Using passwords to access online accounts is a dated authentication method that many people still use today. A password is a knowledge-based authentication method that serves as the first line of defense against unauthorized access. Its effectiveness in securing accounts vary depending on password strength and whether people reuse passwords for different accounts. Because most people use one password for multiple accounts, password logins are ineffective for online identity verification.
Financial technology firms and banks must now ensure that they can authenticate their clients’ identities and ensure that only legitimate clients can transact with them. This is part of their due diligence with regulations like AML or Anti-Money Laundering, KYC or Know-Your-Customer, and PSD2 or Payment Services Directive 2. Shifting to a passwordless authentication method is an effective way to comply with the regulations.
Passwordless logins improve a firm’s defenses while providing customers with seamless account access and authentication experience. Banks that want to go digital will need to adopt such measures to ensure that their customers’ data are secure. It is possible to implement passwordless logins through FIDO2 authentication that leverages a combination of different authentication credentials, including biometrics, cryptographic keys, and knowledge-based authentication factors.
FIDO2 cryptographic login credentials use common mobile devices with facial and/or fingerprint recognition support to provide a simpler authentication experience. Login access is limited to a customer’s registered device and requires a secondary facial or fingerprint biometrics authentication to unlock the cryptographic keys.
By using passwordless logins, financial firms can comply with different regulations with the highest certainty. Digital banks can also save up on password reset costs, drive up revenue, and allow them to invest the resulting funds into better endeavors to promote business growth.
Passwords no longer serve as an effective authentication method. They are more of a security threat today, especially since most customers use and reuse old and weak passwords for multiple accounts. Passwordless logins can help eliminate the risk of phishing attempts and fraudulent takeovers that areproblems when institutions use passwords. For more information, see auhtID’s infographic here.
