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Biometric Authentication: A Game-Changer for the Fintech Industry

Fintech, or using digital technology for managing finances, has become more popular in recent years. However, the fintech industry faces potential risks, such as cyber security and data breaches. Implementing biometric authentication systems can help ensure the security and integrity of fintech operations and protect customers’ financial information. To learn more about how biometric authentication can help prevent fraud in fintech, read more here.

Biometric Authentication: A Game-Changer for the Fintech Industry

The utilization of digital technologies for managing finances and conducting financial transactions, commonly known as Fintech, has experienced a significant increase in popularity for the last years. The provided data illustrates the overall transaction report from Indonesia’s Fintech Industry spanning from 2017 to 2022, demonstrating a consistent upward trend in growth each year. Predictions from statista.com indicate that this upward trajectory is expected to continue in the foreseeable future.

However, the fintech industry is characterized by various potential risks, of which cyber security and data breaches are among the most significant. As fintech companies handle sensitive financial information, they are susceptible to targeted attacks by cybercriminals, which can lead to the compromise of personal information, financial data, and financial loss. Additionally, the emergence of fintech products and services, many of which are relatively new and not yet fully understood, poses a risk of being utilized for illicit activities, such as money laundering for cryptocurrency or fraud perpetrated through the use of fake online identities.

Furthermore, the fintech industry also presents the risk of operational failures, as some companies may not have the necessary infrastructure or compliance measures in place to ensure the security of customer financial information and meet regulatory requirements. This can result in financial losses for consumers and damage to the reputation of the fintech industry. In order to mitigate these risks, the implementation of robust biometric authentication systems can play a crucial role in ensuring the security and integrity of fintech operations, while also providing an added layer of protection for customers’ financial information.

What is a biometric authentication system?

According to sciencedirect.com, a biometric authentication system is a type of technology that uses an individual’s unique physical or behavioral characteristics to identify them. Some common types of biometric systems include fingerprint scanners, facial recognition systems, and iris scanners. These systems have recently been used for security purposes, such as:

  1. Granting access to buildings or devices,
  2. Verify a person’s identity when they are making a financial transaction

Biometric systems are more secure than traditional identification methods, such as passwords or PIN numbers, because of their unique characteristics that are difficult to forge or imitate.

The use of biometric authentication in the Fintech Industry

The fintech industry is increasingly adopting biometric authentication as a means of verifying the identity of users and preventing fraudulent activities. This technology utilizes various biometric modalities to confirm the identity of an individual, such as:

  • Using fingerprint scanners to verify the identity of users when they access their mobile banking app or make a payment using their smartphone
  • Using facial recognition technology to verify the identity of users when they login to their online banking account or make a transaction through a web-based platform
  • Using iris scanners or other biometric devices to verify the identity of users at ATMs or other points of sale

Implementing biometric authentication can help fintech companies improve security, reduce the risk of fraud, and provide a more convenient and user-friendly experience for their customers. It can also help reduce the use of passwords or PIN numbers, which can be hard to remember and easy to forget. Overall, biometric authentication will likely become increasingly important in the fintech industry in the coming years.

The hidden risk behind it

However, like any technology, biometric systems used in the fintech industry can carry certain risks. Some potential risks associated with using biometric authentication in fintech include:

  • Privacy concerns: Biometric data, such as fingerprints or facial scans, is highly personal and sensitive information. If not handled properly, it could be accessed by unauthorized individuals or used for nefarious purposes, such as identity theft or fraud.
  • Accuracy: Biometric systems are not always 100% accurate, and there is a risk that they could fail to correctly identify a person or mistakenly identify someone else as the user. That could cause inconvenience or frustration for the user, security breaches, or fraud.
  • Dependence: Relying too heavily on biometric systems for authentication can create a false sense of security and make it easy for attackers to bypass other security measures. If a biometric system is compromised or hacked, the entire system becomes vulnerable to attack.

One other possible risk related to the biometric system is its fallibility. According to an Software Secured in August 2022, when biometric authentication is used as a sole method of accessing a system or location, a failure in the system can cause significant inconvenience. This is because there is no alternative way to gain access. On the other hand, when biometric authentication is one of multiple options, such as using a fingerprint scanner, facial recognition, or a password to unlock a phone, a failure in one system can be bypassed by using another method. However, compared to the risks mentioned above, this is not a critical concern.

All in all, biometric authentication can provide many benefits in the fintech industry. However, it is critical to carefully consider the potential risks and take steps to mitigate them.

How to prevent this from happening

There are several steps that companies can take to prevent these risks from happening, which are:

  • Implement strong privacy and security measures: including encrypting biometric data, using secure servers to store biometric data, and limiting access to biometric data to authorized personnel.
  • Regularly test and evaluate the accuracy of biometric systems: This can help to identify and fix any issues with accuracy or performance before they cause problems for users.
  • Use a multi-layered approach to security: Biometric authentication should be just one part of a broader security strategy that includes multiple authentication methods and layers of protection. Doing so will reduce the dependence on any single authentication method and make it harder for attackers to bypass security.
  • Provide clear and transparent information to users: Users should be informed about how it will be processed and what to do if they have any concerns.
  • Follow industry best practices and standards: Companies should stay up to date with the latest best practices and standards for biometric authentication and ensure that their systems and processes align with these standards.

By taking these steps, fintech companies can reduce the risks associated with biometric authentication and ensure the security and privacy of their users.

Implement the right biometric authentication system with ASLI RI

An authentic biometric system is a technology that uses unique physical characteristics, such as fingerprints or facial features, to verify individual identity. It is highly accurate and can provide a secure method for identifying and authenticating individuals. If you are from the fintech industry and interested in learning about authentic biometric systems and their implementation, or if you are looking for the right biometric authentication system for your company, we encourage you to visit our website at www.asliri.id.

Last modified: January 19, 2023