamlessly work together, customers can be asked for the same data multiple times, elevating frustration.

Customers have little patience and can be inclined to publicly broadcast problems when left unresolved. In a world of social media and online reviews, this could be detrimental to a company’s reputation.

With digitally native, non-traditional financial services players gaining market traction by offering a seamless customer experience, maintaining satisfaction is crucial for traditional banks to ensure that customers don’t switch. Banks must focus on making it easy for customers to do business with them by offering faster cycle times with more streamlined operations.

 

The fintech effect

Fintechs and challenger banks like Starling have shown what connected operations can do, having been built with digitised processes from day one. Modern consumers expect round-the-clock service from their bank. As financial institutions look to the future, developing a model of operational resilience that is capable of withstanding unforeseen issues, like power outages or cyberattacks, is critical to minimising service disruption. Having connected internal communications between front and back office staff means customers can be notified about any problems, how they can be fixed and when they might be resolved, as well as receiving continuous progress updates instantaneously.

Automation can go a step beyond this. Today, customers expect companies to not only do more and do it faster but to prevent problems arising in the first place. With connected operations and Customer Service Management (CSM), banks can proactively fix things before they happen and resolve issues fast, enabling frictionless customer service and replicating the ‘fintech effect’.

 

What about compliance?

In the European Union and the UK, PSD2 and the Open Banking initiative are giving more control to the customer over personal account data. Digital banks such as Fidor and lenders like Klarna are seeking to reinvent banking by offering customer-centric services. But the process of streamlining underlying operations is not simply about providing customers with the fintech-esque experience. More than 50% of a financial institution’s business processes are also impacted by regulation.

Financial services leaders are focussing on streamlining and taking cost out of business operations while also placing importance on resilience. Regulators are pushing banks to have a firmwide view of the risk to delivering their critical business services.

Banks must invest in digitising processes to intuitively embed risk and compliance policies, which are generally managed separately and often manually from the business process, leading to excessive compliance costs and risk of non-compliance. With the right workflow tools for monitoring and business continuity management, banks can minimise disruption by gaining access to real-time, actionable information about non-compliance and high risk areas, encompassing cybersecurity, data privacy and audit management.

Increasing openness of financial institutions to regtech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation. Banks will increasingly move away from people and spreadsheets and toward regulatory solutions that provide a real-time view of compliance and provide an end-to-end audit trail for Heads of Compliance, Chief Risk Officers and regulators.

With a unified data environment aided by technology, financial institutions can drive a culture of risk management and compliance to improve business decisions.

 

Riding the wave

The banking industry is still in the midst of its second transformation, and the pandemic hasn’t made it any easier. But riding this wave and successfully digitising processes to connect back and front office employees will present a profound difference to customer service.

The bank of the future will be frictionless, digital, cloud-enabled, and efficient; interwoven into the fabric of people’s lives. It will continue to be compliant and controlled but will deliver those outcomes differently, with risk management digitally embedded within its operations.

Demonstrating the operational resilience of its key services will not only drive customer confidence but will also provide a greater indicator of control to regulators and the market, adjusting overall risk ratings and freeing up capital reserves to drive more revenue and increase profitability.

The institutions that will thrive in this increasingly digital and connected world are the ones that are actively transforming themselves and the way they do business now, by taking learnings from fintechs, following regulations and paving the way in defining the future of financial services.

 

Continue Reading

Technology

MAINTAINING SECURITY: NOT SOMETHING TO LOSE CUSTOMERS OVER

investing

By Philipp Pointner, Chief Product Officer of Jumio

 

They say it takes 60 days to make or break a habit. With the UK having spent over 100 days in lockdown, old habits have changed and new ones have formed. While restrictions are starting to ease, these habits will stay with us, including how we choose to manage our finances. While prior to the pandemic, we may have gone to the bank regularly to deposit a cheque, change our bank account or open a new one, this habit has now been broken, putting the role of the branch in question.

Well before the outbreak of COVID-19, bank branches were closing in large numbers. More than a third of the UK’s bank branches have shut for good in less than five years, while hundreds of those that remain have reduced their business hours.

These macro changes in how we interact with our finances impacts financial institutions, which have had to adapt to allow current and prospective customers to access services remotely with the same level of security. Digitalisation in banking has been happening for years, but the global pandemic has significantly accelerated these efforts. While newer challenger banks have a reputation for faster sign-ups and seamless customer experience, security remains a top concern, particularly when the annual value of online banking fraud losses eclipsed £112 million in 2019.

