The demand for remote services spiked when the novel coronavirus pandemic broke out. Apart from moving to eCommerce and online shopping platforms to acquire groceries and other essentials, consumers have also turned to digital banks and financial technology (fintech) firms to perform payments, money transfers, and other financial transactions.
This increased usage of digital financial services has challenged financial institutions to implement a more secure and efficient method of authenticating their customer’s identities. Regulatory bodies mandate that financial organizations implement necessary measures for data protection and threat prevention. Banks and fintech companies must adhere to regulations such as Anti-Money Laundering (AML), Know-Your-Customer (KYC), and Payment Services Directive 2 (PSD2) to ensure that they are transacting only with legitimate clients.
For decades, passwords have been used to verify a person’s identity when accessing their accounts. However, these knowledge-based authentication credentials are one of the leading causes of security breaches. The Verizon Data Breach Investigations Report stipulated that weak and compromised passwords contributed to approximately 80% of hacking-related data breaches in 2020.
Passwords and other knowledge-based authentication credentials are inconvenient and do not verify the legitimacy of a person’s claimed identity. Therefore, when a criminal uses a stolen password credential to hack into an online account, the system will not be able to confirm that the one accessing the account is not the real customer.
Many financial organizations are replacing legacy systems with modern identity proofing solutions as they see that using passwords to access accounts is becoming a significant drawback for financial institutions. Still, several other banks and fintech firms continue to use passwords as an authentication method.
If banks go truly digital, they must utilize new technologies for passwordless login to bolster their cybersecurity defenses while providing their clients with seamless account access and transaction authentication experiences.
Digital banks and other financial institutions can reduce security risks by leveraging FIDO 2.0-compliant modern authentication solutions. The FIDO2 authentication standard utilizes a robust combination of other login credentials like inherence factors (biometrics) and possession factors (cryptographic keys stored on a registered device). These authentication factors bind identity to the device; thus, they are not easily stolen or susceptible to other circumvention tactics used against passwords.
FIDO login credentials are ideal password replacements as these provide a seamless and secure method of authentication. For more information on how going passwordless enables digital financial services providers to keep up with the fast-paced changes in the industry landscape, see this infographic.
Infographic Source: https://authid.ai/blog/digital-banking-goes-passwordless
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