In Brazil you can go to an ATM and withdraw cash with just your fingerprint. The tech has been around for a while and has changed the way Brazilians are banking. They are not the only ones. Bankingtech.com recently reported that Nequi, a financial mobile banking service from Bancolombia, has become the first in Colombia to deploy mobile biometrics for authentication. The technology – the IdentityX platform – is supplied by US fintech specialist Daon, which is also being used by Brazilian online bank Neon which offers smartphone access only to its accounts. Neon claims to be the first bank in Brazil to use biometric authentication for transactions within smartphone applications.
Ilnort Rueda Saldivar, partner at global management consulting firm A.T. Kearney, says that biometric implementation is not unique to Latin America and while there are isolated implementations in various countries – Poland, China, Taiwan, South Africa, Brazil and Mexico – in most cases biometric identification is being tested in small scale pilots.
He adds biometrics can bring convenience and security to the banking system. “Fingerprint and finger vein scanning improve account opening and financial transaction validation – in a fraud environment where consumer’s login credentials can be stolen, fingerprints cannot. Biometrics also improve convenience – scanning the finger tends to be easier than typing and remembering passwords.”
Saldivar describes the three main characteristics of the Latin American banking environment that have served to push the implementation of biometrics. These are the need for robust solutions to prevent fraud in the account opening and transaction process, the need for simpler authentication solutions targeted to individuals with lower levels of education, and the existence of major banking players with budget and scale to roll-out the technology.
The Brazilian example shows the relevance of scale and time in the implementation of such solutions. “Biometrics require major investments and, although it provides a better final experience, it requires customers to go through an unfriendly registration process,” Saldivar says. “Major players in Brazil have spent several years enrolling customers and rolling-out hardware and software implementations. Not having a market standard increases investments in shared infrastructure, like external ATMs.”
VP Strategic Marketing and Global Alliances at Bioconnect, Bianca Lopes says the banking sector is leading adoption of biometrics as a security authentication factor, especially in Brazil. She adds that instead of PIN memorisation or carrying a card containing pre-set authentication keys, biometrics means customers can access their bank accounts with just their fingerprints.
“The usage of biometrics in the Brazilian banking market has been so successful that banks and electronic means of payment enterprises are now exploring the possibility of integrating biometrics at non-supervised types of transactions, pushing the biometric authentication towards personal computers and e-commerce, as well as mobile platforms for banking transactions,” she says.
Lopes believes the increase in biometric adoption across Latin America is due to the volume of the critical mass of inhabitants. “The sheer number of people in the countries and the fundamental lack of trust in documents, such as your birth certificate as a form of identity ‘proof’, something that is often the gold standard in countries like Canada and the USA.”
Many countries in the Latin American region use biometrics as a key factor for identifying their citizens. Fingerprints and biometric face enrolment are widely used in broader document issuance in countries such as Brazil, Argentina, Chile, Mexico, Peru, and Paraguay, creating databases of biometric and biographic information that are useful for inhibiting fraud. “Biometric collection is not typically performed by a single government agency, but rather by several independent government branches—both at federal and state levels—using the collected data for their own independent authentication and validation processes,” Lopes explains. “These independent databases are generated over long periods of time, and eventually a citizen will likely have their biometrics duplicated in various repositories.”
Lopes continues: “What Latin America has taught us is if it can work there, it should work anywhere. We in North America have much more stringent laws and documentation parameters enabling even better data points to add to a biometric system. We have better connectivity and fewer people, so it’s about time we move ahead.”
Tony Virdi, VP and Head of Banking & Financial Services in the UK & Ireland at Cognizant, cites projections indicating that the implementation of new biometric technologies in the banking industry have the potential to cut a financial institution’s operational risk by at least 20% over the next 10 years as the technology becomes more pervasive. “In the long term, widespread adoption of this technology could eliminate the need for ATM cards, creating huge cost savings for banks. That is quite an incentive for banks to get on board,” he says.
Siddharth Jaiswal, Assistant Manager for Business Research & Advisory at Aranca, agrees that Latin American banks have been leading the way in adoption of biometrics. He believes that the recent rise in use of biometrics in the banking sector is being driven by two important factors: the rise in data thefts, which, according to the Center for Strategic and International Studies, costs the global economy an estimated $450 billion a year, and the advancement of cost effective technologies. “Smartphones are equipped with fingerprint biometrics technology which will be able to shift the cost burden from bankers to the consumer,” he says.
Jaiswal adds that biometric technology is already popular in various sectors across the developed world. “But when it comes to ATMs, its adoption has been relatively slower in US and Western Europe – largely due to privacy concerns – compared to some of the emerging economies of Asia and Latin America. But the situation is changing due to rapid digitisation of banking services and convenience demanded by the consumers,” he says, adding that banks in developed economies seeing the advancement in Latin America are further moving towards biometrics as they have the potential to replace traditional cards and thus reducing the expenses associated with them.
One area that has not been addressed much in the Latin American market, according to Lopes, is that of data redundancy, the storing of data in multiple regions, that don’t communicate with each other. For example, a typical Brazilian citizen has a federal ID card, driver’s license, and a passport, and their data is duplicated in all three systems. “These databases are not interconnected or interoperating due to systems and procedures being optimised to each agency’s own specific obligations and responsibilities, as well as the prohibition of data exchange for security and privacy reasons,” Lopes says, adding that the result is an undesirable scenario where each citizen has many different ID credentials issued by different states and agencies.
For Saldivar, the evolution of internet connected devices and mobile phones is changing the way the implementation and roll-out of biometrics occur, and more changes will still be seen in this area. He explains that mobile phones now have finger print readers and touch-screens are evolving to be able to recognise fingerprints as well. “High definition cameras allow secure eye-vein scans and face recognition with selfies, while geo localisation together with biometrics can enhance fraud prevention,” he says, adding that voice recognition solutions currently used to provide convenience can easily evolve to identify individuals.
“Until now, banks were rolling out solutions where they controlled the registration and verification processes. The new solutions are using devices with standards defined mostly by headset manufacturers, and processing the information within the device,” he says. However, he cautions, that this does not necessarily provide the same level of security of proprietary and centralised validation. “On the other hand, the enrolment process is easier and much faster, and convenience is further driving adoption.”
Many banks in Latin America have already accepted and integrated these technologies into their apps, using them as “soft logins” to provide basic account information. “Moving forward, we may reach a point where hardware and software providers – and not banks – control the authentication process,” Saldivar says.
Lopes champions the platform approach to biometric adoption. “Consumers want to decide whether to capture their fingerprint, be prompted to speak (voice), scan their eyes, or enter a password. Merchants, and banks also need choices in the way that consumers are authenticated – from who you are to what you do, anywhere across the globe, using any device,” she says. By broadening the universe of authentication options with a platform approach to biometric authentication – that includes all types of biometric from fingerprint, face, eye, voice – it will make this much more scalable and frictionless for everyone involved.
Lopes believes we are also about to see the use of biometrics for other applications like the transit systems and law enforcement. “Look at what Colombia is doing for their entire transit system and enabling public sector to achieve efficiencies and enable better identity and authentication to the masses. There are over eight million cards in Bogota alone,” she concludes.
Phil Muncaster reports on China and beyond