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SCANNING THE HORIZON: EMERGING MARKETS IN BIOMETRICS

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By David Orme, SVP, IDEX Biometrics ASA

 

By 2023, the global biometrics market is predicted to grow by more than 15%, to over $24 billion. Yet, despite many of today’s most commonly-adopted biometric technologies stemming from Silicon Valley, such as Apple’s Touch ID, only 30% of that growth market will come from North America. So, if it is no longer just North America where consumers are rapidly embracing the security of biometric authentication, where else in the world is the growth of the sector coming from? Surprisingly, much of this progress is taking place in emerging markets such as Latin America, Africa and Asia. Recent developments in these regions have shown they can rapidly incorporate biometric technology into country-wide banking, government IDs and retail programmes, without being held back by legacy technology and systems which have delayed wider biometric adoption across Europe and North America.

 

Disrupting the Asian retail market with a smile

According to a Technavio report, 36% of the global biometrics market growth will come from the Asia Pacific region. In this region, China is already ahead of the rest of the world when it comes to biometric-authorised payments. In fact, it’s being adopted so quickly that cash is fast becoming obsolete in urban China, where the mobile payments market is worth around $12.8 trillion, led by fingerprint-to-pay apps, roughly 50 times the value of the mobile payment market in the USA.

 

AliPay, China’s biggest payment app, from e-commerce giant Alibaba, has 870 million registered users on its fingerprint-to-pay service. The brand even recently launched a trial ‘smile-to-pay’ feature at a branch of KFC in Southern China, which uses facial recognition to identify the customer at a self-order terminal and automatically charges them via the payment app – meaning the store has no cashiers, no tills and near-instant order collection.

 

Futuristic biometric payment methods like this are increasingly disrupting the retail industry across Asia. Korea too is using biometric authentication to make the shopping experience faster and more convenient. Recently, a Seoul convenience store became the first in the world to have customers pay with a hand scan. This palm vein authentication self-checkout facilityfeatures an emerging biometric technology which scans the veins of a user’s hand to identify registered shoppers and requests payment from their account. Thailand is also incorporating biometrics into the shopping experience, with facial recognition at 7-Eleven stores identifying loyalty members, analysing in-store traffic and suggesting new products to customers.

 

It’s not just in retail where Asia is proving to be a leader of biometric adoption. India has launched the Aadhaar programme, the largest biometric-backed national identity scheme in the world. With this scheme, over a billion citizens will receive a unique 12-digit ID number, supported by fingerprint and iris data, which gives them secure access to welfare schemes and government services.

 

Developing government IDs in developing markets

However, while Asia may be leading the charge in biometric growth, it’s far from the only region where these technologies are transforming day-to-day activities. Across Africa, the national ID market is also maturing rapidly thanks to biometric data. Fingerprint and iris authentication methods are helping to synchronise the data from expansive populations while providing easier access to public services.

 

In Kenya, fingerprint authorisation has sped up the largest population registration programme in Africa. Its national ID project,Huduma Namba, has provided the government with a comprehensive central population database, leading to it being called “the single source of truth on a person’s identity”. Kenyans will be provided with a single fingerprint-backed ID card, for access to healthcare, to get a driving license, pay taxes, enrol in a public school, or even request access to the electricity grid.

 

Fingerprint scanning technology is also being used to empower farmers in Nigeria, where the ‘Anchor Borrowers Programme’, an agricultural subsidy, is now distributed via biometric ID cards. The digitisation of the scheme has seen all farmlands mapped to their owner’s biometric information. This has increased the efficiency of fund distribution while eliminating so-called ‘ghost-farmers’ from the database.

 

Latin America also sees the value in national biometric databases. Brazil’s electoral commission intends to register over 140 million Brazilians by the 2020 rollout of its biometric ID smartphone app, which it anticipates will reduce the risk of voter and benefit fraud. Residents, meanwhile, will be able to use the app to claim social security, and eventually integrate all ID documents into one app. Similar schemes are also underway in nearby Mexico, where the Sonora State Government recently adopted fingerprint authorised pre-payment cards to deliver benefit services.

