IBSi Blogs

By Lina Andolf-Orup, Head of Marketing at Fingerprints

Gangsters cutting off enemies’ fingers to access secret locations and spies lifting fingerprints from martini glasses – the imagination of the entertainment world has been running wild ever since biometrics entered the scene.

Couple that with the limitations of some early biometric solutions from 15 years ago, still anchored in the minds of many consumers, and you have the perfect recipe for an apprehensive and uncertain public.

Thawing lukewarm attitudes with a biometric touch

The biometrics industry has made great strides in the last few years – something particularly true for smartphones. Fingerprint authentication has replaced PINs and passwords as the most popular way to authenticate on mobile, with 70% of shipped smartphones now featuring biometrics.

And it doesn’t end there. Many adjacent markets are now eager to benefit from the secure and convenient authentication solutions that biometrics offer. Take the payments industry, for example, where biometrics payment cards are currently gathering real momentum.

However, some consumers are still uneasy about accepting biometrics. A recent study found that 56% of US and EU consumers are concerned about the switch to biometrics as it’s not enough understood to be trusted.

Although attitudes are shifting for the better, stats like this demonstrate there is still some work to do to disprove common biometric myths and showcase just how smart today’s solutions really are.

Dispel, adopt, repeat

The evolution in consumer biometrics in the last two decades has been phenomenal. And today’s solutions are far more advanced and safer than many may think.

To help bring an end to the myths, let’s expose some of the most common misconceptions around biometrics.

Myth: Biometric data is stored as images in easy-to-hack databases.

A leading myth about biometrics is that when a fingerprint is registered to a device, it is stored as an image of the actual fingerprint. This image can then be stolen and used across applications. In reality, the biometric data is stored as a template in binary code – put simply, encrypted 0s and 1s. Storing a mathematical representation rather than an image makes hacking considerably more challenging. In most consumer applications, this template is also not stored in a cloud-based location, its securely hosted in hardware on the device itself for example in the smartphone, in the payment card. Thus, it stays privately with its owner.

Myth: Fingerprints can be easily replicated to ‘trick’ devices.

The internet is full of articles and videos that claim it is possible to use materials from cello tape to gummy bears to craft fingerprint spoofs and access biometric systems. Although there may have been a time where gummy bear spoofing was the go-to party trick, todays’ consumer biometric authentication solutions have too many technological defences, such as improved image quality and matching algorithms, to simply ‘trick’ devices. Plus, on top this, the criminal needs to have access to the person’s device where this fingerprint is enrolled e.g. smartphone, payment card, before he/she notices and blocks it. This is not scalable nor common, in comparison to gaining access to someone’s PIN code or skimming a contactless card.

Myth: Physical change will prohibit access to my device.

Although our irises don’t change as we age, our fingerprints can and our faces will. Does that mean we have to update our biometric devices every few months to capture these changes? Not quite! Unless there are drastic, sudden changes, the self-learning algorithms in modern-day biometric systems are able to keep up with our developing looks.

Who you gonna call? Mythbusters!

These are just some of the common biometric myths and misunderstandings perpetuating in consumer mindsets. Thankfully, though, while we’re working hard to rid the world of the myths, belief in the value of biometrics is only expected to grow. But as solutions expand and diversify, the myth-busting fight will continue.

The fate of a beleaguered Wirecard hangs in the balance as €1.9 billion of trust funds are reported missing, and CEO Markus Braun is arrested. This crisis is sending ripples across the industry, affecting Wirecard’s bankers, clients, customers and regulators – at a time when many are already reeling from the impacts of Covid-19.

by Peter Cox, Executive Chairman and Founder, Contis

Bafin, the German financial regulator, is facing questions on its failure to prevent this crisis. Whether we’ll see reform across Europe and tightening of auditing processes, only time will tell. But regulatory capabilities in this previously trusted market have been thrown into question – perhaps damaging Europe’s reputation as a leading FinTech hub.

This is yet another blow to the FinTech industry, where many have already seen serious shocks to their businesses due to the pandemic. Income generating activity has ground to a halt for some, particularly in Foreign Exchange and travel. Risk appetite from venture capitalists has rapidly cooled off, with most only interested in profit-making businesses now.

But against this backdrop of confusion and fear, there does lie opportunity! FinTechs that focus on a core valued offer, own their customer relationships and consolidate their outsourced functions stand a good chance at survival and success. The key is managing costs, continuing to generate revenues and simplifying processes.

