How Secure are Biometrics in Banking?

Table of Contents

1. What Are Biometrics, and How Are They Used in Banking Today?

2. What Are the Most Common Types of Biometric Authentication Used in Banking?

3. How Do Biometric Systems Enhance Security Compared to Traditional Authentication Methods?

4. What Are the Potential Vulnerabilities or Risks Associated with Biometric Security?
5. How Do Financial Institutions Ensure the Privacy and Protection of Biometric Data?
6. What Are the Regulatory Considerations for Using Biometrics in the Financial Sector?
7. What Are the Benefits of Using Biometrics for Both Banks and Customers?
8. How Do Customers Perceive the Use of Biometrics in Banking?
9. How is the Future of Banking Security Expected to Evolve with Advancements in Biometric Technology?

The use of biometric technology has become common in banking and other areas of the financial sector because it protects consumers – and there’s a good chance that your credit union or bank provides an option for biometric authentication. You'll likely recognize things like fingerprint recognition or facial recognition scanning which verifies your identity before providing you with financial services.  

You may be wondering about biometrics in banking, including how they’re used to enhance security, how banks ensure your privacy and security when using biometric authentication and what the benefits of using biometric scans on your mobile banking app are. We’ll answer these questions in this article, and tell you where we think the future of biometrics in the banking sector will lead us. 

What Are Biometrics, and How Are They Used in Banking Today?

Biometry is the science of measuring individual body characteristics, and biometrics are physical or behavioral characteristics measured in biometry. You’re probably already familiar with biometry in some form; for example, if you’ve ever used fingerprint recognition or facial recognition to unlock your phone, that’s biometric scanning.

Many credit unions and banks include a process for biometric verification for digital banking particularly for accessing mobile banking services. Every bank employs security measures to protect accounts, and the use of biometric data is an effective way to minimize the risks associated with mobile and online banking.

What Are the Most Common Types of Biometric Authentication Used in Banking?

You may be wondering how credit unions and banks use a biometric system to protect their members and customers. The most common types of biometric authentication methods are:

Fingerprint Scans

Facial recognition

Palm scans

Palm scans are more likely to be used to allow someone to gain access to a safe deposit box than in digital banking. Other types of biometrics that may be used more commonly in the future include iris scans and voice verification.

You should also know that biometrics may include behavior recognition. Many financial institutions use AI to scan for behavioral patterns and identify unusual or suspicious spending, for example. This can help avoid synthetic identity fraud.

How Do Biometric Systems Enhance Security Compared to Traditional Authentication Methods?

Before biometric verification was an option, financial institutions and other companies relied on password protection or multi-factor authentication to keep accounts safe. We’ve all heard horror stories about people who reused the same password for multiple sites and who have experienced identity theft. Passwords can be effective, but they’re also susceptible to hacking.

Biometric information is more secure because it’s personal and individual. Nobody else has the same fingerprints as you. In fact, research by a Columbia Engineering alum even found that your fingers may not be identical to one another.

Adding biometrics to customer accounts allows credit unions, banks and companies that offer financial services to protect accounts and deposits from unauthorized access.

What Are the Potential Vulnerabilities or Risks Associated with Biometric Security?

No technology is completely free of risks. Here are some of the potential vulnerabilities of implementing biometric security.

1. An unauthorized party gains access to stored biometric data and uses it for fraud or theft.
2. A business collects face biometrics or voice biometrics from its customers without permission.
3. A business fails to properly evaluate the security, capabilities, and practices of third parties that have access to stored biometric information.
4. Employees of a business don’t receive training on how to interact with biometric data and use it appropriately.
5. Someone uses deepfake technology to confuse or fool biometric systems.

Any bank that stores biometric data should employ encryption and vet third parties to ensure that account holders’ data is kept secure.

How Do Financial Institutions Ensure the Privacy and Protection of Biometric Data?

Financial institutions use state-of-the-art encryption to store any personal data they collect, including biometric scans. 

In some cases, the biometric data is not stored by the credit union or bank. Instead, your verification method, like your fingerprint scan or facial recognition scan may be stored only on your device. That means there’s no risk of a “middleman” intrusion. As long as your device is secure, your authentication scan is secure.

