Technology

Technology is racing ahead of legal structures that were never designed to address challenges of the sort presented by cryptocurrencies, central bank digital currencies, stablecoins, decentralized finance, and myriad other innovations. The resulting tension between innovation and regulation creates difficult challenges for legislators, regulators, and innovators alike. While regulatory bodies worldwide are diving into the crypto debate, jurisdictional differences, along with a lack of common standards, create uncertainties for crypto businesses operating globally.

Why biometrics are the future of securing digital currency

Blockchain and biometrics

Innovation in financial services is driving central banks to closely inspect digital currencies, their viability, and potential evolution. Consumers and businesses alike have embraced blockchain technology, despite growing concerns about sustainability and volatility. As digital currencies are becoming more widely adopted, financial institutions must understand the opportunities blockchain technology will create in terms of security, privacy, and integration with existing payment technologies. Combining blockchain with biometrics could provide solutions with desirable features such as immutability, accountability, and universal access.

Cryptocurrencies, such as Bitcoin and Ethereum, have been scrutinised by investors for years, only recently have national digital currencies been establishing a foothold in the global economy. China is the first country to adopt central bank digital currency (CBDC), with testing trials having launched in four Chinese cities in April 2022.

Safeguarding digital assets

Digital currencies may aid with financial inclusion and create a more equitable society; however, the challenges are far and wide. These challenges are centered around security. Early cryptocurrency transfers required storage in ‘hot wallets.’ Hot wallets refer to devices such as a laptop or phone, connected to the internet. Though convenient, hot wallets are susceptible to hacking and fraud. Countering this issue, many adopters of crypto today use ‘cold wallets’ – external storage like a hard drive or USB stick.. These devices are safer; however, they are still flawed in countering security threats. By integrating fingerprint biometrics with cold wallets, users can access and control their crypto funds in a highly secure and authenticated way.

The world’s first next-generation Web3 biometric card is already considered for development by IDEX Biometrics and other partners. It includes cold storage, a digital asset wallet, and digital identification — and is EMV compliant. It represents a shift in data ownership as well as the viability of Blockchain.

Understanding biometrics technology

Biometrics and SCA

Confirmation of identity utilizing traits unique to individuals is proving to be the most dependable method of Strong Customer Authentication (SCA) in financial services. Some institutions opt for facial recognition, while others use voice or fingerprint detection. Each biometric technology has its benefits, disadvantages, and preferred use cases.

Consumer preference

Facial recognition has been especially complicated during and post-Covid, while the friction ridges of our fingerprints remain non-replicable. Moreover, the technology invested in developing secure and accurate fingerprint sensors is unparalleled within the biometrics arena. A recent study by Mastercard and Oxford University states that 77 percent of participating consumers consider facial recognition a secure system, rising to 93 percent who consider the use of fingerprints a secure biometric system.

Security and accuracy

Fingerprint recognition is a secure authentication method that provides quick access to devices. The encoded image of our unique fingerprint ridges cannot be replicated, providing high accuracy. Meanwhile, our fingerprint data can be stored on the sensory chip and not transferred to bank servers, providing high security.

Facial recognition remains one of the most popular methods of authentication. While its technology is accurate in facial detection, there are significant concerns around security. This technology’s main point of contention is using deepfakes and images to grant access.

Iris/retina authentication is highly secure, as iris patterns are unique for each individual. However, resistance from users and readability difficulties make this technology less practical.

Enhanced digital healthcare

A patient-centric approach is being adopted across healthcare establishments, including enhanced security in accessing, storing, and relaying information. Integrating fingerprint biometrics in healthcare identification greatly impacts the user experience, providing consumers with greater trust in the organization, and streamlining the organization’s storage of data.

Secure & convenient banking

With biometric smart cards, you become your password. The process creates and saves a model that represents the user exclusively and confirms their identity when they request access or make a transaction. The impact of biometric smart cards is a more secure banking ecosystem. Fingerprints minimize the risk of deepfakes being used to access information fraudulently. It also allows for instant authorization and forgoes forgetfulness of PIN codes and passwords. This can be helpful for those living with Alzheimer’s and dementia.

Safe digital wallets

Digital wallets are not limited to payments. Users store e-tickets, public transportation cards, boarding passes, and cryptocurrencies. While private keys and passcodes are easily forgotten and stolen, fingerprint biometric authentication in digital wallets enhances security in a frictionless way. Users are also able to forgo the timely process of one-time passwords (OTPs) and multi-factor authentication (MFA). 

Strong currency authentication

Digital currencies will also need to comply with the PSD2 banking regulation and require Strong Customer Authentication (SCA) to validate users at the point of transaction.

From 14 September 2021, SCA will be required for all payment transactions in the European Economic Area, aiming to lower fraud and increase security for customers. SCA essentially means requesting two forms of authentication for every transaction above the contactless limit.

This will require consumers to confirm extra security information, such as a password or PIN, or physical biometric authentication to transfer or pay with digital currencies across Europe. With passwords and PINs increasingly recognised as insecure, consumers are more worried about potential banking fraud.

Therefore, the payments industry needs to adopt fingerprint biometric authorisation for digital currency transactions to provide greater security to protect consumers. It could also provide both consumers and issuers with higher confidence in a digital transaction if it is fully authenticated, further encouraging the uptake of national digital currencies among the population.