Is Biometric Authentication a Revolution in Fintech Security?

Biometric authentication is on the rise in 2024, with many digital finance companies and service providers claiming it for their business. For example, according to The Coolest Gadgets, worldwide revenue from the sales of biometric authentication systems reached roughly $15.1 billion in 2023. 

In this article, I seek to explore what biometric authentication means for fintech businesses in the smaller segment. I will look at biometric authentication as a phenomenon that shapes the industry’s trends, its importance, examples, and application, and briefly discuss the KPIs for its implementation. 

I have practical experience implementing biometric authentication, and we also created a webinar for DashDevs in addition to this article. You can listen to it while you read, but note that some of the information might differ between the two sources. 

That being said, brace up! Let’s take a closer look at biometric authentication and figure out how big of a game-changer it is. 

What is Biometric Authentication 

First, let’s bring here the biometric definition as a technological innovation. To explain it simply, biometric authentication is a method of identifying customers based on their unique traits, such as facial features, fingerprints, etc. It does two things first of all: 

1. Allows customers to ease their mind by not memorizing complicated passwords
2. Upscales the apps’ security as it takes the unique features of a person that are impossible to replicate 

This makes biometric authentication insanely popular among users and drives its CAGR up to an astounding 14.1% in 2027. 

This very simple biometric definition covers everything you need to know to understand this technology. However, this technology can also differ depending on its biometric authentication methods. 

Biometric authentication methods

In this article, I will discuss three of the most popular biometric authentication methods. The technology is not limited to exclusively these methods, but these are the most widely used ones. 

1. Biometric fingerprint authentication. This biometric authenticator method scans the fingerprint patterns of the user to verify their identity. In many cases, the scanner that’s being used as a biometric authenticatior is provided by the smartphone of a user. For example, Google Pay relies on biometric fingerprint authentication for transactions. This application uses the described biometric authentication method for online payments, money transfers, and NFC payments. New hardware on the latest smartphones allows the implementation of biometric authentication into fintech solutions to use fingerprint as biometric authenticator. Due to this, many challenger banks also adopted this method for money transfers through their software.
2. Facial recognition. It’s a biometric authentication method like this utilizes the ability of certain hardware to perform facial scans. It reads the user’s facial traits to determine the user’s identity and can be sometimes paired with short passwords for additional security. Some services, such as Apple Pay, implement facial recognition into their everyday identification process. 80% of government structures also use this method. For example, the Ukrainian government app Diia is a software that contains individual personal documents. This app uses facial recognition to identify a person for a digital signature. There are more applications that use biometric authentication, such as BioID, which enables users to log in to different services using their face. Sometimes, this feature is being used for digital wallets to confirm transactions and view card balances. They can also be used to enable innovative features such as tap-to-pay.
3. Iris scanning. This biometric authentication method utilizes specialized hardware to capture a detailed image of the user’s iris as a biometric authenticator. The unique pattern of the iris is an inherent part of each individual’s eye, much like fingerprints, and serves as the basis for identification. For example, PayEye is a European company that uses iris scanning to enable authentication for payments and transactions. It enables fast and secure transactions and improves customer experience by recognizing patterns in each individual’s iris. This application also enables online biometric payments with the same upscaled security level. It has versatility in various light conditions, which sets it apart from facial recognition, which requires good lighting.

Other types of biometric authentication techniques include voice recognition, retina recognition, DNA matching, behavioral biometrics, and signature recognition. I also discuss these methods extensively in our webinar, so if you’re interested in learning more about biometric definition, watch it. 

Other types of biometric authentication techniques include voice recognition, retina recognition, DNA matching, behavioral biometrics, and signature recognition. I also discuss these methods extensively in our webinar, so if you’re interested in learning more in biometric definition, watch it. 

Why Biometrics Matter for FinTech Businesses 

According to the statistics, biometric authentication is quite popular and spreading quickly, especially across the fintech sector. Its market value rose to 2,209 million UDS in 2026. It vastly depends on the factors that set biometrics apart from other technical methods of authentication. I have worked with several methods during my hands-on practice and encountered three main differences that take biometrics from good to great. 

