Many people worldwide relied on passwords to secure their accounts and still do so to this day. It served as a knowledge-based authentication method to keep unauthorized people from accessing another person’s account. Still, this practice requires people to use different passwords or reuse old ones for different accounts.
Password logins are already an outdated authentication method, and reusing passwords is risky since fraudulent individuals can potentially utilize this weak authentication practice to circumvent networks and transact with banks. Financial technology firms and banks must ensure that only their actual clients can transact with their platform to prevent illegitimate clients from accessing them. It is also part of their due diligence with various regulations, including the Anti-Money Laundering or AML, Know-Your-Customer or KYC, and Payment Services Directive 2 or PSD2 Compliance for Strong Customer Authentication.
One way to comply with regulations is for digital banking to go passwordless for online identity verification. Passwordless logins can effectively shore up a firm’s defenses while providing seamless account access and transaction authentication experience.
Thanks to the constant threats in the financial sector, the changing demand of modern consumers, and different regulations set in place to mitigate threats, banking companies have started digitizing their operations to replace old password-based systems fully. Banks can implement passwordless login through FIDO2 strong customer authentication. The FIDO2 standard leverages a combination of other authentication credentials, including biometrics and cryptographic keys, alongside a knowledge-based authentication factor.
FIDO2 authentication harnesses the commonly used mobile devices for a simpler authentication experience. The login is limited to a registered device the user owns and requires a secondary biometrics authentication factor to unlock the cryptographic keys.
Many Android and iOS mobile devices have support for facial and/or fingerprint recognition that allows for device authentication, allowing for mobile biometric verification. Financial technology firms can save on password reset costs which would then let them use the funds they saved up to promote company growth.
Passwords are now inconvenient, and a security threat and switching to passwordless logins can help eliminate the risk of phishing attempts giving thieves access to people’s bank accounts. For more information on firms switching to passwordless logins, see this infographic by authID.