 

The race for global adoption

Despite this growth in emerging markets, Europe and North America aren’t lagging behind in the race for global biometric adoption. In Europe, fingerprint recognition remains the dominant biometric growth sector and is expected to be worth $11.5 billion by 2023.

 

This growth is largely due to advances in security driving the demand for identification and payment methods secured by biometrics. Progress is fast emerging in the physical payment sector and, according to ABI Research, the biometric payment cards market is expected to see significant growth in Europe by 2021.

 

This year, credit card companies and banks across Europe – including Bank of Scotland and Société Générale – have already embraced the opportunity to trial fingerprint-embedded payment cards to provide their customers with greater payment security. Fingerprint authentication technology will reduce the risk of card fraud as the owner must scan their thumb or finger in order to authorise transactions. Banking with your fingerprint is on the rise in the Middle East too, where Emirates NBD bank has launched an automated banking terminal to open new accounts authorised by biometric signatures.

 

Over in the USA, they are already developing the next wave of ground-breaking biometric technology. The ‘behaviometrics’ market, which includes methods such as keystroke and gait analysis, is expected to contribute to more than one-third of the total American biometrics market and dominate industry growth until at least 2025. This emerging technology, which can monitor unconscious movements and gestures, is seen as a promising, unobtrusive method of multi-factor authentication, when paired with more traditional and secure methods, such as fingerprint recognition.

 

As more markets across the world move to a password and PIN-free future, supported by biometric technology, continued awareness of security measures is vital. Recent research from the European Payments Council shows fingerprint scanning still has the greatest customer adoption potential for biometric authentication. But alongside this positive attitude towards fingerprint authentication, for biometric programmes to continue to global expansion, consumers must be assured that their data is secure.

 

Fingerprint authentication increases this sense of security among consumers. With fingerprints, only certain data points, not the full fingerprint image, are stored on the payment or ID card itself, meaning biometric data doesn’t leave the card. This will inspire trust in new consumers from emerging markets so that biometrics can continue to enhance security and make lives easier in all regions, risk-free. Biometric tech providers must educate manufacturers and consumers on these security issues in order to drive adoption beyond North America and across the globe.

 

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Business

How Big Data is Transforming Bilateral Trading

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By Stuart Smith, Co-Head Business Development – Data & Risk

 

Since its inception, Big Data has been an important part of how firms have identified and constructed quantitative trading strategies with hedge funds depending more on quant strategies which rely heavily on big data driven analytics.

As big data technology continues to move from being a specialised technical capability to being a commoditised capability available on a range of easily consumed technology platforms, its use within the financial derivatives will continue to increase beyond the initial quantitative driven capabilities.

At the same time, the number and range of available data sources is increasing rapidly. Whether it’s the increase in alternative data sets or new technology enabling firms to simply keep more of the data they have been creating, the volume of data available is increasing dramatically.

 

Big Data in Risk Management

Risk Management has always had requirements which have driven a close collaboration between business and technology to make available risk analytics useful for the business to make better decisions. As technology becomes more advanced, the metrics available continue to improve as well. This is typically because many risk metrics require high numbers of scenarios and valuations to correctly identify risks in multiple scenarios. To maintain flexibility, this has led to an explosion of data to manage. Firms are increasingly keeping all this data available which can run into many Terabytes (TBs), much of which needs to be ‘In Memory’ to make it accessible to analysts.

Stuart Smith

To achieve this big-data, technology is critical to allow firms to move large volumes of data quickly and easily from affordable long-term storage into high performance in-memory analytics. Big Data technology is ideal for this type of problem to enable large volumes of data to be recalled from across multiple stores and appropriately aggregated or filtered based on the analysis which users are requesting. Whereas in the past, analysts would have to accept that data outside of the last 3-5 days is only available in a summarised format, they can now expect that the data can be re-hydrated quickly and easily from cloud data stores and available to them in an easy-to-consume web interface.

