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Technology in Banking: The developing role of biometrics



Technology in Banking: The developing role of biometrics

By Emilie Casteran, Head of Digital Strategy, Banking and Payment, Gemalto

In the past, technology that could identify us by our biometric data was something we only saw in science-fiction:from facial recognition technology used in Star Trek, to Marty McFly using his fingerprint to authenticate payments in Back to the Future. But over the last few years, developments in technology have demonstrated a world in which our face, voice, eyes and fingerprints can be used to identify and authenticate us.

Emilie Casteran, Head of Digital Strategy, Banking and Payments, Gemalto

Emilie Casteran, Head of Digital Strategy, Banking and Payments, Gemalto

With huge strides being made in biometric technologies, the end of the PIN and password could soon become a reality.Fingerprint authentication is already very common when unlocking our smartphones, while services like ApplePay and SamsungPay have allowed early adopters to pay for things just by tapping their thumb on their phone. But soon biometrics could be the way to secure other proximity payment methods, online/eCommerce payments and a wide range of financial applications.What’s more, the latest open banking initiatives and new regulatory frameworks, such as PSD2, are set to increase the pressure on financial institutions to ensure robust protection of customer data and funds. In addressing these challenges, biometrics can play a central role in the quest to combine security with usability.

Card Payments

Since Apple introduced the fingerprint sensor into the iPhone, some consumers have been enjoying the convenience and security of using their fingerprint to authenticate their payments. Now steps are already being taken to trial biometrics in card payments. One such development is the recent introduction of the biometric EMV card with fingerprint recognition technology. This replaces the traditional PIN code which, along with passwords,could become an outdated form of verification in the next few years.

Passwords are frustrating for the consumer; they’re easily forgotten, and we have too many to keep track of. Having your fingerprint linked to your bank card is not only convenient, but it provides a feeling of personal security that’s embedded into the payment method. As user data is stored on the card, not on a central database, customer details are protected if the bank was to suffer a cyber-attack. Likewise, if the card was to become lost or stolen, users can be safe in the knowledge that their fingerprint cannot be replicated. While the card is currently in trial stages, this is an indication of how biometrics can transform our financial services in the years to come.

But it’s not just about making payments. Biometric technology will have a major role to play in verifying user’s identities, enabling a new era of Open Banking and helping to prevent fraud.

PSD2 and Open Banking

Multifactor authentication will soon be a requirement of industry regulation. A crucial element of the impending PSD2 regulation, and something that’s critical to the Open Banking scheme that’s just launched in the UK,is the need for banks to provide ‘Strong Customer Authentication’ (SCA) to protect users against external threats whilst not compromising their experience. Banks will need to verify an identity using at least two different authenticators. The regulation states this as ‘something you have’, ‘something you know’ and ‘something you are’, which could be translated as your device, your PIN number and a biometric feature.

Since the introduction of fingerprint readers into phones, several leading banks integrated the technology into their apps. Now, the multifactor authentication requirements of PSD2 mean that all remaining European banks should at least be considering doing the same. By supporting the use of biometric authentication via a mobile device – whether fingerprint or other methods such as facial recognition – banks can provide a solution that combines security with usability, creating a better user experience. Most two factor (2FA) techniques currently send a special code to the user’s mobile phone to use in conjunction with a password. But just as someone could steal their password, a hacker could intercept a text, or spy on the phone. In comparison, a request to provide biometric information on a mobile device is much more secure.It’s also a much more convenient, seamless process when compared to the card readers and hardware tokens many banks still use to provide an additional security layer – where customers not only have to carry another device with them, but also end up manually copying one-time passwords to gain access.

Behavioural biometrics

There is also a role for biometrics in fraud prevention, but rather than use physiological characteristics like a fingerprint, banks can look at how consumers behave on a mobile app or website. These patterns include the way the user moves a mouse, types on a keyboard or swipesa mobile screen. We all have distinctive ways of interacting with our devices, clearly distinguishable from the behaviour of a bot.By combining machine learning, artificial intelligence, and behavioural biometric authentication it’s possible to intelligently and automatically identify any unusual behaviour, requesting an additional layer of authentication if necessary.

Banks must acknowledge that implementing biometrics as part of a wider authentication process is the key to balancing security and convenience. Once they do, this is where the opportunity for further innovation lies. It provides banks with the differentiator which they need to maintain a competitive edge and deliver on the promises of open banking in a convenient way. And while fingerprint recognition is the most common use today, we’re already seeing major strides in other biometric identifiers, from facial recognition in the new generation of iPhones, to voice or eye analysis.

