Features, FINANCE

Banks and biometrics: Fingertips confidence

By now, banking sector in Russia is familiar with FinTech, aware of RegTech and curious about IDTech. Financial institutions are learning to identify their customers by their biometrics. Identification of a financial services user is not a matter of business efficiency only, but a way to build a trust perimeter in a digital state. That was the subject of Identification Technologies in Financial Sector: Regulations, Innovations, Experiences, and Prospects conference arranged by Banking Review.

© RIAN / Alexey Danichev

Legitimate biometrics

National authorities currently develop a system which will make it sufficient for an individual to register and leave fingerprints and voice sample, to thereafter be able to remotely become a customer of any bank. Andrey Emelin, Chairman of the National Council for Financial Market, is certain the lawmakers will pass the law on remote identification during their fall session. He noted a juristic collision though. Whereas a biometric system improves customer identification quality, it concurrently restricts customer’s legal capacities, since lawmakers intend to set for remotely identified individuals certain limitations on the number of accounts they may have in banks, on the amounts of their banking transfers and aggregate loans.

The stricter the constraints, the harder it will be for the system to take off”, Emelin said.

National remote identification platform is being developed by Rostelecom Russian Telecommunications Company, and based on two modalities, voice and appearance. Julia Dudkina, Director of Rostelecom’s Digital Identity project office, added that ideally, the two modalities should also be supplemented with eye retina scanning and venous palmprint. According to Dudkina, in December 2017 the platform tests will be started at several banks to be later joined by other project participants. The company forecasts that in a year the number of the individuals registered in the Integrated Biometric System (EBS) will be in six digits range.

The project offers three U-advantages: Universalism (as remote identification may be applied to other sectors in addition to banking), Uniqueness (as biometric identification is the most reliable), and Unlimited distance (as for residents of tiny remote settlements or for persons with reduced mobility that will be the only option for using financial products), as well as one E-advantage, since cost-Effectiveness will be to the benefit of both the banks cutting their staff costs, and the customers who value their time.

As Ekaterina Andreeva, Vice-President of NAUFOR Russian National Association of Securities Market Participants, put it, stock market has been employing remote identification methods since long. That has by now produced some visible effect, too, since the number of customers has grown by one third while time and geography factors are becoming insignificant and market regionalization is advancing. Currently, NAUFOR member-companies have a request to make an administrative effort and anchor mobile phone numbers to the names of their owners.

Banks must share all they have

Banks use biometric identification for their internal needs as well, for staff authentication or customer service improvement, for example. Therefore, they do not need any amendments to the legislation.

In this country, law explicitly requires that an individual must be personally present at the bank when opening one’s first account”, Andrey Emelin reminded. Hence EBS is all about that. In legal context, it will merely replace personal presence with biometrics for the first account opening”.

Dmitry Zlodiv, Innovations Manager at Promsvyazbank, noted that the new EBS will be in supplement to the already existing Integrated Identification and Authentication System (ESIA) which has about 57 million registered users. [EBS will store depersonalized digital prints, whereas ESIA deals with personal data.]

On a customer request, a bank must collect biometric data and make a respective entry in EBS. Therefore, as far as personal information is concerned, there will be donor banks and consumer banks. Conference participants could not forecast the scale of clients migration among banks, once remote identification law is passed. They noted though the competition will certainly grow.

Integrated Biometric System is now dependent on the banks which do not need it, since they run broad networks of offices servicing individual customers and enjoy stable customers flow”, Pavel Gurin, Advisor to Pochta Bank President, said. “That resembles very much the situation with Credit History Bureaus establishment. When it started, the market was dominated by Russian Standard Bank, Savings Bank and others, so they had no incentive to share their databases with other market players. The practice has nevertheless demonstrated that Credit History Bureaus still function and are of great use to everyone, including the said banks”.

He also noted that remote identification implementation will require deep public confidence in the agencies collecting biometric data and the technical solutions employed. Pavel Gurin warned there may appear a colossus on clay feet, as there will be a grand-scale system in place which can be easily accessed with incorrect data, just as is now the case with ESIA.

Biometrics enforcement

Mutual lack of trust among market players and toward the system to be set, is not the only challenge to be resolved by the banking community. Conference participants put together a wishlist which Elman Mekhtiev, Executive Vice-President of Association of Russian Banks, undertook to submit to respective agencies. On the list, there were three points only: (1) ensure most information is available to the users and is regularly verified; (2) specify responsibility of each party for inappropriate acts within EBS; and (3) make ESIA usage in rendering any government services obligatory.

Meanwhile, Russian citizens are rather cautious about innovations. Most people prefer to get all banking services when personally appearing at banks, and merely 39% Russians polled by NAFI think tank in September 2017, are ready to deal with a bank remotely. Biometric identification is considered to be reliable by youth and active Internet users, whereas 78% of all respondents are confident a bank account must not be opened without a personal visit to a bank office.

By Anna Oreshkina

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1 Comment

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