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Biometrics and The Digital Bank of The Future

Verifying people's identity has traditionally been a face-to-face affair. But in today’s digitized world where mobile banking dominates and consumers manage a vast array of daily tasks directly from their devices, it seems silly that anyone should still have to visit a branch to open an account.

Subscribe TodayThe process of identity verification has historically required customers to take their physical ID into a branch, where a service rep determines if they are indeed the same person pictured on their ID. Widely known as in-person “know your customer” (or “KYC” for short), this process is not only inconvenient and expensive, it can also be questionable from a security perspective. In-person KYC relies completely on the branch representative. Human error introduces opportunities for fraudsters to present tampered ID credentials, for example, or for criminal collusion to take place between the bank representative and the applicant.

But the KYC process has finally broken free of branch-based face-to-face meetings. Banking providers can now use biometrics to verify a customer’s identity — even remotely, using videoconferencing for instance.

This is a big deal. Early implementation of new biometric-driven KYC processes can significantly reduce costs while enhancing the mobile banking experience, making services more attractive and convenient to users.

Biometrics Take KYC Beyond Branches

As mobile adoption has grown, banking providers have been under increasing pressure to find digital alternatives to in-person KYC. According to research from CACI, consumer visits to retail bank branches are set to drop 36% by 2022, with mobile transactions rising 121% in the same period. And in the next five years, CACI estimates that 88% of all interactions will be mobile.

The level of engagement that mobile apps enable is incredible, so the race is on for financial institutions to develop a seamless digital customer experience, particularly when onboarding new customers. Effective remote KYC will provide a competitive advantage for true mobile banking.

And this is where biometrics come into the picture.

( Read More: Biometrics And The Future of Banking Security )

The Next Step: Videoconference KYC

Some banking providers — specifically those in Europe — now have the opportunity to verify someone’s identity remotely while videoconferencing, but this process still depends on the operator’s  capacity to match the person to their documentation and identify when fraudulent activity is taking place.

It’s only a marginal improvement over face-to-face validation in branches. To maintain security controls (e.g., tampering with an image) forces many financial institutions experimenting with video KYC to reject applications and require the customer to visit a branch instead.

The solution is to implement automatic biometric face recognition within the videoconferencing system. This has real potential. It can combat many of the model’s security frailties and enable banks to embrace this model as a stepping stone toward the delivery of a fully remote KYC solution.

By replacing human judgement with biometric identity technologies, higher levels of verification accuracy can be achieved in a fraction of the time. This process utilizes automated controls for identity verification and provides the highest level of convenience for customers.

Comparing
Channels

Availability Convenience Security
In Person (F2F)
High Low Easy to secure
Videoconferencing Medium Medium Totally secure
Totally Remote
(e.g., Email)
Low High Hard to secure

Biometric Technology is a True Enabler

The introduction of automated biometric verification technologies is the key to making KYC faster and more convenient for customers. For each delivery channel, technologies such as digital face and fingerprint recognition systems improve security, either by replacing human judgement entirely or by confirming their judgement or alerting them to any anomalies that may otherwise have gone undetected.

For instance, a “face matching score” can be used as a risk indicator during a videoconference. If the matching score is low, the bank representative could ask the applicant to produce additional forms of ID. Conversely, if the score is high, the identity verification process could be streamlined. Furthermore, this validation process can be completely transparent for the user.

Bottom Line: The accuracy and sophistication of biometric technology is increasing rapidly and is now widely accepted by customers, gradually removing the need to remember strong passwords.

TSB will be the first bank in Europe to use retina scan technology to allow customers to access online bank account details. This new technology could be seen as risky, and consumers will likely have fears. After all, hacking these systems is not entirely impossible. Hackers in Germany posted a video showing how they could fool a retina scanner with a photo and a contact lens. Nevertheless, new biometric technologies constantly under development, and over time will become both increasingly more secure and more accessible to consumers (think: iPhone X).

Fingerprint scanners, for example, are evolving so they can map the whole hand, not just read a single fingerprint. This type of authorization, known as “naked payments” in the financial industry, is already being trialed in Chicago where palm secure touchless readers use infrared technology to take a photo of the vein structure to enable consumers to pay for items such as their morning coffee or newspaper. Consumers no longer need to carry cards, cash or even their mobile phone.

Biometric readers in bank branches would surely help combat in-person fraud. However, this fails to address the needs and expectations of today’s über digital consumer. If banking providers already trust biometric technology to authorize payments and account access, why use it as a form of fully remote KYC (e.g., when someone sends or receives an email from their institution)? Here, the customer’s biometric verification takes place on their device, requiring no human validation.

Taking Small Steps Into The Future

To answer the needs of an increasingly digitized customer base, bank and credit unions must move toward a fully mobile and digitized experience — one that includes a fully-remote ID verification process, enabling them to onboard new customers (among other advantages). This won’t happen overnight though.

Most financial institutions will first experiment with small, iterative steps, using traditional document-based KYC in a videoconference context. Then they might ease their way into videoconferencing that uses biometrics to verify identities.

Ultimately we will end up with a fully remote KYC process powered by biometrics. It is the future. Banks and credit unions that can develop and harness this technology quickly will enjoy an early-mover advantage in intensely competitive digital banking battlefield.

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