Enhanced security

So, the biometrics data definition basically means that is difficult to replicate because it is unique for every user. Unless the software is faulty, biometric authentication should have the highest biometric security rate among other methods for user verification. For example, secure authentication can be up to 99.97% accurate with the facial recognition method because by the biometric data definition, this information is secure.

The risk of information leakage or loss with the current biometric data definition is also impeccably low. Biometric information is inherent to a person, it is really hard to fabricate data such as face structure, fingerprints, etc.

Other methods, such as passwords or PIN codes, are still replicable and do not provide such a high-security level simply because they can be tracked, hacked, or, in extreme cases, even guessed. To prove it, 30% of adults in the US experienced data breaches because of weak passwords. This poses a big threat and causes losses to the fintech sector, and in 2023, the total number of losses due to data breaches amounted to USD 4.45 million.

Convenience 

Biometrics improves user experience due to the simplicity of biometric identification. For example, behavioral biometrics wouldn’t need a user to intervene as it can track users’ behavior on its own. The biometric fingerprint, facial recognition, and biometric authentication techniques can take just a second of users’ time but provide valuable biometric information. 

Biometrics clearly outperforms bulky passwords, which require effort to memorize and manually enter. But even more than this, biometrics are fast and can take just a few moments to complete. Passwords usually require more time to process, and PIN codes, while faster, still are a bit behind biometric identification. 

Improved UX

This biometric security measure is often faster than typing and, therefore, less annoying for customers. With biometric authentication, they can feel like it’s easy to complete this step of the process and intuitively understand how to do it. 

A recent study revealed that 7 out of 10 people are annoyed by the necessity of entering their passwords, which is why new opportunities for enhanced biometric security and authentication have started to appear and quickly spread across the market. 

Biometric Applications in FinTech

In fintech, biometric authentication can be used for different types of activities. In our webinar and in this article, I cover the most popular ones that I have personally seen, worked with, or otherwise encountered in my practice. 

• Log in: Payment apps often use facial recognition or fingerprints to authenticate a person when they log in. If you’re a user of any challenger bank or just a bank app, you should be familiar with this feature, as it is highly distributed among many fintech companies worldwide. 
• Payment: Some applications also use facial recognition, fingerprints, voice recognition, and other biometric authentication techniques to identify the person while the transaction is being issued. Again, most iOS or Android operating device owners should recognize the familiar pattern of looking at their screen or pressing the fingerprint scanner when trying to make an online payment or buy something with an NFC chip. 
• ATMs: This is something straight from the future that is being delivered to our doorstep. An accessible ATM with biometric scanners could eliminate the need for PIN codes and make everything work faster for both the customer and the bank. 
• Healthcare finance: In certain cases, biometric identification can be used in healthcare to identify the patient and provide them with all accessible information for their account, such as their conditions, meds, appointments, etc. 

Examples of biometrics in fintech 

1. Bank of America offers fingerprint and facial recognition as login options for their mobile banking app. This solution optimizes their UX, allowing users to securely access their accounts without needing to remember complex passwords.
2. Wells Fargo utilizes voice recognition for customer service interactions. I briefly mentioned it in the article. As I stated, a short security check using the customers’ voice allows them to connect to a representative for secure account assistance.
3. HSBC implements facial recognition as an alternative login method for their mobile banking app to enable users to access their accounts faster and more securely. 
4. Santander is one of those apps that uses fingerprints for both login options and transaction verification. Additionally, some Santander ATMs utilize fingerprint scanners for secure access.
5. Aetna is a major health insurance provider in the US. Its mobile app incorporates fingerprint recognition for secure login and access to personal health information. For users, it means easier access to claims, deductibles, and seamless access to digital ID cards without needing to remember any passwords whatsoever.

