Banking
Posted on
March 29, 2024
by Srikanth Nadhamuni, Founder CTO Aadhaar, Co-Founder, and Chairman Trustt
In the rapidly evolving digital banking landscape, Aadhaar's integration with face recognition technology marks a seminal shift, transforming how banking transactions can be conducted. This article delves into how this blend of biometric authentication and digital technology not only streamlines banking processes but also enhances security and accessibility, democratizing financial services in an unprecedented manner. This approach is not without challenges. Particularly, the lower accuracy of facial biometrics compared to iris recognition and its implications have to be addressed. As we explore this transformational change, we uncover the implications for both consumers and the banking sector, heralding a new era in the digitization of financial transactions.
Aadhaar, as a national ID system, has had a massive impact on financial inclusion and banking. The JAM trinity of Jan Dhan Yojana, Aadhaar, and mobile penetration achieved bank account creation for 80% of the adult population in 6 years, a feat that would have taken 47 years at the normal pace.
[Graph Source: BIS Paper by D'Silva, Filkova, Frank, https://www.bis.org/publ/bppdf/bispap106.pdf]
This achievement was the result of deliberate design and no coincidence. During the Aadhaar system's design phase, we considered the positive impact of robust ID verification systems on financial inclusion and banking. Being part of the Aadhaar DDSVP(Demographic Data Standards and
Verification procedure) committee, I recall our meetings with the RBI to ensure that Aadhaar-based KYC would meet their stringent KYC requirements. Before Aadhaar, a bank KYC would cost about Rs 500; this decreased to Rs 3 post-implementation and resulted in covering nearly the entire population. This not only saved the country a significant amount of money but importantly extended financial inclusion to millions.
Recently, Aadhaar announced support for face biometric authentication. What does this mean, and how does it affect the banking sector? To understand this, we need to understand Aadhaar's two key functions:
- Authentication: It verifies your identity, much like using a user-id/password verification for say Gmail access. Aadhaar facilitated access to services such as ATM transactions, pension receipts, and airport access.
- KYC: Licensed entities such as banks and telecom companies carry this out by first conducting an Aadhaar authentication which then returns the person's demographic details to create a bank account or issue a mobile SIM.
Aadhaar employs either biometric or demographic methods for these verifications, the former method uses devices like fingerprint or iris biometric scanners, and the latter method uses details such as name, address, gender, date of birth, or an OTP sent to a registered mobile number.
Previously, biometric verifications needed specialized devices and had to occur at specific locations with the necessary equipment. Although Aadhaar enrollments captured individuals' faces, this feature wasn't used for verification until now.
A Balancing Act of Assurance and Convenience
In most scenarios, we encounter trade-offs between security and convenience. While high-assurance verifications require biometric methods and specialized devices this does impinge on convenience and availability. Hence one could opt for demographic authentication or OTP using just a phone, while it improves convenience it decreases the level of assurance. Now, Aadhaar's face-matching support allows us to achieve high-assurance authentication without sacrificing convenience since we can simply use a smartphone camera and yet get high-assurance verification, effectively letting us "have our cake and eat it too".
The Merits of Face-Based Verifications
- Non-contact Verification: It offers a non-intrusive user experience as it can be performed from a distance.
- Integration with Existing Technologies: Current smartphones and computers typically feature cameras, facilitating the easier integration of face recognition technologies.
- Speed: This method can verify an individual swiftly, within seconds.
- Ease of Use: It demands minimal effort and understanding from the end-user, involving just a glance at a camera.
- Liveness Detection: Advanced algorithms can discern and ensure the presented face is that of a living person, preventing spoofing.
The challenges posed by face-based verifications
- Accuracy and False Positives/Negatives: Facial recognition inherently has higher false positives and false negatives leading to higher error rates in verification in the field.
- Spoofing Attacks: Fraudsters might use photos, videos, or even 3D models to trick facial recognition systems.
- Deepfakes and Synthetic Identities: Recent advances in Generative AI have led to the creation of deep fakes, where a person's face can be convincingly replicated. This could be used to create false identities or impersonate legitimate customers.
In spite of the above potential challenges, the merits and advantages far outweigh the drawbacks. The key advantage of using the ubiquitous smartphone (over 800 million in 2023) that provides a high assurance biometric verification without the need for special biometric scanners like fingerprint or iris scanners, makes this modality esp. attractive. Face-based verification enhances many everyday activities,
- Imagine sending Rs 20,000 over UPI, by simply looking at your smartphone for an Aadhaar face authentication. This provides the high level of assurance you need to send a larger sum of money.
- Imagine a bank providing MFI or MSME loans in a rural area and doing a face-based KYC in the field for the loan application by simply using the loan officer or agent’s smartphone.
- Imagine walking into an airport and doing face authentication for a much higher level of security than the manual documentary photo match performed today.
- Imagine looking briefly into a smartphone affixed at a Metro station, to let you into the station for a quick and comfortable ride.
Why was this not possible until now
So what changed now to allow Aadhaar to release the face match feature when fingerprint and iris match verifications were provided when Aadhaar was launched 12 years ago?
Advances in artificial Intelligence made all the difference. Twelve years ago when Aadhaar started enrolling residents and started providing verification services, the biometric matching algorithms using faces were quite simplistic. With the advances in AI esp. deep learning techniques, the face match accuracy improved by leaps and bounds and made it feasible to support this convenient method.
The Rising Trend of Face-Based Verification in Banking
In May 2023 alone, a remarkable 10.6 million transactions were performed using Aadhaar-based face verification, illustrating people's growing preference for this safe and convenient identity verification method for banking activities. Currently, Aadhaar handles about 80 million verifications daily, many of which pertain to the banking sector. With face-matching support, the range of use cases is set to expand, enhancing security with each transaction. It is very likely that smartphone-enabled face-based Aadhaar verifications will soon become the dominant method of Aadhaar verification, combining security with convenience.
In summary, Aadhaar's integration of face recognition into digital banking marks a significant step forward in India's banking sector. This technology simplifies and secures financial transactions, enhancing user convenience without compromising safety. As this trend continues, I expect Aadhaar's face recognition to become the dominant verification method in the digital banking landscape, playing a crucial role in advancing customer convenience and financial security.
