What was once a simple trip to the bank or call with an insurance agent has become much more complicated. The Banking, Financial Services and Insurance (BFSI) Industry is experiencing heightened security threats that have increased the need for AI and facial recognition technologies.
To meet threats head-on, requirements for fraud prevention and identity authentication have been strengthened. Financial institutions, banks and insurance providers are incorporating AI technology to meet new know your customer (KYC) and anti-money laundering (AML) standards. AI technology can be used to prevent payment fraud, deter financial crimes and enhance customer identification and authentication processes.
These heightened fraud prevention requirements have collided with the logistical restrictions imposed by the COVID-19 pandemic. BFSI operators need to rapidly digitize core fraud prevention processes and integrate these measures into digital and on-premise channels.
With biometric technologies like eKYC (electronic Know Your Customer), operators can add an additional layer of fraud prevention while riding the wave of rapid digital transformation of all core transactions and processes. Remote services have also increased for everything from account, credit or insurance policy application, to transactions and contactless customer engagement and support. Financial institutions can implement eKYC measures to step into this remote future to be more secure and COVID-safe.
KYC is a system of guidelines that helps ensure banks and other financial institutions are protected from fraud. It utilizes safeguards like passwords and two-factor authentication. The FINRA ‘Know Your Customer’ Rule 2090 ensures brokers keep records of essential information about each client and verify the identity, suitability and risks involved with maintaining a business relationship. Some major financial institutions spend up to $500 million annually on KYC and customer due diligence.
KYC is vital for protecting financial institutions and customers. It’s also valuable for tracking money introduced into the economy based on who and where it comes from. As financial institutions face greater security risks, eKYC has grown in popularity with even more benefits to customers and brokers.
eKYC enables the traditional KYC process to be more secure, quicker and performed remotely. It does this by using digital identification and biometric tools such as facial recognition. Benefits of eKYC include:
To ensure that eKYC processes meet the same safety standards as traditional methods of identification and face verification, companies must implement electronic identification processes that feature high levels of safety and reliability.
Let’s take a look at the three main biometric identification technologies, or vision technologies, used in eKYC to protect both customers and brokers.
Financial institutions are using increasingly advanced technologies to ensure the security of their assets. The three main vision technologies used in eKYC processes are:
Each of these three methods have their strengths. The chart below further breaks down how the solutions stack up.
Iris recognition can be somewhat fast and highly accurate but only select expensive cameras are designed to perform these tasks. There are more cameras on the market that can be tooled to perform facial recognition and identification than iris recognition. Beyond the hygiene concerns associated with fingerprint verification, dirt or oil from fingers can interfere with the efficacy and integrity of sensors. Facial recognition is recognized as the superior method of vision technology because it is affordable, hygienic and flexible.
With this comparison in mind, let’s dive deeper into exactly how facial recognition technology works to secure BFSI transactions and processes.
Facial recognition is a biometric technology that identifies facial vectors and features and matches them to a pre-enrolled individual or to a scanned proof of identity. The tool is able to detect a face, extract its features and reference it with a database for recognition. Recent advancements of AI technologies based on neural networks and inference models allow the software to create even more accurate facial recognition models.
In the case of the most advanced technologies like FaceMe®, the SDK can be installed on a wide range of devices equipped with a camera for edge-based facial recognition. Live facial detection from the device’s camera is transformed into a template. A template is a small encrypted file encoding vectors unique to each face. This template can then be compared to the template on file or one captured live from a subject’s ID. Once the identification process is complete, the software allows the financial transaction to begin.
Block listed & Stranger Prevention
For such an advanced process, the platform requirements to run facial recognition for eKYC are quite broad. A wide array of eKYC and other BFSI authentication use cases require facial solutions that can be deployed across multiple software and hardware, including:
With such a versatile set of installation options, facial recognition technology will be instrumental in strengthening security measures in many BFSI settings. Let’s walk through a few of the most transformative examples of eKYC.
Facial recognition is key to enhancing various in-person and online use cases for eKYC.
When a customer first entrusts a financial institution with their money or information, they expect the highest level of security to keep it safe. Banks can establish this trust immediately by implementing eKYC during the customer enrollment process. This is likely the broadest use case that cuts across the entire BFSI industry. It is relevant for opening a bank account or applying for a loan, or credit card.
This solution can speed up the process in which a customer’s identity gets cross-checked with a number of other pieces of information from other financial, public and employment records.
In opening a bank account, facial recognition would factor into this process as follows.
This process applies to banking but opening brokerage or insurance accounts can also be enhanced with a similar eKYC solution.
Financial services customers were already going remote with mobile platforms. It’s been reported that 80% of Americans say they can now manage their money entirely without a bank branch, expressing a preference for contactless digital solutions. But with decentralized access to servers comes increased risks. Biometric verification diminishes concerns about mobile portals being a more vulnerable access point. With less of a chance of sensitive information being intercepted, institutions can expand the scope of their mobile financial solutions.
With edge-based facial recognition deployed on mobile devices, the information is embedded in the local device. This increases precision and eliminates delays from cloud processing or large file transmission. Only a small encrypted template is sent for validation with the database’s encrypted templates hosted on the financial institution’s server. This makes the operation more secure and can be completed within milliseconds.
Customers will log into their bank app with their ID and password, scan their ID and take a selfie for anti-spoofing. Once their ID is combined with a physical biometric (like a facial template) for identification, the remote verification is complete.
