BIOMETRICS IN BANKING

Transcription

1 w h i t e pa p e r BIOMETRICS IN BANKING From Unbanked to Lifelong Customer January 2014

2 A Significant Opportunity for Financial Institutions Worldwide The financial world appears to be on the cusp of a transformation. The world s 2.5B unbanked adults present an incredible opportunity for financial institutions. A number of studies show that the terms unbanked and unbankable are far from synonymous. Among the 2.5B unbanked adults (just over half of the total adult population 1 ), are potential consumers who are or would be quite adept at managing money and leveraging financial products. More than 2.5B people worldwide are without bank accounts. Over half of the world s adult population is without bank accounts. Source: Global Financial Inclusion Database, 2013 Report Global Financial Inclusion Database, 2013 Report A massive number of people mostly in Africa, Asia and the Middle East aren t currently unbanked because they re unbankable. Many simply cannot comply with the identification requirements posed by most financial institutions. In fact, about 60% of the world s citizens do not have national ID cards, passports, driver s licenses or other government-issued identity credentials. 2 Other inhibiting factors include distance from banking locations and illiteracy. A number of financial institutions have already recognized the tremendous potential of this un-served market and have taken steps to capitalize on it. Many banks in emerging markets, for example, have introduced microfinance products that have already reached about 150M of the world s 2.5B unbanked adults. While it s a relatively small percentage of the total population, those financial institutions have determined microfinance presents profitable, promising and sustainable business. National and regional governments tend to be in favor of financial institutions reaching the unbanked because of the obvious effects on their economies. As such, many countries are working to create environments that make banking services more ubiquitous and more accessible by citizens with lower incomes. Many government and quasi-government agencies also work to promote microfinance services and similar offerings because people without access to legitimate financial services often fall prey to unscrupulous or predatory lenders. Executive leaders in banks, government agencies and other enterprises focused on this issue have identified biometrics as an affordable and secure way to deliver financial services to the world s unbanked. In many cases, the biometrics-based identity files created for one purpose such as national ID, benefits delivery, healthcare access or travel documents are also providing a cost-effective foundation for the delivery of microfinance offerings. 2 Biometrics in Banking

3 Addressing the Identity Void Most national governments are incorporating biometrics into citizen identity documents or are planning to do so. In fact, by 2015, smart card-based citizen IDs such as passports and national IDs issued with biometrics will outnumber those without biometrics 4:1. 3 Field officers will use biometric readers to validate that the person presenting a credential is, in fact, the person tied to the credential. This process will also make it incredibly difficult for people to present counterfeit or duplicate identity documents. Banks and other financial institutions are increasingly exploring options to leverage the identity technologies embedded in these credentials. Biometrics and other identifiers stored on the documents will elevate the security of a wide range of transaction types. As more citizen credentials and banking processes become biometrics-based, corresponding infrastructures in retail, healthcare, transit and other markets will certainly evolve. By 2015, smart card based citizen IDs issued with biometrics will outnumber those without 4:1 Biometric IDs Non-biometric IDs For example, banks in Japan have widely deployed biometrics-enabled ATMs that allow customers to withdraw currency or conduct other transactions after a successful fingerprint scan. There are currently more than 80,000 biometrics-enabled ATMs in Japan and more than 15M customers using them. 4 Similar programs have been launched in China, India and Brazil. Additionally, banks are designing and deploying biometrics-based systems to comply with increasingly more sophisticated anti-fraud and anti-laundering regulations. While the accelerated adoption of biometrics-based credentials and corresponding infrastructures is encouraging, they do not address the identity problems faced by the world s unbanked. They are unlikely to be issued new, biometrics-based credentials anytime soon. One solution either being explored or deployed by governments or financial institutions is the creation of secure biometrics-based identity databases. Unbanked consumers complete a relatively simple enrollment process, which generates a unique and secure identity for each person. Because the identity is biometrics-based, it s virtually impossible to create duplicate or fraudulent identity files. The resulting database could be used to authenticate the identity of consumers when they want to access financial services even if they don t have government issued credentials. They simply scan a fingerprint and their identity is confirmed by matching it to the biometrics stored in their file. In addition to increased certainty in the identification process, biometrics-based systems also bring simplicity and affordability to the process. The scanners and software used to read, capture, manage and confirm fingerprints and other biometrics have demonstrated reliability and performance in a variety of demanding applications around the world. They also tend to be affordable, which contributes to the financial viability of microfinance and other relatively new initiatives. 3 Biometrics in Banking

