As fintech applications become more and more popular, the potential for cyber attacks, fraud, and non-compliance increases. Unfortunately, bad actors have already found workarounds for conventional solutions like complex passwords and two-factor authentication. Is biometric authentication the next step?

Why Fintech Apps Need Biometric Authentication

Many people mistakenly believe that using a fintech app is much safer than other alternatives. While nearly 60 percent of people agree that digital wallets are as secure, if not more secure, than conventional payment methods, they forget that phones can be lost too. An attacker can access the owner’s bank account the moment they get hold of their device.

Because mobile banking gives users 24-hour access to their accounts, attackers don’t have to wait for a physical branch to open its doors to act. Instead, they can change account information or make unapproved transfers immediately.

While passwords can prevent unauthorized access attempts, they are not foolproof: they can easily be leaked in a data breach or bypassed with a brute-force attack. The same concept applies to various other verification and security measures. Given enough time, hackers will come up with workarounds.

The popularity of financial technology is on the rise: the number of mobile banking apps downloads were 34.74 million in the fourth quarter of 2023, up 3.24 million year-over-year. However, security and process flaws remain. Business leaders looking for a solution should consider biometric authentication as an alternative.

The Role of Biometric Authentication in FinTech

Biometric data is the biological, physical, or behavioral characteristics of an individual’s body. Fingerprint scans, facial recognition, eye scans, and voice recognition are the four main types of authentication. In financial technology, this technology is used for convenience, security, and compliance.

1. Customer experience

Convenience is key in the digital age: consumers don’t want to wait a second longer than necessary. Since small annoyances like one too many security questions or a particularly long loading screen can turn consumers away, fintech companies need to consider alternatives.

Biometric authentication is convenient and improves the customer experience. Users do not have to remember or do anything to authorize payments, access their accounts, or check their deposits. In addition, scanning technology has already been integrated into most mobile devices.

2. Account Security

Any online transaction, no matter how small, carries a certain level of risk for the user. Poor security only increases that risk, potentially allowing hackers to remotely access users’ bank accounts and make unauthorized transfers. Biometric authentication is one of the most effective ways to prevent this because it cannot be hacked. Even if attackers steal 3D facial maps or eye scans, they cannot replicate those features.

3. Compliance

Compliance is one of the key roles of biometric authentication in financial technology. Organizations must protect users’ financial data or face legal repercussions and costly fines, so having an effective tool to prevent unauthorized access is important. This allows teams to redirect their resources to anticipate regulatory changes and protect high-priority storage systems.

4. Fraud Prevention

Fraud is becoming increasingly common in fintech because processes are decentralized. Apps don’t have clerks who can recognize an individual by their voice or appearance, and trying to tell if someone is who they say they are just by their account name is a challenge.

Scammers can use someone else’s personally identifiable information to open a fake account. Alternatively, they can log in with a compromised password. In contrast, biometric data cannot be leaked or stolen, preventing them from getting past the login page.

Considerations before implementing biometrics

While implementing biometric authentication is generally beneficial, decision makers must take into account several considerations to ensure success. Privacy has been a major concern since the Federal Trade Commission (FTC) recently issued a warning about this technology and the information it collects.

According to the FTC, false or unsubstantiated claims about the accuracy of this biometric technology, including those related to the collection and use of its data, violate the FTC Act. The agency has already taken enforcement action against companies for noncompliance. Business leaders should take its actions as a signal to prioritize transparency.

Of course, data security is also an issue. Organizations should leverage encryption, authentication measures, and network monitoring tools when storing user fingerprints, eye scans, voice notes, and facial maps. Otherwise, hackers may be able to infiltrate storage systems and exfiltrate data sets.

An attacker stealing an audio snippet or facial scan might not have meant much in the past. However, in the age of AI, it could have a serious impact. Criminals can use deep learning models to create deepfakes, realistic synthetic imitations of images or voices. This allows them to bypass authentication measures.

In particular, people may be able to bypass biometrics even without AI. There are many cases where facial recognition software accepts similar-looking individuals. Evidence shows that family members can bypass this technology relatively easily. Therefore, even biometric systems are not foolproof, and business leaders should take this into account when developing security.

The End of Biometrics Exploitation in Financial Technology

While biometric authentication isn’t perfect, no authentication measure is. It can also simultaneously improve customer experience, security, and compliance—not many other solutions can say that. Fintech business leaders who need a security solution for their mobile app should consider this technology.

Zac Amos is the Features Editor at ReHack, where he covers business technology, human resources, and cybersecurity. He is also a regular contributor to AllBusiness, TalentCulture, and VentureBeat. For more of his work, follow him at Chirping OR LinkedIn.

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