Clearly, biometric technology is no longer out-of-reach and represents a new reality for security in banking. The revolution was kick-started by the introduction of fingerprint recognition into our phones and is moving into a new stage with the development of biometric EMV cards. Banks must be brave and disassociate themselves with legacy systems of authentication, as well as recognise that biometric technology helps construct the perfect balance between improved security and an uncompromising user experience.


Where are we with Open Banking, and should we be going further?



Where are we with Open Banking, and should we be going further? 1

By Mitchel Lenson, Non-Executive Chairman, Exizent

Open Banking has the power to revolutionise the way we manage our money, but most (65%) consumers are still not aware of it, while many financial institutions continue to treat it as an obligation rather than an opportunity.

For Open Banking to truly reach its potential, consumers need to have more trust in its benefits. However, this will only happen if banks and other financial institutions start to embrace it, rather than simply accept it.

Covid-19 has proven to banks that digital banking and open finance innovation is not simply a ‘nice to have’. It is vital for their own survival. With so many challenger banks now coming into the market, many of whom have entirely digital models and therefore invest heavily in technology, banks are starting to become aware that if they don’t embrace it, they’ll get left behind.

So, fuelled by a mixture of competition and Covid-19, banks are starting to realise that Open Banking is not about giving away valuable data, but it is about collaborating with third party fintechs to explore the endless opportunities data sharing can bring – to all sides.

By making open finance easier for developers, banks can not only save time and money by improving their own services but help create useful solutions that add real value for their customers.

Open Banking for all?

There is one, yet untapped area of consumer finance that could be immeasurably improved by Open Banking, and that is estate administration.

Mitchel Lenson

Mitchel Lenson

Recent research from Which? found that many executors contend with delays, errors and poor knowledge from their banks during the probate process. Our own research shows that most legal professionals admit the process does not work as it should, and the time it takes to complete probate is unacceptable.

Like the Which? survey, we found that the main issue is the administration involved, with most legal professionals saying that the time it takes for financial institutions to get back to them with the information they need is the main cause of delays.

Given that the system is not working for consumers, something clearly needs to be done. The good news is that the technology and data is already available – we just need to harness it to create a better system.

That is why we are developing the first ever platform to connect executors, legal professionals, and financial institutions to create a better, quicker, and more secure probate experience for everyone.

Our first release of the platform – a bespoke cloud-based solution to enable legal services firms to integrate directly with financial institutions making information gathering and processing more straightforward – was released in 2020. We are now building on that foundation to accelerate our development work with financial institutions to deliver additional value for all sides.

We also see huge potential in working with banks to utilise the digital financial infrastructure, powered by Open Banking, to improve things even further. But there is one, fairly sizeable issue – currently, Open Banking consent ceases at the point of death.

Is it time for legislative change?

Open Banking is not as open as is should be for those who can give consent, so we are certainly some way off from Open Banking for the deceased.  However, the more that banks acknowledge Open Banking and its potential and are prepared to collaborate with third party fintechs to develop better experiences for consumers, the more likely we are to get to a point where we can tap into that potential to improve things for the bereaved.

Many of the problems – highlighted by Which? – that consumers face when managing someone’s estate could be reduced significantly if open finance continued to apply to the deceased.

Open Banking provides a huge opportunity to speed-up and reduce friction for loved ones faced at some of the hardest moments of their lives, and there is a strong argument here for the current position to be reviewed to enable better access to a deceased person’s assets.

With our current platform, we are showing how technology is playing an incredibly significant role in dealing with the complex, tangled process that is probate and the potential of open finance in radically enhancing what we are already doing cannot be understated.

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What will become of our banks and their channels in 2021?  



From distrust to love/hate – are fintechs and banks starting to get along?

By Mark Aldred, banking specialist at Auriga

As we embark on the new year, 2020 will hopefully become distant but sobering memories, it is time to step back and consider the lessons learnt and look to the trends likely to emerge in the banking sector in the year ahead. To stay relevant and to differentiate themselves in the current digital age, banks need to demonstrate a solid understanding of the current landscape and stay aligned with customers’ changing habits and expectations. COVID-19 may have accelerated trends that were already in play but whether they continue at the same pace is yet to be decided.  It will be those that evolve rapidly that will get ahead and stay ahead. More than ever, it is not only about competitive advantage but, for some, it may be about survival.

Sharing ATM infrastructure

ATM infrastructure sharing is an active trend in markets such as the Netherlands, Belgium, Sweden, Finland, and Indonesia. In Belgium, an initiative known as Batopin, means that a network of bank-neutral ATMs, previously managed by its four biggest banks will from 2021 run on a single software platform. In the Netherlands, a similar exercise started two years earlier. There the major banks have merged their ATMs under the ‘Geldmaat’ label. These bank-neutral ATM estates are one of the responses to challenges of owning ATM and branch estates in a world where banking is more accessible and competitive than ever. This is one way banks can guarantee continuous access to cash to their customers without the cost burden of running channels, which their new competitors do not even offer. Through pooling, the industry landscape is changing, and banks’ costs are reducing.