Fraud detection measures have a reputation for making the customer experience worse. How can we preserve the user experience without compromising online security?

 

Philipp Pointner

The best experience vs. the best security

Top security at the account sign-up stage is essential, yet nearly half (48%) of all fraud value stems from accounts that are less than a day old. Experian’s 2020 Global Identity and Fraud Report found that account opening and account takeover are responsible for higher losses than any other type of fraud. The account onboarding process is one that carries many risks — financial, regulatory, and reputational — when identifying the true identity of a customer, especially when not done in person.

In ensuring fraud detection, measures with incremental friction are often put in place to keep identities secure. However, too much friction can be problematic, with nearly 40% of potential new customers quitting onboarding processes which are too time-consuming and onerous. This level of abandonment represents a significant cost for financial institutions. With friction having such an impact on conversion rates, there are lessons traditional banks can learn from their challenger counterparts when it comes to customer experience.

 

How do we solve this?

For many consumers digital banking is not new, but the global pandemic has forced others to try digital banking for the first time because there are no other options. How many of these consumers will return to a physical branch when lockdowns are lifted?

When onboarding, whether online or in branch, banks perform the same set of steps even though the process differs. While banks are required to perform the necessary due diligence as part of their KYC obligations, many of the onboarding steps required in-branch can be automated, streamlined and simplified to deliver a better customer experience.

Face-based biometrics have the power to help banks strike the right balance between customer experience and security when it comes to digital verification. When a customer goes to set up an account, the bank asks them to take a picture of their government-issued ID (e.g., driver’s license, passport) and a corroborating selfie. This process determines if the ID is authentic and if the person in the selfie matches it.

To make this process even more secure, online solutions are now embedding certified liveness detection in the selfie-taking process to make sure that the customer is not attempting to spoof the system with a deepfake video or a picture of a picture. By leveraging biometrics and AI, an accurate verification decision can be made in a matter of seconds, which dramatically lessens the friction and frustration experienced by most online customers.

 

Going beyond onboarding

With over 60% of financial institutions experiencing an increase in fraud volume over the last few years, and cyber fraud as the primary concern, top-end security needs to go beyond the onboarding stage.

Face-based biometrics can also serve as the answer to ongoing authentication. During the initial identity verification process, better online solutions create a 3D face map, containing over 100 times more liveness data than a 2D photo. When a future authentication is required, for example, when a customer tries to reset their password or initiate a wire transfer, the customer is asked to take a new selfie, during which a new 3D face map is created. This face map is compared to the original and authorises the transaction in seconds with a significantly higher level of identity assurance.

This holistic approach is required now more than ever, with fraudsters taking advantage of the surge to digital.

 

So, what next?

Digitalisation is no longer just an important priority — it must be a primary focus for all regulated financial institutions. When lockdowns were announced all around the world, challenger banks were better prepared to support their customers online, but while they may have had an advantage at the start, it doesn’t need to stay that way. With the extraordinary power of face-based biometrics and AI, financial institutions can level the playing field by delivering an online experience that balances account security and customer usability.

 

Continue Reading

Magazine

Partner Events

Trending

Wealth Management1 day ago

DON’T RISK IT ALL WITH NON-COMPLIANCE

By Paul Sleath, CEO at PEO Worldwide   Did you know non-compliance costs more than twice the cost of maintaining or...

News2 days ago

BANKIA TRANSFORMS THE CUSTOMER AND EMPLOYEE EXPERIENCE WITH BIANKA BY IPSOFT

Developed with cognitive artificial intelligence, IPsoft’s conversational agent can carry out transactional tasks, perform different roles in customer service and...

Finance2 days ago

FIDUCIARY MANAGEMENT

by Devan Nathwani, FIA and Investment Strategist at Secor Asset Management   Defined Benefit pension schemes are one of the most significant institutional...

Business2 days ago

TOUCH-FREE AUTHENTICATION FOR ALL: WHY WE NEED A SAFER PAYMENT METHOD IN THE ‘NEW NORMAL’

David Orme, SVP, Sales & Marketing, IDEX Biometrics ASA   Ever since March, when the World Health Organization encouraged people to...