4 How Biometrics-Based Systems Work During the enrollment process, customers simply place a finger on a scanner. A quality scanner will capture a complete image that can be used as an entirely unique identifier. These biometrics are combined with demographic data to create a complete identity file for each customer. When customers want to access funds or services, they simply scan a finger and an authentication system compares the scanned image to the stored image. Passwords, PINs, tokens and other elements can provide additional levels of security, but biometrics are the most unique and the most difficult to compromise. Also, customers can lose tokens or forget PINs and passwords, but they can t misplace or forget their fingers. Employees of banks and other financial institutions can follow a similar process when logging onto systems, accessing secure assets or clocking in at work. They simply scan a finger and the system verifies their identity and access or security levels. For both customer and employee activity, access is only granted if the scanned biometric matches the information stored in the individual s secure identity file. Suspicious activity is automatically flagged and detailed in management reports, which can be delivered individually in real-time or as part of an aggregate report. How it Works 01 Fingerprints System Customer Employees captured checks for scans scan 04 when customer/ employee enrolls duplicates to mitigate confusion, fraud fingerprint when accessing accounts, funds, etc. fingerprint for confirmation or System automatically flags suspicious activity & generates management reports The biometrics-based identification systems used in processes such as these are generally compact, rugged and require little in the way of surrounding infrastructure. This rugged portability, along with the previously noted affordability, allows banks and other enterprises to deploy mobile biometrics-based solutions wherever they are needed. So, in addition to overcoming the unbanked population s lack of credentials and potential language and literacy issues, biometrics also solve problems associated with location, distance and proximity. 4 Biometrics in Banking

5 Benefits of Biometrics-Based Identification The concept of banking the unbanked holds great promise for both financial institutions and un-served customers. Financial institutions get access to large numbers of new customers and the unbanked get access to financial products and services previously not afforded them. The same holds true with the benefits of biometrics. From an institutional perspective, biometrics allow for the creation of a trusted identity file. Fingerprints and other biometrics are truly unique identifiers that are not subject to counterfeiting and forgery (like birth certificates and other breeder documents). The costs of biometrics-based solutions is relatively low and definitively lower than issuing and managing smart cards or other tokens to widespread populations. Financial institutions can often share the costs of deployment and management with other entities, such as government agencies or healthcare organizations. Low costs on the institution side can contribute to lower cost of services for consumers. From a customer standpoint, biometrics overcome problems associated with illiteracy, language barriers and the lack of government-issued credentials. The convenience of fingerprint scanning versus carrying cards or other tokens is also a plus. Biometrics-Based Benefits for Microfinance Large base of potential new customers Affordable implementation of microfinance initiatives Increased security and authenticity for financial transactions Operational simplicity even over large populations Customer-facing solution for language and literacy barriers Greater customer convenience than carrying cards or tokens 5 Biometrics in Banking

6 Success Factors for Biometrics-Based Programs A number of best practices have risen from biometrics-based initiatives currently being conducted by financial institutions, most notably in Asia, India, Africa and South America. Following these best practices and incorporating them into the assessment and planning phases of a biometrics-based initiative can improve outcomes. INTUITIVE INTERACTION FOR END-USERS Develop systems that require little or no training. Since employee and customer training availability varies, a highly intuitive system design is critical. Part of the intuitive design should be user interfaces that require little or no language. Icon-based systems allow customers to overcome language barriers and literacy issues. Another aspect of intuitive operation is device neutrality. Design applications and other assets to work on multiple devices and operating systems. INTEGRATION WITH EXISTING INFRASTRUCTURE Program costs can be significantly minimized by leveraging existing infrastructures, such as Active Directory and developing solutions built on common interfaces. Using partners with a deep understanding of PIV, STQC, NIST and other industry certifications also helps shorten deployment times and control development costs. PRIVACY & SECURITY Understanding and communicating how biometrics are captured and stored will help with customer privacy and security concerns. With most systems, fingerprint images are not technically stored on servers. Composite biometric profiles are generated from multiple data points and used to confirm identities. Unauthorized users cannot access an identity database and steal fingerprint images. If composite biometric profiles are stolen or breached, it is nearly impossible to use the data to reconstruct a fingerprint image. LAYERED & MULTI-FACTOR SECURITY A common best practice is to capture biometrics plus one other factor during the enrollment process. This allows for a multi-factor authentication at the point of service. A second best practice during the enrollment process is the capture of multiple fingers. Using more than one fingerprint to build the identity file and authenticate users at the point of service decreases false rejections and increases security. STREAMLINED DEPLOYMENT Another way to minimize customer reluctance is to conduct pilot programs and publicize the resulting success. In addition to making rollouts more manageable and affordable, pilot programs allow you to monitor and refine offerings based on real-world results. Another deployment related best practice is the documenting of core processes. Accurate documentation of enrollment, implementation, disaster recovery and lifecycle management processes leads to repeatable success and consistent operation. 6 Biometrics in Banking

