Biometrics to curb financial identity theft

It’s has been a perennial challenge for banks to verify that someone is who they claim to be. As banks transform from being branch-focused to providing digital services, more banks are analyzing and adopting biometrics to replace paper-based forms of identification to fight identity theft. It is used when engaging in initial customer due diligence and before granting access to accounts, payments and transactions in person, online or through mobile devices.

Biometric identity theft

Identity theft occurs when a person uses another’s personal information for example: name, address, date of birth, identity number, etc. to commit fraud or engage in illegal activities such as opening a bank account or obtaining a credit card under victim’s name. According to Bureau of Justice Statistics, an estimated 17.6 million Americans were victims of identity theft in 2014. Most victims (86%) experienced the misuse of an existing credit card or bank account. About 4% of victims had their personal information activity stolen and used to open a new account or for other fraudulent activities. This can lead to serious incidents such as money laundering or scam which results in financial losses to the victims, banks and governments as well. Through biometric authentication, banks can establish and verify a customer’s identity, hence make financial transactions auditable and traceable. As a result, their know-your-customer (KYC) and anti-money laundering (AML) management become more effective.

Imagine a future of completing your banking and purchasing needs without a bank card and using only your iris or fingerprint. First, your unique biometric data and personal details will be registered and stored at bank’s database. When accessing accounts or services, you will be asked to scan a finger/ iris and the system will compare the scanned template to the stored ones. Unlike relying on paper documents, biometric identification ensures that multiple identities cannot be created for the same person. Banks’ and other financial institutions’ employees can follow a similar process when logging onto systems, accessing restricted assets or clocking in at work. Instead of typing in a user ID and password, a biometric scan verifies their identity and security levels, providing fast access to applications, systems and networks. Access will be granted to the authorized person only and suspicious activity will be automatically flagged and reported in real-time.

In recent years, countries and banks in regions such as Somalia, Pakistan, India, Nigeria, Mexico, Australia, Japan and others have turned to biometrics to better protect themselves from financial crime risks. Banks in the Europe and the US are also changing their attitudes toward and interested in adopting biometric solutions as “the largest portion of cybercrime is happening in finance and retail,” said Chris Trytten, the market solutions manager for Palm Beach Gardens, FL-based Crossmatch. Not only private corporations but also governments are taking actions using biometrics. According to media reports, Chinese authorities have announced to use facial recognition to fight money laundering at Macau casinos. And the Financial Action Task Force (FATF), an inter-governmental body is developing and promoting policies to combat money laundering and terrorist financing, has recommended the use of biometric security.

In fact, there have been many positive forecasts on the implementation of new biometric technologies in the banking industry. Goode Intelligence market research firm predicts that the market will reach a value of $11 billion by the year 2020 with one of the highlighted trends that is the rise in using biometric authentication on ATMs while mPayment platforms is still the most prominent. Although there are existing challenges such as large amount of investment but in long-term it will help payment providers to cut financial loss including identity theft and fraud cost, as well as time and efforts spent resolving those problems. As Biometrics Research Group forecasted, it is potential to cut operational risks by at least 20% over the next 10 years as the technology becomes more widely adopted.