Biometrics: facial recognition in banking services Biometrics: facial recognition in banking services

Biometrics: Facial Recognition in the Banking Sector

One of the biggest challenges facing the banking systems today is the security of transactions. By identifying and confirming the identity of users based on their physiognomy, biometrics such as facial recognition can support the banking and financial sector in identifying fraudulent transactions, increase the security of payments, and enhance customer experience. Face recognition algorithms can be used for user authentication procedures, the automated opening of checking accounts, authorization of financial transactions, and performing payments.

As our society becomes increasingly digitalized, biometrics solutions (i.e., technologies using anatomical features to verify someone’s identity) are slowly starting to replace traditional methods. Based on checking unique biological traits such as facial characteristics, retinas, irises, voices, fingerprints, or two-dimensional images of finger veins, these technologies promise faster, more secure, and more accurate authentication processes. Tailored applications have been developed for sectors such as banking and finance, defense, transportation, and manufacturing, to name a few. With the number of startups drastically increasing in the last decade, the biometrics market is expected to grow from US$42.9 billion in 2022 to US$82.9 billion by 2027.

The number of companies and financial investments (US$) in biometrics (US$) worldwide. Data source: CrunchBase

Currently, the US is the world leader in terms of investment volume and the number of companies developing biometric solutions, followed by Latin America and Asia. Africa has a relatively high number of startups; however, the total funding amount is very low compared to other regions. Nevertheless, the trend is picking up all over the world, powered by the quest for digitalization across all industries and the need for more secure and personalized solutions.

Facial recognition in the banking sector

While biometric technologies like facial recognition have been around for a while, the banking sector is only now starting to incorporate them into authentication processes. Adoption is also accelerated by significant advancements in technology, the increasing need for remote onboarding and interaction with customers, and by regulatory provisions such as “know your customer” (KYC) guidelines and the US Bank Secrecy Act.

In the banking sector, ATMs equipped with cameras can verify and validate a customer’s identity by checking the image of their face against a database of stored photographs. After the validation takes place, the customer can withdraw money or access other banking services. This type of authentication is already offered to customers by banking institutions such as CaixaBank in Spain and Singapore-based OCBC Bank.

Facial biometrics have additional applications in finance: The technology could be used to enable customers to log in to digital financial applications in order to open new accounts, secure mobile wallets, or approve financial transactions. In these situations, too, the face scan is matched against official identity documents or images that have previously been stored in the database.

Challenges in implementing facial recognition biometrics in banking

Despite its numerous advantages for multiple industries, face recognition technology also comes with a series of challenges and limitations. Firstly, the technology requires an extensive dataset to train the algorithms. However, these datasets are difficult to obtain and store, given privacy regulations and the growing number of data breaches and cybersecurity attacks. Moreover, poor-quality datasets could introduce biases and lead to false matches, which would defeat the main purpose of this technology.

Secondly, apprehensiveness and cultural anxiety among the general public regarding potential abuses of this technology might slow down adoption, despite the fact that providers are selling it as a means to increase customer satisfaction.

Startups on the rise

Although facial recognition is one of the most controversial and complex issues to regulate and implement in the market, investors’ interest in the technology surged in 2021. A CrunchBase analysis conducted by Supertrends shows that more than US$1 billion has been invested in various funding rounds. Here are some examples of face recognition solution providers that tailor their services to the needs and regulations of the financial industry.

US-based Incode Technologies is a digital identity company that develops biometric identity products for industries such as banking, retail, healthcare, and hospitality. Headquartered in San Francisco, it has offices in Europe and Latin America. One of their platforms, Incode Omni, offers self-service, omnichannel, and secure multi-biometric capabilities, supporting customers in performing identity authentication.

Based in the UK, Shufti Pro is a SaaS company providing fully automated solutions for end-customer authentication and business verification. Their solution can be integrated with other proprietary systems via an API. Besides face verification, the solution also supports document verification, video interviews, address verification, two-factor authentication, consent verification, and biometric sign-in through facial recognition. The verification process can be completed in under 30 seconds and is available in more than 230 countries.

Brazilian company unico develops facial recognition and identification solutions for banks and retail companies. Their product, Unico Check, allows for biometric authentication and validation of individuals during the onboarding processes and while performing various transactions, helping companies and the government to reduce fraud, streamline processes, reduce operation costs, and increase the security of exchanges.

An artificial intelligence and computer vision-enabled SaaS platform developed in India, Biocube offers biometric technology for border control, the finance industry, insurance businesses, and governmental organizations. Their robust yet easy “know your customer” and transactions system helps identify frauds in account opening and fraudulent transactions.

In the corporate banking sector, companies such as Barclays and Citi are experimenting with the finger vein reader technology. At the same time, fingerprint-based identification codes have been successfully incorporated into several contactless card pilots worldwide. Other organizations are pushing the envelope even further by developing 3D imaging for finger veins using photoacoustic tomography. However, experts consider that, among all biometric authentication methods, facial recognition is currently the closest to maturity, capable of confirming a person’s identity with high confidence. Nevertheless, governments and regulators must ensure that the legal and regulatory framework keeps pace with technological advancements so that basic ethical principles are respected and no civil rights are infringed.

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Catalina Sparleanu

Working with top experts to identify how the latest innovations and disruptive technologies will impact businesses, industries, and society. I have an academic background in social science (Ph.D. in Sociology), an MBA degree, and experience in private companies and NGOs.

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