Other technology-led approaches are delivering value, including increasing adoption of cloud-based technologies, removing the need to rely on massive on-premise infrastructure, skills, and services.  The pooled ATM business model provides many benefits and as discussions progress in different markets, banks, and ATM deployers will certainly be watching with interest the progress made in Indonesia and Belgium, when considering next steps. There needs to be more use cases that prove this model can indeed reduce costs while maintaining access and improving customer experience.

Cashback for all?

Loss of access to cash when ATMs disappear has the potential to be a national scandal and an embarrassment to ATM deployers. Offering cashback at retailers of all sizes is one way of softening the blow. In Germany cashback limits and the requirement to make a purchase have long been lifted. Whilst in the UK new schemes to address this are on their way as we move into 2021, the government revealed that consumers received £3.8 billion of cashback when paying for items last year – making it the second most used method for withdrawing cash in the UK behind ATMs. This suggests that properly implemented cashback, with support from retail, could help reverse the unwelcome reductions in the accessibility of cash in remote and rural communities in particular.

That said, it is important not to fall into the trap of shifting the burden onto small businesses. They are already under their own pressure because of changing consumer behaviours and, of course, the pandemic. The benefits to the retailer should be more footfall and lower costs of cash handling. Small stores full of consumers only wanting access to cash for which the retailer cannot charge is an outcome that will not help revive communities.

Community-led initiatives

Bank branch closure rates and ATM losses keep on accelerating but we have not reached peak yet. It is predicted that there will be a continued decline in the penetration of UK branches over the next four years.

To compensate for the loss of ATMs, LINK (UK’s national switch, owned by the ATM deployers themselves) has founded a delivery fund to enable all communities to request help with accessing cash. Any member of the public can get in touch directly with LINK or via their MP or local council to argue the case for an ATM to be sited (or re-sited) in their area. This is bringing out the best in some communities and several have already successfully argued that they need an ATM.

Equally, there are regional and national initiatives aimed at re-banking areas where legacy banks cannot profitably operate a branch (or even an ATM). Many of these are attracting interest and investment but the road is long, and the re-opening of branches or ATMs in many remote communities will be made to wait while some of these bodies build their alternative banks. The barriers to entry are vast, not least the requirement for a banking licence, which means the model favoured by many cannot be expected to be live much before 2024.

So, while bank branch closures continue, and alternate providers build their propositions, the only way to mitigate and manage this is to consider new, lean, and agile models. The next generation bank branch must be cheaper to run, smarter, smaller, automated, full-service, and available 24/7 to pay its way in the community.

A great example of how this could look is the way Millennium BCP in Portugal has deployed new model branches built around their MTM devices (Millennium Teller Machine).  As part of its long-term plan to modernise its business and balance the books, Millennium recognised that many branches built on the legacy model could not support themselves. They recognised that consumer behaviours and habits meant that new sites should be considered for their new branch models. So, it created a new kind of customer-centric branch format for the future – a 24/7 branch supported by remote banking overnight. This resulted in greater footfall and, before COVID-19, the new style branches delivered productivity gains and increased deposits. As transactions were managed by personnel by day and remote teller assistant by night, the branch was cheaper to run – this model is now deployed around cities in Portugal to improve customer loyalty and retention score.  As we emerge from the pandemic, further development of this model to accommodate new behaviours are expected to achieve great results for Millennium and its customers, who rate in the best for customer service in Portugal.

If banks do not produce lean, smart, remote, around the clock branches somebody else will – whether it be community-based or even independent ATM deployers – the principle of white labels is absolutely part of this new future.  If this model is adopted, then in future it is also possible that we will see branch sharing.

In the UK there are already Business Banking Hubs set-up, a shared space providing business and corporate customers more flexibility to manage their day-to-day finances. In shared branches the user experience can “follow the customer”. Sharing the space with a third party commercial or community enterprise should lead to an upswell in community hunger for this.

AI continues to thrive

Artificial intelligence will continue to be a key business investment as financial institutions seek out amplifications of the technology. In 2021, expect the continuing slow adoption of AI to do repeatable and predictable processes.  Already AI is deployed to provide cash predictions to forecast when and where cash is needed. Predictive tools are time and cost-effective, they can also be used for preemptive equipment maintenance. This facilitates the scheduling of engineering calls before a failure, improving availability, and reducing costs. We may also begin to see AI being used to monitor the mood of customers using facial recognition. This could allow banks to determine how to address the customer, what services they should promote, and when.

What next for tele-banking?