Banking2 days ago

WHY BANKS NEED TO EMBRACE OPEN SOURCE COMMUNITIES

Nikolai Stankau, Director Business Development, EMEA Financial Services at Red Hat, the world’s largest enterprise open source solutions provider.  ...

FINANCIAL MARKET FINANCIAL MARKET
Wealth Management2 days ago

FOR PE TO SNAP UP “GOOD” COMPANIES, THEY MAY NEED TO WADE INTO “BAD” ECONOMIES

By  Martin Soderberg, Partner at SPEAR Capital   There’s no shortage of global challenges for investors currently, especially for those...

Business3 days ago

THE BASICS OF BUSINESS FINANCE

When you’re starting your business, you’ve got a lot to be thinking about. You need to find affordable suppliers, market...

Business3 days ago

HOW THE IMPORTANCE OF E-COMMERCE PLATFORMS GREW DURING THE PANDEMIC

Never in history has the world relied more on the internet than during this Covid-19 pandemic. With governments imposing lockdowns...

Business3 days ago

UNBANKED AND UNCONNECTED: SUPPORTING FINANCIAL INCLUSION BEYOND DIGITAL

Darren Capehorn, Director, Icon Solutions   Many of us take it for granted, but accessing basic financial services is fundamental...

Banking5 days ago

MORE THAN REGULATION – HOW PSD2 WILL BE A KEY DRIVING FORCE FOR AN OPEN BANKING FUTURE

Ralf Ohlhausen, Executive Advisor, at PPRO   Whilst initially seen as simply a regulation exercise, the second Payment Service Directive,...

Top 105 days ago

TIME TO THINK OUTSIDE OF THE BLACK BOX

Mike Brockman, CEO, ThingCo   If you have the unbridled joy of parenting a teenager you’ll probably know what telematics...

Banking5 days ago

BANKING’S SECOND WAVE OF TRANSFORMATION: INTEGRATING THE CLOUD-ENABLED FUTURE BANK

Keith Pearson, Head of Financial Services EMEA, ServiceNow   The last six months have seen significant changes to the financial services landscape, with operational resilience, economic recovery, cost reduction and an...

News5 days ago

RISK AND INVESTMENT SPECIALIST, CARDANO, TAKES TO DOCUMENT AND EMAIL MANAGEMENT IN THE CLOUD WITH ASCERTUS AS IMPLEMENTATION PARTNER

Ascertus also providing document comparison tool, compareDocs    Cardano, a privately-owned, purpose-built risk and investment specialist, has chosen Ascertus Limited as its implementation...

Wealth Management1 week ago

HOW SALARY SLIPS HELP YOU UNDERSTAND TAX DEDUCTIONS ON YOUR SALARY

A salary slip is defined as a document that is provided by your employer which contains the breakdown of your...

Banking1 week ago

BRANCHES ARE THE HUMAN FACE OF YOUR BANK?

Sudeepto Mukherjee, Senior Vice President, Financial Services Lead EMEA & APAC Publicis Sapient   Branches have always played a pivotal...

News1 week ago

RISE IN E-COMMERCE FOR SMALL BUSINESSES IS A BIGGER RISK THAN JUST STOCK CONTROL

With consumer confidence in the high street at an all-time low, many SME shops and businesses have moved to online...

Finance1 week ago

TIME TO FOCUS ON YOUR ‘WEALTHBEING’

Tony Mudd, Divisional Director, Development & Technical Consultancy. St James’s Place   FIVE WAYS TO SAFEGUARD YOUR FINANCIAL FUTURE The...

COVID-19 COVID-19
Finance1 week ago

PAYROLL AGILITY IN THE CORONAVIRUS CRISIS – HOW FINANCE FIRMS CAN ACHIEVE IT

by Hannah Grimshaw, BPO Payroll Lead, Symatrix   The government has published guidance with regards to the next steps for...

Business1 week ago

WHY IT’S TIME TO ADAPT TO THE VIRTUAL WORLD: HOW TO MASTER ONLINE NEGOTIATIONS

By Tony Hughes, CEO at Huthwaite International, a leading global provider of sales, negotiation and communication skills development   Virtual...

News1 week ago

BNP PARIBAS PERSONAL FINANCE COLLABORATES WITH EXPERIAN AND ARYZA TO HELP CUSTOMERS THROUGH THE COVID-19 PANDEMIC

The consumer finance specialist will be using the Open Banking tool to help customers create an affordable payment plan based...

Trending