Step-by-Step Guide to Implement Biometrics into Fintech

Implementing biometric authentication into a FinTech app would only enhance its effectiveness. There are many reasons why, and I have already discussed many of them in this article. Biometric authentication seems like the future and will soon be a prevalent way of identifying customers and verifying identity. Statistics only prove this. 

Source: https://www.coolest-gadgets.com/biometrics-statistics/ 

So, let’s discuss how you can integrate this software solution into your fintech application! I have broken down this process step by step. 

Biometric data capture

Start by choosing the biometric modality, whether fingerprint, facial recognition, voice recognition, etc. It’s best to base your choice on security needs, user experience, and device compatibility.

The best part is that you don’t need hardware as the application can rely on the hardware in the smartphone or other device it is being installed on. Do not forget, however, to inform users that their biometric information is being collected and let them know how it will be used. 

Data processing and storage

Your most vivid concern should be the processing optimization. Make sure that the data is optimized for accurate identification. It would be possible to extract unique identifiers from the biometric data for comparison during authentication.

Data storage is a separate issue. Of course, you should store it in an encrypted format, using practices that are compliant with fintech security standards. 

Authentication process

In many cases, the more, the merrier. Notice how some applications ask you to provide more information for two-factor authentication? This would be a great solution for biometrics as well. While exceptionally secure, it’s not flawless. So, it is recommended to establish a threshold for accuracy during authentication. If the match falls below the threshold, additional authentication factors might be required (e.g., password, one-time code, or PIN).

Integration with existing systems

Try to utilize the relevant APIs provided by the chosen biometric technology provider. Fintech is often all about integrations and the ability to cooperate, and it is important to integrate this part of your software as seamlessly as possible. We have experience with over 70+ vendors that we have integrated over the years of our practice. We know that it will ensure secure communication between the new system and your application’s backend so that all the data stays secure and exchange is performed with no safety risks.

User interface design

The whole point of biometric authentication is to enhance user experience, so I think the user interface is also quite important for this feature. I recommend you design an intuitive interface that would guide your users through the capture clearly and transparently. Not everybody trusts the biometric system, unfortunately, so think also about providing alternative login methods should your customer want to use them.

Testing

Finally, the most important part in my opinion. Testing is crucial for biometric authentication to work right. So, make it rigorous to ensure that your system performs equally well and accurately under any circumstances.

Remember to match the data collection, usage, and storage to the regulations in your region as well.

KPIs for Successful Implementation

Based on my experience, it is always important to track how well your new integration is performing. 

So, I believe it would be productive to perform a cost-benefit analysis a few months after you integrated the system. This metric would allow you to see how well the system is performing by analyzing the costs you spend on implementing it and the benefits you get from it actively performing. If you see that the system falters in delivering desired results, see what can be revamped to make it more efficient. 

The payback period is something you can use even before you implement this solution. You could calculate the risks by estimating the time biometric integration would need to recover the initial investment costs. 

A third metric that I propose is the rate of return, which would be calculated using the annualized cash flow generated by the benefits this solution delivers and investment costs. Here, for example, the benefits would be reduced risks, fraud, and identity theft. 

The Future of Biometric Authentication in Fintech

As I stated before, I believe biometric authentication to be the future of fintech. It has such advanced methods as iris scanning or behavioral biometrics. According to everything stated in the article, it would be prevalent on the market due to several factors such as its benefits that include enhanced security, convenience, and improved UX. Along with this, market conditions are really acceptive for this technology, with people vastly being annoyed at passwords and ready to accept new and more efficient forms of authentication. 

More importantly, this technology, albeit relatively new to the world, has already outperformed the traditions and entered most of the apps we use today. It is incredibly accurate, and low-effort for users, and around 72% of consumers chose it over traditional methods. 

Implementing such a technology would most likely upscale your fintech business, but as with everything, biometric technology should be treated carefully. Approach it responsibly, ensure that it’s thoroughly tested, and you should enter the world of fast-processed transactions and much more secure log-ins.