Many businesses have reviewed their supply chain and uncovered underlying weaknesses, probably due to buying many pieces of the solution and then bolting them together, adding the complexities of managing multiple vendors. This approach was quickly found to be inadequate in this time of crisis, when full disaster recovery was needed.

Covid-19’s impact has not just been on FinTechs, but across the entire financial services sector. Major banks have found that their outsourced customer services left them hanging, as their chosen sub-contractors had no fall back capability allowing for remote working, because they had never considered a Covid-19-type scenario. Many lessons have been learned by big and small players who are reliant on their outsourced back office services to perform in what is now a completely digital world.

I’ve long been a firm believer that to be successful in payments, you need to focus on your core mission and own all the touch points. This is the only way to deliver on promises, without compromise or disruption to clients and their customers.

I learned the hard way when I purchased my first prepaid card company, credEcard back in 2008. I spent much of my time debating with suppliers, BIN sponsors, processors and call centres who just couldn’t allow me the agility to be disruptive, let alone the accountability to deliver a perfect solution with high availability and reliability.

With Contis, my decision to own all the touchpoints has allowed us to service 200 plus clients with 99.99% platform availability, PCi_DSS level 1 service security, through this difficult trading period and provide clients with total accountability through one partner.

We’ve been able to help clients completely transform their business model to keep trading in the Covid-19 environment. Through our ‘Contis Cares’ programme, we’ve solved many requirements for emergency payments for vulnerable people – helping Credit Unions, banks, FinTechs, and retailers to support their customers who are still shielding.

I have a simple message for those thinking of entering the payments space or becoming a financial backer: beware of trying to be a payments expert when your core skills are different. For all FinTechs trying to weather this current storm, your choice of partner will determine your success and returns. So, choose carefully and prioritise simplicity!

Now more than ever, digital transformation and the ability to respond rapidly – in what is a very fluid situation – are critical.

By David Murphy, Financial Services Lead, EMEA & APAC Publicis Sapient

Unlike the last major financial crisis, which played out over the course of months and years, the current economic upheaval has impacted markets, businesses and livelihoods at lightning speed. Similarly, in contrast to the events of 10 years ago, banks find themselves on the front-line of the recovery, charged with helping to address the acute financial needs of their customers. The ultimate test is whether they can do so effectively and at speed.

Customers at the centre of the response

If there’s one thing we can be certain of with Covid-19, it’s that life isn’t returning to normal any time soon. On the other side of the curve, when the economy shows signs of an upward trajectory, the recovery is likely to be protracted and arduous.

While banks need to confront and mitigate risks – spanning income, operations, capital and reputation – all solutions must start with the customer. And in line with the expected slow pace of recovery, they’ll have to move from shorter-term metrics driving customer decision-making to a far longer-term focus on lifetime value.

Customers will be looking to banks to cut them some slack. Following standard rules and policies won’t work for a population that remembers very clearly the bail-outs of 2008. Since then, banks have focused on improving customer leadership, revenue growth, operational efficiency and automation, but with the emergence of this new crisis, they will need to revisit their communications, policies, business rules and operational processes to ensure they are fit for a very different economic, sociological and reputational era.

Digital transformation’s time has arrived

The availability of new digital capabilities means that banks can fundamentally change their response from previous crises. Organisation-wide digital transformation is the catalyst that enables them to act and implement changes faster than ever before; specifically addressing three key pillars:

Prioritising customer help: Access to significant levels of data means that banks can identify strategies and comms appropriate to different segments, repurpose existing products and generally enable a broader set of personal and business customers to address and take control of their finances. Empowering these customers to digitally serve themselves through the crisis can provide both stability and longer-term growth.

Optimising decision-making: Decision-making and approaches to many of the income, capital and reputational risks, can be optimised through the implementation of technical solutions, such as machine learning and AI. Triaging, adjusting and deploying new models for a more relevant and impactful response will not only increase effectiveness but generate new organisational capabilities.

Maintaining operational resilience: Changing traditional ways of working to enable the successful deployment of technology will be required to secure and maintain operational resilience. This can include assessing and adjusting governance structures, streamlining highly complex and manual processes to reduce the operational burden and retraining staff for remote proficiency.

Clients taking action

We’re already seeing banks take positive steps to leverage existing digital transformation capabilities or accelerate programmes. They’re emphasising strategic thinking and operational efficiency and framing responses around customers. From fast tracking solutions for health workers and vulnerable customers to leveraging cloud-based technology to bridge financing gaps for small businesses, this bold approach is precisely what’s required.