Mobile eKYC solutions allow existing customers to move beyond regular banking transactions. Customers can remotely and securely apply for additional products like credit cards, loans or securities accounts. They can also use tablets and other mobile devices within physical branches, which would be more secure with biometric verification.
Many customers use browsers on personal laptops and PCs to conduct banking or brokerage transactions and apply for various financial services and products. Facial recognition technology can make these arenas more secure.
Imagine a user wanted to open a brokerage account via their PC. Their identity can be verified through capturing facial vectors and ID using their device’s webcam. The system can quickly process the data on the cloud using the same encrypted templates process. Biometric verification links the user’s identity to the new account and ensures it is secure, even though the entire process happens off-premise.
Despite the rise of mobile banking and operations, ATMs are still essential when it comes to making certain quick in-person transactions. Facial recognition technology opens up the possibility for a cardless ATM transaction. Once a customer’s face is captured by the ATM camera, the facial recognition system looks for a 1:1 match within the database. The customer then enters their PIN for a second authentication and their identity is confirmed. Then they can begin the transaction. No need to carry the ATM card or even take out a wallet.
As banking and other financial services activities are increasingly performed remotely, so is the use of customer service. As support conversations often involve the exchange of sensitive information, it is imperative to verify a customer’s identity. The security questions typically asked by customer service reps at the beginning of a consultation are often predictable and easily available to someone seeking to commit identity fraud. Facial recognition technologies are helping protect sensitive information across virtual customer service interactions.
First, a user contacts financial customer service via a video call and gives their consent. Then, their facial features are extracted from the camera and matched with the biometric profile already in the institution’s database. Once the user’s identity is confirmed, staff can provide customer service knowing they are conferring with the actual account holder. Facial recognition is key to conducting eKYC measures in these scenarios, allowing these conversations to continue remotely.
However, some BFSI customer service interactions are still done in person. Banking transactions at a branch’s teller window can add an additional instantaneous layer of safety through eKYC facial recognition technology, while brokers can use eKYC verification on their tablets or PCs to quickly onboard customers or perform an identity check. Both of these in-person interactions can be made faster and more secure through the use of eKYC.
Financial processes are moving further into the digital realm, but physical banks and financial institutions are still vulnerable to threats from people entering a branch. Banks often have lists of banned individuals to identify known bad actors or enemies. Facial recognition can be an impactful tool to enable security to act more swiftly in response to a threat. Even before a security guard might see them, cameras fitted to perform facial recognition on ATMs or in bank branches can identify people on the ‘banned’ list and confirm their identity in an instant. Then a security guard can be notified and act accordingly.
We can take this further by imagining an entirely integrated branch security system using eKYC across multiple AIoT devices. A local workstation at the branch would connect to the clerk’s POS terminal and bank employees’ tablets or PCs for facial and ID capture. The information would also be linked to IP cameras for security surveillance. Local ATMs and remote verification as part of secure mobile transaction and application processes could even be incorporated to extend the reach of a single branch’s security. eKYC builds upon the web connectivity of IoT devices with machine learning, creating a more secure physical banking location at every point of interaction.
Facial recognition can be implemented in so many ways and is poised to become an integral part of the BFSI sector.
With the continued increase in identity theft and fraud, considerable losses loom for banks and other financial institutions that don’t follow KYC standards. eKYC is a hot topic in the industry. In the US, the BFSI industry is already facing mounting federal and state-specific regulations. Facial recognition can empower these institutions to more effectively secure their assets and information.
Although facial recognition can be held back due to the current lack of consistent regulations, this is starting to change. Facial recognition technology is already being used in the US to unlock smartphones, protect hotel guests, aid in forensic investigations, streamline airport check-in processes and even help the blind understand social situations more easily. Other parts of the world with more centralized regulations, including a number of countries in Europe and Asia, are rapidly implementing facial recognition for use cases like eKYC.
Costs of facial recognition deployment are quickly decreasing. Cheaper tablets, smartphones, AIoT hardware and workstations are allowing businesses in BFSI to digitize outdated processes and speed up routine in-person interactions. These processes cannot be improved fast enough.
Traditional verification and authentication methods like passwords or even dual authentication are easily compromised. Facial recognition is the best form of security for BFSI and there is no doubt it will become prevalent in the near future. It is the most secure and sophisticated verification method to protect against biometric fraud.
The pandemic has accelerated the need for more remote and secure solutions in BFSI. Financial institutions of the future can be empowered with eKYC technologies that will provide benefits to enhance security, fraud prevention and authentication. With mobile eKYC tools, insurance, loan and credit card applications can be streamlined and financial institutions can extend the reach of their customer service without compromising private information.
Facial recognition tools like FaceMe® provide the opportunity to strengthen mobile access points, streamline account creation and secure physical branches through highly accurate verification. Financial institutions will continue to incorporate biometric solutions as the need for a more flexible and secure banking experience continues to grow through 2021 and beyond.
For a full overview of facial recognition, how it works and how it can be deployed, read Edge-based Facial Recognition - The Ultimate Guide.
For how is facial recognition used in 2021, read Facial Recognition – How is It Used in 2021?
Our team of experts will be happy to answer your questions and schedule a demo. Free evaluation versions of the FaceMe® are available to qualified contacts.