Banks in GCC, APAC adopting digital identity, biometrics, AI

Banks in GCC, APAC adopting digital identity, biometrics, AI

Customers around the world are turning to digital platforms for daily operations, including banking transactions. The world is in the midst of a digital revolution in banking and the fintech ecosystem, where financial development and innovation such as biometric technology and digital identities deliver robust security and a better mobile banking experience.

With FinTech solutions breathing down their necks, ready to disrupt the industry, a high interest in tech adoption is noticed among banking institutions in key economic regions, such as APAC countries and the GCC (a political and economic alliance between Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman). As a result, the number of data breaches in banks in the UAE has been decreasing since December 2014, according to market intelligence company S&P Global research reported by UAE’s The National.

“The adoption of big data, artificial intelligence analytics, as well as voice and facial recognition tools could enable a more effective and cost-efficient provision of customer (banking) services,” S&P Global said.

The concern among banks in the GCC is that FinTech companies will revolutionize money transfers, foreign currency exchange and payment services, to the point of cutting down transfer fees and times. According to S&P, this could have a major impact on traditional banking and exchange operations in the GCC.

However, it is customers who put pressure on the industry for more effective service delivery, and not so much regulators. Understanding the power of strategic partnerships, regulators advocate banks work together with FinTech companies to deliver optimized and secure solutions for their customers.

Mohamed Damak, S&P Global Ratings credit analyst, explains: “Regulatory risk is low because policymakers are conscious of the extreme importance of local banking systems in the region and the need to keep them safe from potentially disruptive unregulated competition.” He further states that banks have about two more years to not worry about it “because regulators continue to protect them (banks) and the share of current activity at risk is small.”

According to the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf, some 40 percent of the GCC population is under 30. As young professionals are more tech-savvy, there is a strong demand for digital services in retail banking.

“Online banking penetration has reached 92 per cent in the UAE banks and 85 per cent in Saudi banks,” found McKinsey. To attract a young audience, Mashreqbank in Dubai has launched ‘neobanks’ that are 100 percent digital banks that operate only through mobile apps and personal computers.

Elsewhere in the world, following a high demand for robust security, as data privacy is at risk due to a boost in banking fraud, APAC banks are looking into safeguarding mobile banking by implementing biometric authentication and digital identities.

Three-quarters of APAC consumers have more confidence in banks that have integrated biometric online security, found the Experian 2019 Global Identity & Fraud Report Asia Pacific (APAC) edition.

Up until recently, the only security customers in the region had was the use of their personal identification number, which made it easy for hackers to take over their accounts. According to Banking CIO Outlook, the new strategy involves multi-factor authentication that consists in a mix of biometric identification, most likely in the form of fingerprint scanning, passwords and personal identification numbers. By deploying biometric authentication, not only do APAC banks want to reduce costs associated with traditional banking methods, but they also want to deliver an enhanced user experience and boost security. One of the options is Biometric-as-a-Service (BaaS), a subscription-based service that will provide functionalities such as “enrollment and duplicate identity detection, mobile biometric, biometric liveness and spoof detection functions.”

While most financial ecosystems focus on leveraging blockchain, AI or IoT, experts preach about the equal importance of e-KYC in further developing digital banking and e-commerce technology, writes Open Gov Asia.

In Malaysia, they are pushing for government action to boost the buildup of the FinTech ecosystem. McKinsey research claims e-KYC could generate a 90 percent cost cutback in customer onboarding, while “digital identity could potentially enable 1.7 billion of the unbanked population to gain access to financial services.” According to Bank Negara Malaysia (BNM), 11 banks are already testing e-KYC solutions.

In August, Malaysia’s Ministry of Communications and Multimedia (KKMM) launched a national biometric digital identification platform (National Digital ID) to enable its 32 million residents to conduct online operations in “a safe and seamless manner.”

Faced with a fast-growing population and concerns of digital ID fraud, Malaysia will soon be likely looking into virtual banking licenses, says Open Gov Asia, and as regulators are pressured into establishing e-KYC guidelines for wider applicability the financial industry, e-KYC regulations will be critical for faster customer onboarding.

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