Customers of digital banks are ready to adopt modern authentication methods for security reasons

The news: Customers of US digital banks prioritize the security of their financial data over convenience, but new technologies could merge the two, by PYMNES.

More on this: Two-thirds of digital bank users in the United States would rather know their private information is secure than have a simple and convenient digital app, by a report by PYMNTS and Entersekt.

But as banking progresses, frictionless passive authentication can bridge the gap between the two.

  • 73% of consumers who access financial accounts through multiple devices are ready to log in with alternative authentication methods.

An alternative authentication methods include multi-factor authentication, biometric authentication and single sign-on solutions. These methods can reduce the need for passwords, make it difficult for fraudsters to impersonate a user or for attackers to infiltrate user accounts, and provide a seamless authentication process.

The future of banking: Our report, The Bank in 2025explains how the future of the banking industry will rely on data sharing through application programming interfaces (APIs) and an open banking infrastructure, and therefore, on the implementation of strong privacy and security controls .

  • To access the tools and services offered by fintechs and other brands, banks will need to build an infrastructure that supports open APIs.
  • Increasingly, banks will have access to more and more of their users’ financial data. But consumers will also have control over what is shared and how it is used.
  • Access to data will allow banks to personalize their services and offers for each customer, but this access means that security and privacy will be at the forefront.

Banks are already migrating a large part of their data to the public cloud platforms. Although the cloud makes it easier to share and store data, it also creates more opportunities for data manipulation or theft than for data stored on a local server. But technological developments are mitigating concerns. Artificial intelligence (IA) is a way for banks to verify transactions and other customer actions in real time. AI capabilities are able to quickly process large amounts of data and can flag potentially fraudulent situations. Banks leveraging these capabilities, however, must ensure that the authentication technology companies providing these tools are reliable and will maintain strict confidentiality protocols.

Funding trends: Venture capitalists understand the importance of frictionless authentication and the growing demand for this technology. Funding in the authentication fintech space is heating up.

  • In February, biometric user authentication Passage raised $4 million in New funding to promote its FaceID and TouchID products.
  • In April, Own IDanother biometric authentication provider, raised $6.2 million in plant funding to double its workforce and further expand its biometrics service that uses a customer’s smartphone to verify their identity for access to certain websites.
  • This week mobile identity startup Incognia raised $15.5 million in Series A funding. Incognia provides software that uses location signals and on-device motion sensors to verify user identity. The company claims the software is 10 times more accurate than facial recognition software.

The big takeaway: The digitization of people’s daily lives has revealed how much companies have collected data on their customers. Customers have learned that the simplicity of some new features can potentially put them at risk. Banks must move from reducing friction in the customer experience to protecting their customers’ data, thereby earning their trust and retaining their business. For now, customers may be willing to take additional steps to verify their identity to ensure their safety. But as digital experiences continue to evolve and grow in sophistication, customers expect strong security measures to be seamlessly integrated into the service they receive.

Sylvia B. Polson