Fintech

The Role of Biometric Authentication in Fintech Applications

Published

6 months ago

27 July, 2024

The Role of Biometric Authentication in Fintech Applications

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.

TNGlobal INSIDER publish contributions relevant to entrepreneurship and innovation. You can Submit your original or published contributions subject to editorial discretion.

Ethical Considerations in Using Customer Data

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

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Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

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Aveni Assistance
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Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”