7 Biometrics Case Study Microfinance at Banco Azteca As Latin America s leading specialty retailer, consumer finance and banking services company, Banco Azteca needed a better method to help customers protect their savings and credit accounts from fraudulent use. Banco Azteca also wanted to strengthen their internal controls. Seventy percent of the population in Mexico lives in rural communities without access to banking or credit services. Those that do have access often lose or have their account identification cards stolen. With more than 91,000 credits being authorized weekly over the bank s network, including 7.3M operations and 10M transactions, Banco Azteca needed to ensure the security of its customers accounts. It wanted a solution that could be used in rural and urban communities that increased network security and protected its customers from bank fraud. Banco Azteca, a subsidiary of Grupo Elektra, discovered an unmet microfinance need and capitalized on it by leveraging the power of biometrics. Convinced that a fingerprint system was the most convenient and secure way to authenticate customers, Banco Azteca engaged a solutions provider to devise a biometric system for testing. Many customers were farmers and construction workers whose fingers were damaged and worn. If Banco Azteca were to adopt a fingerprint-based authentication solution, it needed to be sophisticated enough to image and authenticate these difficult fingerprints. After conducting a pilot program in three store branches with extremely positive results, neighboring stores began requesting fingerprint protection for their accounts. Banco Azteca has deployed biometrics-based systems throughout 900 of its branch locations with more than 15M customers using fingerprint authentication to access their account. Upon opening an account, a customer is biometrically registered for debit and credit transactions, allowing them to securely and conveniently review balances, track transactions, withdraw cash, transfer funds and exchange currency using fingerprint authentication. By acquiring a fingerprint reader from the bank, customers can also take advantage of secure Internet banking for many of the same transactions, including the transfer of funds to other financial institutions. Customers can also apply for an Azteca bank card to use at Point-of-Sale (POS) stations within retail stores. Each card has a picture of the customer and a fingerprint template to be used at a POS terminal to authorize charges. Internally, Banco Azteca executives and employees use fingerprint authentication for time and attendance control, access to the bank vault and meal payment at corporate restaurants. The results of the initiative have been astounding. By adding biometrics, Banco Azteca experienced strong and sustained growth and quickly became one of the largest banks in Mexico with $6.1B in assets. Banco Azteca has also expanded its operations by offering highly profitable microfinance services in Honduras, Argentina, Panama, Peru and Brazil. 7 Biometrics in Banking

8 About Crossmatch TO LEARN MORE For more information, visit or contact us at: In North America, call: In EMEA, call: In Asia, call: Crossmatch helps organizations solve their identity management challenges through biometrics. We empower governments, law enforcement agencies, banks, retailers and other enterprises to mitigate risk, drive productivity and improve service levels. Our solutions are built on consultative expertise, refined best practices and the application of advanced biometrics technologies. Crossmatch understands the forces of change in the markets we serve and we develop solutions that anticipate customer requirements. Our network of consultative and technical service experts collaborate with customers in more than 80 countries worldwide. Learn more at REFERENCES 1. Global Financial Inclusion Database, 2013 Report 2. Acuity Market Intelligence, 2013 Report 3. Acuity Market Intelligence, 2013 Report 4. Journal of Basic & Applied Scientific Research, 2012 Report DISCLAIMER THE INFORMATION IN THIS DOCUMENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL STATEMENTS, INFORMATION, AND RECOMMENDATIONS IN THIS DOCUMENT ARE BELIEVED TO BE ACCURATE BUT CROSSMATCH MAKES NO CLAIMS, PROMISES OR GUARANTEES ABOUT THE ACCURACY, COMPLETENESS, OR ADEQUACY OF THE INFORMATION. CROSSMATCH SPECIFICALLY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED. USERS MUST TAKE FULL RESPONSIBILITY FOR THEIR APPLICATION OF ANY PRODUCTS OR COMPLIANCE WITH ANY NATIONAL, STATE OR LOCAL LEGAL OR REGULATORY REQUIREMENTS OF ANY KIND. Crossmatch 3950 RCA Boulevard Palm Beach Gardens, FL USA Tel: Fax: Copyright 2014 Cross Match Technologies, Inc. All rights reserved. Specifications are subject to change without prior notice. The Crossmatch logo, Crossmatch, Cross Match, L Scan, D Scan, I Scan, Guardian, SEEK and Verifier are trademarks or registered trademarks of Cross Match Technologies, Inc. in the United States and other countries. DigitalPersona, TouchChip, Eikon, U.are.U and FingerJet are trademarks or registered trademarks of DigitalPersona, Inc., which is owned by the parent company of Cross Match Technologies, Inc. All other brand and product names are trademarks or registered trademarks of their respective owners