A digital security point of view for the digital business era

How can the Authentication Process for Micro Banking be Simplified and Improved?

13 Aug 2018

Micro banking has different connotations depending on where we live. In Western countries, it has typically evolved as a way to provide individual relationship based financial services to entrepreneurs and small businesses who might otherwise have struggled to get help through a traditional financial services approach. In other parts of the world, it is seen very much as a way of getting basic financial services to the poor and needy or those that would typically be unbanked.

When we think about “unbanked” individuals, it is perhaps hard to reconcile with the figures published by the Financial Inclusion Commission in 2018 showing that in the UK today there are still more than 1.5m adults that remain unbanked. This, despite the World Bank rating the UK as the ninth best country in the World in terms of banking inclusion.

The effect of financial exclusion can be devastating, impacting on all major aspects of citizens daily lives including housing, education, health and employment and can mean exposure to risky and unsuitable financial products. In the UK, according to the Commission, between 1993 and 2014 there was a tripling in the level of unsecured consumer credit lending from £51.8bn to £160.4bn and the number of illegal money lenders almost doubled between 2006 and 2010 to 310,000. More than 3m households use high cost credit and the payday lending market that was worth £330m in 2006 had increased dramatically to be worth £3.7bn by 2012.

Access to a variety of key financial services can help to improve the lives of low income people and the outcomes for micro businesses. With 50% of households in the lower half of the income distribution lacking home insurance compared with one in five households on average incomes, we see that the problem is not only limited to loans and credits.

According to the 2017 BNP Paribas Microfinance Barometer, the global market for micro finance is dynamic, fast changing and buoyant even though more than 2bn adults lacked access to a financial institution. In 2016 there were more than 123m customers worldwide for a loan portfolio of $102bn with India as the leader with 47m borrowers and roughly $15bn in outstanding loans. Europe accounts for around 9% of the total with $9.3bn of outstanding loans.

The traditional role of Financial Institutions has been to support those with financial assets with the banks generally making better returns when providing larger loans and managing bigger savings and investment portfolios. The question to ask is “how can micro finance providers ride on the wave of digital transformation and offer new and better services to their target customers?”

According to Statistica, there are now around 48.5m smart phone users in the UK and around 2.3 bn smart phone users globally. It makes huge sense to include the mobile channel when thinking about innovative services for micro banking and it is becoming increasingly important to make sure that those services are provided in an easy to use and secure way.

Hitachi provides new technologies that aim to contribute to a safer and more secure society. These address the usability question by providing a simple, easy to use interface that enables the straightforward authentication of users. At the same time, they provide a secure foundation for providers conducting finance related transactions with end customers in the all important mobile channel.

Hitachi’s latest VeinID offering can be used by a device equipped with a digital camera (smart phone, tablet, laptop etc.) to capture finger vein data.  Easy to use and straightforward to integrate with mobile banking applications, it provides an ideal and secure way for customers to authenticate themselves. Before its introduction, finger vein authentication required the use of dedicated hardware with infra-red scanners, but now, the advantages of using finger vein data for customer authentication including; privacy, ease of use, higher security levels, and simple registration process, can all be met using the ubiquitous smart phone.

A smart image-processing algorithm applies filters to a standard photograph captured by the smart phone. This allows the vein patterns, normally invisible to the naked eye, to be extracted. To improve accuracy, a single photograph of multiple fingers is made and the App extracts the vein data from each finger. The resultant processed finger vein data is encrypted and sent to a central system for validation. The whole process takes only a few seconds.

The addition of a strong authentication step that is simple to use whilst ensuring best possible security for both customers and providers means that financial products can be purchased quickly and safely.

The adoption of these kinds of technologies as part of a wider digital strategy by both fintech and established micro-banking providers can help those providers to fundamentally overcome the burden of getting to “know the customer”. The process and operational costs for offering an increased range of reasonably priced financial products to a wider potential customer base through a low touch and ubiquitous channel with higher security levels can be optimised.

For further information on how these tools can be deployed to enhance security of micro banking operations, please contact us via