Biometrics for Banking and Financial Services Market Trends

Growth Drivers

• Escalating financial fraud and cybercrime: The cost due to cyber attack is the primary driver for biometric adoption. The FBI’s Internet Crime report in 2023 reported that USD 12.5 billion loss occurred due to cyber threats, a significant portion from business email compromise and phishing attacks targeting banks. This has enabled a powerful, quantifiable argument for biometrics to avoid cyber frauds. Financial institutions are seeking solutions for one-time codes, strong passwords making for advanced biometrics to protect bother consumer and bank assets.
• Demand for frictionless banking: Nowadays people expect for instant results and transactions from their bank. As per the IIMB report in September 2022, nearly 280 million people have opened their bank account via online bank opening and online or mobile banking as their primary method. This demand has surged the adoption for advanced biometrics that enable instant logging and transaction approval without passwords.
• National governments driving public-private G2P payments: The national governments are driving the increase in bank-led biometric usage by linking public payments to biometric authentication. The G2P frameworks associated with the World Bank, and implemented by emerging economies such as Indonesia and India, require banks to verify recipients through fingerprints or iris scans at micro-ATMs. The implementation is at its early stages, and is expected to significantly expand and add to the surging volume of biometric transactions by the end of this decade. The trends signify the onset of tremendous opportunities for vendors supplying biometrics for banking and financial services.

Global Transactions for Biometric Digital Identity

Source: The Biometric Digital Identity Prism Report 2024

Challenges

• Escalating complexity associated with biometric data privacy regulations: A key challenge of the global biometrics for banking and financial services sector is the intensifying complexity associated with changing data privacy regulations from one regional market to another. For instance, the GDPR provisions, along with the UK Data Protection Act, have contributed to increasing the compliance costs for BFSI firm’s YoY. Additionally, the regulatory burden is detrimental to the cross-border payment providers reliant on biometric authentication for KYC, as it increases the risk of penalties.
• Lack of global standardization and interoperability: The lack of universal technical standards in one country differs in another country. This change in the market forces manufacturers to give country-specific variants, increasing R&D costs. Governments and cross-border payment providers lack interoperability delays in the creation of seamless global financial networks. Further, the initiative by the World Bank emphasizes the requirement for interoperable digital ID systems, noting that the issue of standardization is a major barrier in achieving financial inclusion and limiting biometric solutions.