But in the early days of this crisis, there’s a lot more work to be done and many more institutions need to lift their game. Not just to provide the help that many customers so desperately need but to manage the considerable organisational impact and successfully navigate the uncertain digital transformation journey ahead.

The past three months have set in motion changes that will not be stopped nor reversed as social distancing measures are gradually relaxed. This is certainly true in the financial services sector, where the lockdown has brought about a watershed moment in the proliferation of FinTech.

by Ammar Akhtar, CEO, Yobota

In the aftermath of the coronavirus pandemic we – consumers, businesses and governments alike – will be living in the “new normal”. We have purportedly witnessed ‘a FinTech revolution’ over the past decade; however, such claims have suddenly been brought into sharp perspective. Only now is the much-lauded transition from a physical world to a digital one going to take shape.

Gathering momentum in the aftermath of the 2008 global financial crisis, the so-called FinTech revolution promised open access to data, hassle-free banking experiences and fairer deals for customers. Yet only relatively small steps have been taken towards this vision.

Until now we have witnessed a cautious adoption of technology in the finance sector as consumers, regulators and established banks familiarise themselves with what it can enable – and this has still come at considerable investment.

Covid-19 has changed this.

Today, people must be able to access advice, take out new products and manage their finances digitally. Financial service providers, meanwhile, must ensure business continuity and a painless customer experience at a time when their teams are unable to work from the office or bank branch.

The pressure is on

At present, many finance companies remain completely reliant on legacy technologies and on-premises servers – they cannot access data or execute processes remotely. Simply put, these firms are under threat of being left behind as society prepares for the new normal.

The pressure is on, with technology no longer just a form of competitive advantage for financial services firms; it is essential to their very existence. And for those now grappling with how to deploy FinTech successfully, two things are key: interoperability and cloud computing.

Over the past decade firms have too often taken a piecemeal approach to adopting FinTech; they have used specific technologies to solve isolated problems. That is because FinTech startups are typically created with that very focused mindset.

Finance firms, particularly those providing banking services, should have a much broader perspective when developing or adopting technology. They must focus on the interoperability of best-in-class technologies – put another way, they must make progressive choices to use technologies that fit together to form entire systems that work together seamlessly.

Take the example of someone applying for a credit card; something that is increasingly common as a result of the economic hardship brought about by Covid-19. There are various different stages that an applicant will need to pass through – identity verification; credit scoring; advice or product recommendation; application and assessment; and, if successful, creating the account.

There are FinTech solutions that can automate each of those processes. Yet the companies best equipped to deliver exceptional services in the post-pandemic landscape will be those that have interoperable cloud-native technologies on a platform that can take the user from the start of the credit card application process to the end as quickly and easily as possible.

Embracing FinTech

FinTech should not be confused with someone checking their account or transferring someone money. These isolated actions are not a true reflection of FinTech’s revolutionary potential, which is quickly becoming apparent.

In the primarily digital environment we are now living in, financial services firms that cannot deliver an exceptional level of service to customers – be it individual or business – risk losing them to those who can. Now is the time for the sector to embrace FinTech to its fullest and build systems that are not just adapted to the new normal, but actually help to shape it.

The world of international remittances is now worth $550 billion to low- and middle-income countries, and the World Bank only expects this growth to continue. 

by Daumantas Dvilinskas, CEO and co-founder of TransferGo

As physical borders look to once again be drawn firmly in the sand, virtual borders – such as those in financial services – are expanding and becoming ever more inclusive.  This trend is reflective of the role of FinTech in navigating geo-political tensions to provide a service that connects us all, no matter which physical borders separate us.

Democratising financial access

For too long, financial services has not worked for hard-working migrants. They have been victimised by an outdated system that benefits local communities as opposed to those who maintain a need for global connections. Traditionally, migrant communities have been stung by predatory fees, inefficient processes and unfair foreign exchange margins when making international money transfers. Remittances are a vehicle for international development, effectively lifting people out of poverty by funding education, healthcare, housing and business investments. They empower families to explore new opportunities abroad, learn new skills and seek out better career prospects.

Yet, the existing model can penalise this movement of workers by charging unfair fees. The World Bank estimates the global average cost of sending $200 at around 7% – or $14. However, traditional incumbents have been charging anywhere between 11-29% of the transfer value, and few can settle those transfers in anywhere near what consumers should accept.

Thankfully, this system of remittances no longer needs abiding by. It’s a model that is synonymous with the same attitudes as creating physical borders and preventing free movement. Instead, FinTechs have created an alternative; borderless financial services that create access for migrants the world over.

