Banking, Biometrics and the Shift to Cryptocurrency

August 25, 2022     |    5 minute read

Banking, Biometrics and the Shift to Cryptocurrency

August 25, 2022     |    5 minute read

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We love to bank and shop online. If there is virtually anything that you want or need, it’s only as far away as a few taps on your smartphone. Within a day or two, or sometimes hours, items can show up at your door. Online shopping convenience is now a way of life.  

Retail shopping isn’t the only aspect of our life that is easier now, thanks to the internet. A few taps of the screen can open bank accounts, apply for home mortgage loans, and even get a car delivered to your door. 

Biometrics has helped tremendously with the online shopping experience. Years ago, borrowing money or opening a bank account meant traveling to the bank to fill out a paper application. In-person identity verification was the de facto authentication method. Now, you can fill out an online form, take a selfie and secure a new bank account, apply for a loan – or just get access to your financial assets.  

Behind the scenes, biometric platforms ensure that your documents aren’t fake or altered and that your selfie image matches the image on your identifying document. The best biometric platforms add a second or third biometric modality to their authentication process, like voice or iris recognition, to go along with facial or fingerprint recognition. These steps to authenticate your identity using biometrics are quick, easy for end users, and exceptionally more secure since they are much more difficult to steal or spoof. 

For banks, simply processing financial transactions isn’t enough. They operate under KYC – “Know Your Customer” – requirements and other regulations meant to stop bad actors. A KYC check means that financial institutions must verify their client’s identity when opening an account and periodically over time. Financial institutions also face stringent regulatory oversight as part of anti-money laundering (AML) policies, which means it’s critically important for banks to establish the legitimacy of a customer’s identity. Biometric authentication has been an important advancement for the financial services industry since it has increased their ability to confidently confirm identities while simultaneously reducing customer friction.  

But just as banking and financial services had evolved from when someone needed to bring their driver’s license to the neighborhood branch to open an account, the industry is still changing.  

Customers realize that cryptocurrencies can offer shorter settlement times, lower fees, and protection from inflation. Perhaps most enticingly, there’s often a potential for outsized returns with the right investments. About one in five Americans have invested in, traded, or otherwise used cryptocurrency.  

What are Cryptocurrency and Crypto Banking?

Now that more banking is done online, it’s important to consider how cryptocurrencies might influence banking overall. Cryptocurrency is entirely digital, meaning there is no gold or paper money to back it up. Assets like Bitcoin and Ethereum are coded strings of data that represent a currency unit. Instead of being overseen by traditional central institutions like governments or banks, cryptocurrency operates independently through peer-to-peer networks called blockchains.  

Despite the fact that there were thousands of cryptocurrencies before the COVID-19 pandemic, the pandemic accelerated the use of crypto – and just about all things digital. No longer a novelty, cryptocurrencies are major players in banking and online investing. 57% of all U.S. crypto owners are millennials, even though they represent 30% of the population. 

Older investors’ aversion to investing in and holding cryptocurrency is likely due to the nature of the currency and its tendency to undergo wild swings in value. Older people have less investment horizon to recoup their losses, whereas younger investors will have more time in the markets to help them recover. But it’s not just about the returns and potential losses. To get started in cryptocurrency, one needs a virtual wallet—a process that, while somewhat routine, isn’t exactly intuitive.   

How to Get Started with Cryptocurrency

Crypto wallets come in different formats and can be software for mobile devices or desktop computers or come as hardware (such as a thumb drive). A quick online search will point you to many options for digital wallets. Buy the virtual wallet online, download it, and install it on your desktop or mobile device. Crypto wallets keep your private keys, and these keys are what give you access to your cryptocurrency. The keys are proof of your cryptocurrency’s ownership, which technically resides on a blockchain.  

It helps to do some research, so you choose a wallet that best supports the type of cryptocurrency you want to buy. Perhaps the second biggest factor, after the kind of wallet to purchase, is to consider how the wallet provider keeps your financial assets secure.  

How Do Biometrics Factor Into Crypto Wallets?

Crypto wallets that use biometrics are a great choice to secure your financial assets. As a consumer, you have a right to understand how your crypto wallet assures that security. Biometrics rely on something that you are (like your face or voice) instead of something that can be hacked or spoofed (like a password or account number). You should consider crypto wallets and financial services providers that use biometric technology to verify and authenticate your identity. 

Relegating access to cryptocurrency wallets to passwords alone isn’t just problematic because those passwords can be stolen. Passwords can also be forgotten. One San Francisco-based programmer, Stefan Thomas, has forgotten the password that would allow access to a $220 million Bitcoin fortune. And since the tools, technologies, and techniques that bad actors have available to try to crack passwords (even if you don’t forget them) have advanced exponentially in recent years, PINs, passwords and passphrases, and challenge questions are no longer confidence-inspiring. 

With the right information and considerations of how a financial institution protects your assets, you can stay safe in the world of cryptocurrency. And for better or worse, it’s a world that will bring lasting changes.  

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