The banking, financial and insurance (BFSI) sector has built its legacy on being able to successfully mitigate risks in order to provide their much-needed services to consumers. Unfortunately, risks such as identity theft and payment fraud are evolving at an unprecedented rate, making it very hard for the BFSI sector to protect its customers using its legacy practices. Practices such as physical cards, passwords and PINs for access are no match for today’s cybercriminal. More than most industries, the BFSI sector must take into consideration the implementation of technology that can help them effectively navigate digitization while still providing security.
The risks impacting the BFSI sector
As businesses increasingly depend on electronic data and computer networks to conduct their daily operations, a growing amount of personal and financial information is being transferred and stored online. Even though this has been incredibly convenient for users, online data storage can leave individuals exposed to privacy violations, thus incurring huge liability charges for the BFSI sector. Data and security breaches can be extremely costly with the average attack cost rising to $4.24 million in 2021, up from $3.86 million in 2020. The Identity Theft Research Center (ITRC) reports a 17% increase in U.S. business data breaches in the first three quarters of 2021 compared with the 2020 total. There were 1,291 breaches, January to September 2021, compared with 1,108 in 2020. These breaches can then lead to identity theft.
With every data breach, millions of individuals are impacted. In 2020, identity theft cost U.S. consumers $56 billion. An estimated 49 million people were victims of identity theft in 2020, meaning that more than 33% of Americans have been victims of identity theft. Unfortunately, with identity theft comes insurmountable financial loss. A 2016 study found that identity theft resulted in up to 20% of all credit losses for a total of $6 billion loss. That number rose to $13 billion 2021. Research has found that each instance of identity theft costs financial institutions between $10,000 – $15,000. Oftentimes, fraudulent purchases made using stolen credit or debit card information are covered by the bank or company issuing the card. Sometimes, though, money that’s stolen through other means such as wire fraud or fake money orders or cashier’s checks can be more difficult to recover. Also, if time has passed and the victim doesn’t notice the fraud in a timely manner, the chance of recovering the stolen money greatly decreases.
Another costly risk for financial services is payment card fraud. Payment card fraud can be a direct effect of data beaches. Cybercriminals use leaked personal identification information to make card-not-present transactions or CNP. A 2018 study from the Federal Reserve showed that card-present fraud in the U.S. declined from $3.68 billion in 2015 to $2.91 billion in 2016, while e-commerce and card not present fraud jumped from $3.4 billion to $4.57 billion during the same period. The consequences for CNP transaction fraud are astronomical for both financial institutions and consumers.
Reduce rates of identity theft and payment fraud
The rising rates and occurrences of data breaches, identity theft and payment card fraud are worrisome for leaders in the BFSI sector. This sector needs to enhance security for themselves and their consumers while adhering to federal laws and regulations. Additionally, COVID-19 has increased the demand for contactless payments, meaning digital solutions are here to stay. The consumer will inherently be more loyal to brands that can meet their needs.
The key to mitigating risks associated with financial services is prevention. The BFSI sector needs to be able to ensure secure transactions while avoiding the financial repercussions associated with fraud. Biometric adoption has accelerated within the past several years and today, biometrics are the gold standard for secure authentication and identity proofing. Streamlining facial recognition or voice authentication into the payment process will ensure secure authentication for card-not-present transactions. If the credit card information is being used by an unauthorized individual, biometric technology will be able to stop the payment from being authorized.
Streamline biometrics for risk management in BFSI sector
The BFSI sector is no stranger to biometric technology, with many key players offering branchless banking and selfie onboarding. Streamlining the technology has already proven its worth and can solve other issues in the financial sector. The industry is dealing with the heavy financial burden that comes with data breaches, identity theft and payment card fraud. In order to mitigate these risks, the BFSI sector will have to turn to stronger authentication methods to protect themselves and their customers.
For leaders looking to manage these risks, Aware has two solid offerings. For example, Aware’s Knomi® mobile biometric authentication framework is a robust choice. Knomi uses mobile devices to conduct biometric enrollment and authentication with a simple selfie. Its advanced security checks can authenticate driver’s licenses and passports and use leading liveness detection to ensure spoof-resistant biometric facial matching between live and printed images. For businesses looking to tackle payment fraud, Aware’s recently acquired FortressID platform is a robust option. Fortress Identity provides a unified, cost-effective platform that enables you to verify IDs from 195 countries and continuously KYC (know your customer) from beginning to end. The platform combines onboarding validation, compliance, and due diligence, with biometric multifactor authentication that eliminates passwords and enhances the entire user experience.