As has always been the case, the customer journey cannot be neglected. Banks need to have a good channel mix; a digital platform is not enough as they are susceptible to IT disruptions and failures. Tele-banking has always proven to be an important lifeline and back-up. Without it, customers could become disenfranchised.

Over the years, the banking experience has changed through the adoption of technologies designed to reduce costs and increase efficiencies.  In fact, the unintended consequence has been that they have become more and more impersonal. Over 50 years ago, ATMs took us outside the branch. Tele-banking provided customers with remote interaction. Most recently, internet and then mobile banking mean that some demographics never engage in person with their bank and the distance between the supplier and customer even during engagement can literally be thousands of miles. This lack of human touch has reduced customer loyalty.

On the topic of channels, like many others, a first in and first out policy is seldom the right one. Banks need to evaluate each channel and see its value to customers and provide choice. Older channels, such as tele-banking, should not be the first to disappear, and in fact it could see a revival alongside video-banking in the new 24-hour branch model.

In fact, as online banking gives way to a mobile banking one could argue the case that this is the channel that might start to disappear sooner. Channel choice will differ by generation, demographic, and other factor but it remains key that choice is available and that there is always a reliable alternative available.

Branch and ATM, marriage, or divorce

Legacy ATM infrastructure needs an upgrade. Without it, the channel will not be able to modernise and play a role in the next generation of delivery channels. ATMs and assisted service devices offering a full range of banking services, not just cash, need to be in the mix. Automating all teller functions using self-service technologies, supported by video- and tele-banking, is likely to accelerate.

2021 is all about making consumers’ lives easier as they decide for themselves how they want to engage safely with their banks. Each customer journey should be able to become bespoke. Access to cash is an on-going issue but the stakeholders will need to work harder than ever to find viable solutions given the impact of COVID-19 across all industries.

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Japan PM Suga’s cellphone cut call adds to BOJ’s headaches



Japan PM Suga's cellphone cut call adds to BOJ's headaches 2

By Leika Kihara and Kaori Kaneko

TOKYO (Reuters) – Prime Minister Yoshihide Suga is making life tougher for the Bank of Japan as carriers respond to his calls to cut cellphone charges, a move seen as adding deflationary pressure on the country’s already weak economy.

Suga has publicly said he believes Japan’s cellphone fees are too high and that carriers are a monopoly, a message seen as resonating with younger voters.

Nodding to the pressure, major Japanese carriers NTT Docomo, KDDI and Softbank announced plans to cut charges by up to 20% from as early as March.

That could push down the core consumer price index, which fell 0.6% in January from a year earlier to mark the sixth straight month of falls, by as much as half a percentage point, analysts say.

The move highlights how deflation remains the BOJ’s primary headache, even as its U.S. and European peers face communication challenges posed by recent rises in inflation.

It also shows how in Japan, even seemingly straightforward government decisions can have vast ramifications for the BOJ, given the spectre of deflation.

“Unlike in the United States, government policies work to push down inflation in Japan,” said Mari Iwashita, chief market economist at Daiwa Securities.

“Japan is a country where companies struggle to raise prices because consumers are so sensitive to price hikes,” she added.

(Graphic: Japan is facing rising deflationary risks,

(For an interactive graphic on Japan’s core consumer price index, click here

Cellphone fees have a big influence on Japan’s price gauge because they have the fourth highest weighting among the 523 components making up the core consumer price index (CPI).

The resulting fall in core CPI would mostly offset an expected boost from a recent rise in energy costs and the base effect of last year’s pandemic-induced sharp declines, analysts say.

Excluding any impact from cellphone fee cuts, analysts expect core consumer prices to start creeping up by mid-year but rise only modestly thereafter.

“Bottom line, Japan’s trend inflation is quite weak because demand is sluggish,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

To be sure, lower fees would give households money to spend on other items. Fees for a 20-gigabyte plan in Tokyo are highest among the world’s six major cities and triple the sum in London, according to a Japanese government survey last year.

But data so far paints a bleak consumption outlook.

Bank deposits jumped a record 15.5% in January from a year earlier to 827 trillion yen ($7.83 trillion), 1.5 times the size of Japan’s economy, as households save rather than spend.

Real wages fell 1.2% last year, the fastest pace of drop since 2014. Nearly three quarters of firms have no plan to offer blanket base pay hikes at this year’s labour talks, a recent Reuters poll showed.

Takumi Harada, a 27-year-old engineer, says he would consider switching plans to reduce the 6,000 yen in smartphone fees his family pays each month.

But he has no intention of spending the extra money on other items. “I think I’ll just save,” he said.

($1 = 105.5800 yen)

(Reporting by Leika Kihara and Kaori Kaneko, additional reporting by Kentaro Sugiyama; Editing by Raju Gopalakrishnan)

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