Transmission of biometrics involves converting the verification itself to digital code that can’t be used in place of an actual scan.

These things all help keep your identity authentication private. 

What Are the Regulatory Considerations for Using Biometrics in the Financial Sector?

Any financial institution that uses biometrics technology must adhere to regulatory requirements to protect consumers’ privacy and identity data. There are federal regulations that apply to everyone and individual states may also have privacy and data protection laws that must be followed.

One of the most important federal laws that applies to financial institutions and financial services is the Financial Modernization Act of 1999. It includes the Federal Privacy Rule, which lays out regulations for how financial institutions may collect and disclose personal financial data. It also includes the Safeguards Rule, which says that all financial institutions must protect customer information and prevent anyone from gaining access to personal financial information under false pretenses.

What Are the Benefits of Using Biometrics for Both Banks and Customers?

There are some important benefits to using a biometric authentication method, including some that apply to both financial institutions and bank customers. Let’s start with customers.

• No passwords are required. We all have so many passwords for identity verification that they can be difficult to remember, particularly when adhering to best practices such as including numbers and special characters.
• Remote access to accounts. Using biometrics means you can access your account information through a mobile app instead of having to visit a branch.
• Improved security. Biometric scans are inherently more secure than other account or identity verification methods and can help avoid identity fraud.
•  The benefits for credit unions and banks are just as important.
• Increased trust. When account holders know that nobody can access their bank account without biometric authentication, they’re more likely to trust their financial institution with their personal information.
• Reduced risk of theft or fraud. Financial institutions that use biometric authentication that are properly stored are less likely to experience intrusions that impact their customers’ privacy and finances.
• Improved fraud detection. Biometric authentication makes it easier for banks to spot fraudulent or unusual activity and notify customers, particularly behavioral biometrics.
• More inclusion. Biometric authentication makes banking more accessible and inclusive and may help financial institutions expand their services.

The use of biometrics protects consumers and financial institutions.

How Do Customers Perceive the Use of Biometrics in Banking?

A biometric solution has become widely popular among credit unions and other financial institutions, as well as with companies in the financial sector. It’s clear that these entities are embracing biometrics, but how do consumers perceive them?

One recent study found that 72% of all global consumers prefer biometric verification to other forms of security, including passwords and PINs.

The preference is due in part to the widespread belief by two thirds of consumers that biometric authentication is easier and faster than using a password for identity verification. 

Here are some other key statistics to consider.

• Approximately 80% of people in North America, Western Europe and Asia Pacific currently use biometrics on their smartphones.
• 81% of consumers believe that biometrics are more secure than passwords.
• 80% of consumers would prefer to work with financial institutions that have strong security measures in place, including biometrics.
• 53% of credit card holders say they would change financial institutions if their bank didn’t offer biometric authentication.

These numbers clearly illustrate that consumers value and trust biometrics to protect their money.

How is the Future of Banking Security Expected to Evolve with Advancements in Biometric Technology?

There are many ways in which biometric technology could advance. Here are some of the innovations we expect to see in the not-too-distant future.

1. Biometric ATM. Financial institutions will replace existing ATMs with ones that implement biometric scans for verification, including fingerprint, palm and iris scans, and voice biometrics. 
2. Iris scans. We anticipate that iris scans will be used more frequently in the future. Irises contain 240 recognition points, far more than fingerprint scans. The one downside is that the technology is expensive and may not be usable for people with cataracts.
3. Infrared scans. Companies like Apple are already building infrared scans into Apple Watches. This uses a biometric sensor to map the veins in the wrist as a way of verifying identity.
4. Voice recognition. Financial institutions have started to use voice recognition for customer service. When an account holder calls, voice recognition may be used to verify their identity and give them quick access to their account information.

Use Biometrics in Banking

The use of biometric scans and technology has become nearly universal among the banking industry for a good reason. It protects account holders’ personal information and their banking transactions while making it easier for them to access what they need online or using a mobile app.

Want to learn more about security in digital and mobile banking at Addition Financial? Visit our digital banking page now!