This can enable much more dynamic types of analysis, for example where a new risk is identified, through analysis of a recent data set it’s now possible to find a long history of that risk, whereas previously it would have been lost through summarisation and fixed reporting processes.

 

Collaborative Data Sets

More big data stores are being created as the industry becomes more collaborative and uses increasing numbers of fintech solutions and platforms. With this change come new ways to analyse data and provide new insights.

For instance, through the automation of collateral exchange, an historical store of margin calls, payments and disputes has been created. This history provides a resource for banks to understand their performance in accurately issuing and making margin calls based on derivatives and compare their performance to that of the industry as a whole. The example below shows how a firm can be benchmarked while holding other institutions data private.

These types of analysis are new and could not be delivered without the centralised collaborative data model. It can prove to be instrumental in improving firms’ overall operational efficiency and client service.

It also provides an opportunity for Machine Learning techniques, based on big data sets, to analyse and predict payments requests which are likely to be disputed and potentially identify causes before an actual dispute is even raised. This type of ‘self-healing’ process can only be enabled by a large history of data through which algorithms can be trained.

In the case of Initial Margin (IM) calculated by ISDA SIMM* a new set of challenges have been introduced through having a two-sided risk calculation as part of the process of deriving payment information. This adds another level of complexity to the resolving of disputes; however, the potential offered by having large volumes of data opens up new options on how this challenge could be solved. The long history of Common Risk Interchange Format (CRIF)** data provides a long-term view of the sensitivities for most OTC derivatives, which can enable firms to identify basic issues like stale market data day over day. However, as with most detailed analysis differences in models, they can also be identified through looking at differences over long periods of time. Identification of these types of model discrepancies can help firms to be more proactive about reviewing their modelling deficiencies to ensure that differences don’t lead to disputes.

 

Looking ahead

The sheer volume of data can be an industry-wide challenge with firms having to manage disparate, needlessly duplicated and ultimately overwhelming information. Creation of an industry standard for reporting and analytics is, therefore, crucial to enable firms get clarity and valuable insights from the masses of data and centralise the information as a single data layer. Acadia has designed Data Exploration (DX) suite to be one-of-its-kind big data analytics platform to help sell-side, buy-side and fund administrators see its market positioning, trends and analysis of industrywide metrics.

The impact of big data will only grow and the industry is left with no choice than to evolve the use of technology, whether that is to drive quant strategies for hedge funds, more dynamic forms of risk management or larger shared industry data sets. All of these applications rely on underlying big data technology platforms to provide distributed analysis capabilities. As these capabilities continue to develop so will the types of analysis which are available to firms.

*The ISDA Standard Initial Margin Model (ISDA SIMM™) is a common methodology for calculating initial margin for non-centrally cleared derivatives, developed as part of ISDA’s Working Group on Margin Requirements (WGMR) to help market participants meet the BCBS-IOSCO margin framework for non-cleared derivatives.

** The CRIF file (Common Risk Interchange Format) is the industry template used to hold and exchange sensitivity data. ISDA’s calculation specifications are used to produce Delta, Vega and Curvature sensitivity numbers at Risk Factor-level

 

 

 

 

 

 

 

 

 

 

 

 

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Banking

How Biometric Payments Are Tackling Financial Exclusion

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By Catharina Eklof, CCO, IDEX Biometrics

We are moving closer to a cashless society: 89% of payments in the UK are contactless and, globally, contactless payment transaction values are set to surpass $10 trillion by 2027. Ease, convenience, security, and inclusion have accelerated the transition away from cash. However, many of today’s current payment solutions are leaving entire cross sections of society behind: including the most vulnerable, underserved, and unbanked populations.

Developments in the payment sector over the past decade still aren’t a perfect fit for all. Those suffering from dementia, literacy challenges, or impaired vision can find current payment methods – with a PIN to remember – extremely challenging. Financial inclusion requires us to make payments accessible to all demographics. Though the financially excluded represent minorities, they account for an estimated 1.7 billion people – almost a third of adults globally.

