A study on digital banking in 2020 showed that 78% of consumers globally now use at least one digital banking service, up from 68% in 2019. This trend was already well underway before the pandemic, but it was greatly accelerated when bank branches closed and the digital channel became the only option for consumers to perform banking tasks or connect with their banks. The study also found that the introduction of digital signatures has been a major driver of adoption, with 43% of consumers saying they would be more likely to use digital banking services if they could sign documents electronically. This is particularly relevant in the BFSI sector, where the need for physical signatures has traditionally been a barrier to digitization.
However, the increased usage of digital banking channels has coincided with a significant increase in fraud. Throughout the epidemic, the number of data breaches aimed at banks has increased. Because fraudsters are increasingly targeting digital banking users, banks and financial institutions must tighten their access management and update to current, advanced authentication methods in order to protect their clients’ transactions and sensitive data.
The use of passwords is still a persistent problem today. Password theft, along with dark-web distribution of stolen passwords (password dumping), is still the most common method fraudsters use to gain access to a user account. Consumers put themselves at risk when they use weak or recycled passwords, or compromise their own data security with unsafe behavior, such as sharing passwords. In addition, businesses need to ensure that their employees are using strong and unique passwords, and that these passwords are not being reused across multiple accounts. One way to address this issue is to use digital signatures instead of passwords for authentication. Digital signatures are more difficult to counterfeit than passwords, and they can be used to verify the identity of the person signing a document or transaction.
Furthermore, some financial services providers follow reactive rules, such as acting only after a fraud has occurred rather than preventing it in the first place.
The security measures and historical authentication that banks have put in place tend to exist at the front-end and back-end of digital transactions, which is an underlying issue. Banks have implemented usernames, passwords, and one-time passcodes on the front end. They’ve installed fraud detection systems in the backend that analyze the transaction and decide whether to approve or refuse it. Regrettably, there isn’t much happening in the middle.
Continuous risk monitoring throughout the banking session, from login to logout, is the missing middle component. Just because a user logs in successfully doesn’t indicate they’re interacting with the account legitimately. These days, relying on a single point-in-time occurrence isn’t enough. Banks and other financial organizations must keep a constant eye on things.
Banks should consider what they can do right now to ensure that their fraud protection systems are capable of dealing with future threats. This includes looking at what other online businesses are doing outside of the banking sector. Fintechs, cryptocurrency platforms, ecommerce, and other digital merchants are all experimenting in this space.
In light of the deluge of data breaches, identity theft, phishing scams, malware, and account takeover situations, many are resorting to modern authentication methods such as multi factor authentication and orchestration hubs.
Financial institutions have long been hesitant to embrace change, preferring instead to stick with tried-and-true methods that have served them well in the past. However, this cautious approach may no longer be the best strategy, as customers have shown that they are willing to adopt new technologies and approaches when necessary. The pandemic has forced many people to use digital banking solutions, and the uptake has been swift and widespread. Now that consumers are used to these solutions, there is a good chance that they will continue to use them even after the pandemic ends. This shift could have a major impact on the way that banks operate, and those who are able to adapt quickly will be best positioned to thrive in the new environment.
The objective is to make it simple and secure for people to conduct digital banking in ways that are familiar to them. Biometric authentication provides the best of both worlds in terms of improving security while also improving the consumer experience. Many smartphones, in example, include fingerprint scanners and facial recognition capabilities that allow users to access mobile banking apps without the use of passwords. Furthermore, consumers who use biometrics to access their banking apps believe those banking apps to be safer as a result of their use of biometrics.
Despite the urgent need for heightened cybersecurity measures, online fraud is growing alongside online banking. This is due to a variety of reasons, including budget and lack of resources. The good news is that research has shown that when authentication modernization is tied to customer experience, these projects have a much higher chance of getting funding and approval. In the BFSI sector, for example, digital signatures are now being used to authenticate transactions and grant access to sensitive data. This not only improves security, but also enhances the customer experience. As more organizations recognize the importance of authentication modernization, it is likely that this trend will continue to gain momentum.
Read Blog: Are Electronic Signatures Secure?
The threat of fraudsters gaining access to people’s bank accounts is a reality. Banks and other financial institutions (BFSI) need to begin thinking about modernizing their authentication practices with an eye toward password less authentication, which will enable them to authenticate without causing unnecessary friction and, in high-risk situations, apply friction-appropriate authentication. Password less authentication methods, such as digital signatures, can be used to verify the identity of a user without requiring them to remember and input a password. In addition, digital signatures are more difficult to forge than passwords, making them more secure. As BFSI organizations move away from passwords and toward digital signatures and other pass wordless authentication methods, they will be able to reduce fraud and increase security.
Some security technologies are more effective at combating fraud than others. Companies who invest in the long term to not only establish security systems, but also to improve their functioning as fraudsters adapt, have the most success.
The tools, as well as the vendors who provide security products and services, should change with the evolving security environment. Because no single solution can address all of a bank’s digital security concerns, understanding client wants and the user experience they desire is more important than micro-focusing on prevention.