Leading by example

Across Europe, there are start-up hubs that are leading the charge in breaking down the obstacles in remittances, and creating virtual, permeable borders. One FinTech strain that is pioneering change is digital money transfer services. These facilitate the flow of money across borders without unfair fees and hidden exchange rate mark-ups, empowering migrant communities by giving them total control over the movement of their money.

As well as empowering consumers, a separate cohort of FinTechs that specialise in payments are creating open, financial borders for businesses of all sizes. Companies are unlocking the global opportunity for online businesses, allowing them to accept payments in foreign currencies, scale into new markets, and tap the growing global e-commerce market. Similarly, point of sale (POS) merchant platforms are enabling businesses to accept online, mobile and POS payments and access a global customer base.

Therefore, while geo-political trends [and the pandemic] may be leading to the affirmation of physical borders and a move away from globalisation, FinTech is playing an evergreen role in connecting international communities regardless. The incumbent money transfer system is outdated and detrimental to migrants, but innovative start-ups across Europe are helping to provide borderless remittances and offer an inclusive alternative.

As it gradually becomes mainstream, evolutionary AI’s capability to innovatively create complex AI models, and to optimise decisions considering multiple scenarios, is set to reimagine the financial sector. It will enable every player in this field to spot novel strategies that would never have been identified by human data scientists, and, in turn, allow companies to take full advantage of today’s massive data sets.

 by Babak Hodjat, VP of Evolutionary AI at Cognizant

 AI driven solutions are becoming a competitive differentiator for banks and other financial services — delivering a hyper-personalised customer experience, improving decision-making and boosting operational efficiency. Yet, many financial services institutions (FIs) remain in an experimental phase and will need to accelerate actual AI deployment. Otherwise, they risk being left behind by digitally native players. AI is rapidly transforming every aspect of the financial world. This transformation has accelerated recently, thanks to evolutionary AI – a new breed of technologies that allows AI to automatically design itself with little need for explicit programming by humans

How it all works

Emerging technologies that enable AI algorithms to design themselves are allowing organisations to transcend human limitations. Evolutionary AI operates iteratively. Firstly, it randomly generates a set of potential solutions to form an initial population and assigns a score to each solution based on how well it performs relative to other solutions. In the second round, it retains the solutions that performed best, perhaps only 5% of the total, and recombines their components, sometimes “mutating” them to create a new population. This new population is then tested, and the process begins again. Over multiple generations, the appropriate components of the more successful solutions become increasingly prevalent in the population, and eventually a solution is discovered that yields the best outcomes.

The advantages of evolutionary AI

Compared to human design, evolutionary AI can be deployed far more quickly, avoids biases and preconceptions, and typically performs better. Furthermore, the chosen model will evolve and improve over time, based on new data.

Evolutionary AI can be applied in a wide variety of areas at FIs. Some examples include designing quantitative trading strategies to maximise returns while minimising risk and loan underwriting. Rather than relying on human analysis, evolutionary AI solutions can quickly analyse all the combinations of relevant variables to create models that more accurately assess the risk of default by a potential borrower.

Reaping the benefits

In order to reap the benefits of the technology, FIs should focus on the following:

• Create and maintain responsible AI applications – Behave in ways that make customers and employees comfortable, i.e. not making decisions that are unethical or exhibit bias. Companies need to monitor them to ensure they continue to act appropriately, as they learn and evolve.
• Craft business-driven AI strategies – AI should be viewed through a business lens, rather than as a technology issue. Having AI projects managed by cross-functional teams with business executives in the lead is a good place to start. Companies also need to look across their organisations to identify opportunities to generate concrete business value from AI — not only in reduced costs but also in boosting revenues by delivering enhanced customer experiences and through improved decision-making.
• Enhance data management – AI applications depend on access to timely and accurate data, which is a challenge for many FIs that have fragmented data architectures with multiple legacy systems. Companies need to identify which types of data are required for each AI project and ensure they can be captured in an appropriate format.
• Adopt an experimental mindset – AI projects need to be rolled out quickly, while at the same time be rigorously measured, so failures are terminated promptly while successes are moved into production.

As AI applications increasingly design and test themselves, the pace of innovation and the accuracy of predictions will vastly improve. It is inevitable that FIs will soon consider it irresponsible to make important business decisions without first consulting with an AI system. Robots will handle routine tasks while flagging exceptional cases for review and resolution by employees. Employees will spend their time on more complex decisions and sensitive interactions with customers, such as resolving complaints or providing sophisticated financial advice. In short, humans and AI robots will be working side by side, delivering more value in combination than either could on its own.