Enabled by huge advances in technology, our evolving social dialogue has become accelerated and unfettered, on a global scale. It is critical to harness technology as a force for dynamic economic improvement: democratizing access to banking and payments. As such, we need to look beyond mobile wallets or digital payments and support those in need of easier access to payment and fintech solutions. A more inclusive form of payment technology is essential.

Catharina Eklof

 

Personal Identity as the New Pin Code

Many communities remain vulnerable or underserved by the functionality of traditional payment solutions such as bank cards. These products are, at their core, only linked to the owner by way of name and signature, offering limited security and protection. With contactless payments, no link whatsoever is required to a card for payment.

In an increasingly contactless society, fraud and digital security are growing concerns. Credit and debit cards can be used by anyone, and card readers don’t understand if cards have been apprehended illegally. Vulnerable groups may also struggle to input their credentials into what can be, for some, a complex system. Empowering those vulnerable groups therefore means providing them with the independence to access payments with greater ease.

Biometric payment cards play a significant role in bridging the gap between the financially underserved and the financially included. Simple and secure financial authentication, like facial or fingerprint recognition, allow payments to become about who a person is rather than what they know or remember. If individuals can be personally linked to a payment card via biometrics, it can address the significant 1.1 billion people worldwide who are currently without official government identification or access to it. In Nigeria alone, 149 million individuals lack the legal means to evidence their identity, while in South Africa, 12 million individuals are excluded from the country’s formal identity system.

Fingerprint authentication has the added benefit of optimizing security, in that it requires the individual to opt into a purchase, avoiding any issues of unauthorized or unintentional payments from having a reader placed near the card owner’s face. This provides increased independence for the blind and visually impaired, who account for an estimated 2.2 billion people globally, as it allows for seamless payment authentication without sensory barriers. Similarly, biometric smart cards can be transformative for more than 55 million people living with dementia and Alzheimer’s, as it enables access to payment without the difficulty of remembering passcodes.

Literacy is also a little talked about hurdle to inclusion. Globally, there are 750 million “functionally illiterate” individuals struggling to use and understand financial products. Across all levels of education, biometric authentication is a universally inclusive concept. It is easy to communicate and understand that one’s fingerprint is inherent to their identity, and can act as a form of verification. Biometric smart cards facilitate and secure payments with ease by simply requiring their fingerprint to instantly authenticate their own card.

 

Pushing on With Progress

Even the most reluctant individuals are likely to have succumbed to contactless payments and some form of digitized banking in recent times. This will have the positive impact of making the needed transition to biometrics more seamless. Using fingerprints or facial recognition to unlock phones or access apps is not unusual. If anything, they have been convenient and comforting additions to the surge of tech innovations over the last couple of decades. There is a relief in knowing that these portals are being secured by methods that are almost impossible to replicate.

It is a breakthrough that financial players and governments in the world’s most developed countries still need to catch up with, as emerging economies have already capitalized on biometrics’ capabilities for almost a decade now. In India, for example, internal fraud and leakage from pension payments dropped by 47 percent after transitioning from cash to biometric smart cards. Because the solution bypasses the need for prior credit ratings or credentials, the country has also been able to catalyze safe online banking among previously unbanked adults since biometrics’ introduction in 2014.

Meanwhile, in Pakistan, the total number of mobile wallet accounts tripled from 5 to 15 million in 2015, with an estimated 50 percent of new registered mobile wallet accounts opened using biometric authentication. This was a result of Pakistan’s National Database and Registration Authority’s (NADRA’s) effort of collecting biometric information to allow for more convenient and democratic account opening processes.

Many around the world have been marginalized by both the pace of change in banking and the solutions that have, to this point, been created to accommodate such change. With the mass adoption of biometric smart cards, the same benefits seen in India could be realized on a global scale. If we take on the opportunity in front of us – promoting solutions like biometric smart cards to increase accessibility to the global economy – we will foster a digitally-focused, equitable and inclusive society. This doesn’t just mean ease and convenience, but also security for all and financial inclusion of those who have been left out of digital evolution, until now.

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