To counteract security threats while meeting updated know-your-customer (KYC) and anti-money laundering (AML) standards, the banking, financial service, and insurance (BFSI) industry is leveraging AI and facial recognition. These technologies can prevent payment fraud, deter financial crime, and enhance customer identification and authentication processes.

When utilizing biometric technologies as part of the eKYC (electronic Know Your Customer) process, organizations have access to a new layer of fraud prevention, all while digitizing core transactions and processes. With the rise of crypto-currencies and the expansion of remote work, financial institutions have begun implementing eKYC measures for a more secure future.

What is KYC? Why switch to eKYC?

KYC is a system to protect financial institutions, and their customers, from fraud. It utilizes safeguards like passwords and two-factor authentication. KYC also tracks money in the economy based on where it originates and who is involved. Global spending on anti-money laundering (AML) and KYC is estimated to climb to $2.94 billion USD in 2024..

With financial institutions facing increased security risks, the demand for eKYC (electronic Know Your Customer) has grown, providing more benefits to customers and brokers than KYC.

eKYC makes the traditional KYC process more secure, more efficient, and is accessible remotely by using digital identification and biometric tools such as facial recognition. The benefits of eKYC include:

• Stronger protection from identity theft across BFSI operations
• Safe, instantaneous, paperless, and cost-effective account opening processes
• Simpler remote onboarding while protecting account integrity
• Saves time by reducing the need for on-site visits
• Quick and robust identity validation

Increased customer satisfactionTo ensure that eKYC processes meet the same standards as traditional methods of identification and face verification, companies must implement electronic identification processes that feature high levels of security and reliability.

How do biometric identification technologies compare?

Financial institutions are increasingly using advanced technologies to ensure the security of their assets. The three main technologies used in eKYC processes are:

1. Fingerprint Recognition: uses a specific sensor that is designed to pick up on fingerprint patterns and match those to an individual
2. Iris Recognition: measures unique patterns in an individual’s iris to verify identity
3. Facial Recognition: identifies facial vectors and features and matches them to an individual

Each of these three methods have their strengths and weaknesses. Use the chart below to further understand the benefits of each solution.

Iris recognition can be fast and highly accurate but only select expensive cameras are designed to perform these tasks. Beyond the hygiene concerns associated with fingerprint verification, dirt or oil from fingers can interfere with the efficacy and integrity of sensors. Facial recognition is recognized as the superior biometric technology because it is affordable, hygienic, and flexible. Additionally, you can install a solution like FaceMe® eKYC on a wide range of camera-equipped devices to perform edge-based facial recognition.

How does facial recognition technology work in the BFSI industry?

Facial recognition technology is instrumental in strengthening security measures in many BFSI settings. Let’s explore some of the most transformative examples of eKYC.

1. Creating a more secure onboarding experience

When a customer entrusts a financial institution with their money or information, they expect the highest levels of security. Banks can establish this trust by implementing eKYC during the customer enrollment process. This is the broadest use case across the BFSI industry, from opening a bank account to applying for a loan or credit card. eKYC speeds up the process of cross-checking a customer’s identity with other financial, public, and employment records.

When opening a bank account, facial recognition factors into this process as follows:

• Client requests to open an account or apply for credit
• The bank clerk takes the client’s photo as part of the account registration and eKYC process, and scans a government-issued ID
• The bank clerk performs biometric verification using facial recognition technology
• Clerk performs biometric verification using facial recognition technology
• Digital authentication is complete, allowing the bank’s systems to instantly review the client’s legal and financial standing. If the client passes the eKYC check, they can open an account and gain access to the bank’s services

A similar eKYC solution can also enhance the process of opening brokerage or insurance accounts:

• As part of the registration process, the client fills out the required information on a tablet provided by the firm
• The agent takes the client’s photo and scans their government-issued ID to compare with data stored on the server
• Once facial recognition biometric verification is complete and the customer passes the eKYC check, the agent quickly matches the client’s identity with other critical information required to prevent fraud and meet anti-money laundering regulations
• The agent completes the application process and opens the customer account

2. Modernizing mobile security solutions

There has been a growing preference for contactless digital solutions with U.S. consumers conducting their banking via mobile apps more often than any other method. Using biometric verification in mobile apps diminishes concerns about sensitive information being intercepted.

Deploying edge-based facial recognition on mobile devices embeds information in the devices, eliminating lag from cloud-based processing. Devices only send small, encrypted templates for validation to a database of encrypted templates hosted on the financial institution’s server. This means that operations are faster and more secure – completed within milliseconds.

Mobile eKYC solutions move beyond daily banking transactions, allowing customers to apply for additional products like credit cards, loans, or securities accounts, remotely and securely. Customers can also use tablets and other mobile devices inside physical branches to enjoy the security of biometric verification.

3. Remote transactions

Second in popularity to mobile applications, many customers use browsers on laptops and PCs to conduct banking or brokerage transactions and apply for various financial services and products. Facial recognition technology can help make these options more secure and efficient.

If a user wanted to open a brokerage account via their PC, they can verify their identity using a webcam to capture facial vectors, and then match them to the image from an ID card. The system quickly processes the data on the cloud using the same encrypted template process as with mobile devices. Even though the entire process is off-premises, biometric verification links the user’s identity to the new account, ensuring it is secure.

4. Enhancing ATM convenience and security

Facial recognition technology enables cardless ATM transactions. Once an ATM camera captures a customer’s face, the facial recognition system looks for a 1:1 face match within the bank’s database. The customer then enters their PIN for a second form of authentication, confirming their identity. They can then begin the transaction without needing to take out their wallet or even carry their ATM card.

5. Fully integrate security

Although financial processes and security concerns are moving further into the digital realm, physical banks and financial institutions are still vulnerable. Facial recognition cameras placed in banks and their branches instantly identify block-listed individuals, confirm their identity, and notify security personnel who can take immediate action.

Imagine an entirely integrated branch security system using eKYC across multiple AIoT devices. A local workstation at the branch would connect to the clerk’s POS (Point of Sale) terminal and employees’ tablets or PCs for facial and identification captures. The information would also be linked to IP cameras for security and surveillance. ATMs and online verification could even incorporate facial recognition to extend the reach of a single branch’s security. eKYC builds upon the web connectivity of IoT devices with machine learning, creating more secure physical and digital banking operations at every point of interaction.

Facial recognition and the future of BFSI

Facial recognition is poised to become an integral part of the BFSI sector. With the continued increase in identity theft and fraud, considerable losses loom for banks and other financial institutions that do not follow KYC standards. eKYC, through facial recognition, can empower institutions to secure their assets and information more effectively.

Empowered by eKYC technologies, financial institutions can enhance security, prevent fraud, and simplify client authentication. With mobile eKYC tools, financial institutions can streamline insurance, loan, and credit card applications, and extend the reach of their customer service without compromising confidential information.

Facial recognition solutions like FaceMe® eKYC use highly accurate verification to strengthen mobile access points, streamline account creation, and secure physical branches. In the years ahead, financial institutions will continue to incorporate such solutions to meet demands for more flexible and more secure banking experiences.