With this tenth episode of SME Banking Conversations, and the first one recorded this year, I continue the series of inspiring interviews on SME Banking, digital transformation, and people making innovations happen in the industry!
The recording of this episode took place in Warsaw (Poland) in February, where I met Enrico Montagnino, General manager for EMEA at Facephi, who came from London to visit Facephi’s Warsaw office. We talked about biometrics solutions, which Facephi provides worldwide.
Read my conversation with Enrico below or hear it on Soundcloud:
Let’s talk about Facephi. It is a company headquartered in Spain, and present worldwide, having customers all over the world with what I know, 200 and even more banks. Now you are entering the Central Eastern Europe region, and Facephi is providing biometrics technology solutions. Tell us more about your company.
Enrico Montagnino: So firstly, thank you for having me. It’s lovely to be here in Poland and to be part of your Club. Facephi’s core is around fighting financial crime through the use of biometrics. So, what that means for us is our solutions focused on eKYC and AML, and our value that we bring to the market is that we have a suite of biometrics that allows customers to pick the best-of-breed technology to provide remote verification through mobile or web. So, in this digital revolution that we have, particularly within the banking sector, we enable our customers to ensure that the person who is rolling onto a service is who they say they are through the use of this suite of technologies that we have. So, thank you for having me.
What is your personal path and journey to Facephi?
EM: I’ve had the privilege of working in the technology sector for most of my life, particularly in biometrics. When I left my last company, I was looking for a vendor that was focused on biometrics that was moving into a focus on a sector that was adopting biometrics to enable customers to have a better experience in using different services our customers offer. So, when I was looking at the market, I came across Facephi and what really interested me about Facephi, was the number one – there was a global company. Number two, they had a huge customer base, as you mentioned, with over 200 banks globally with some of the biggest brands, including Santander. It caught my interest and when I actually looked at the technology, what really interested me was that what they were looking at was how they could adopt biometrics but looking at it from the customer experience perspective. You know, technology is so broad and so wide. How is huge and how is adopted really defines if it’s good or bad. But what I liked about Facephi is that it was easy to use. Customers liked it, and it did exactly what our customers were looking for – to make it user-friendly. So, I looked at the technology, I looked at the market. It was a natural choice for me. I met the CEO, I looked at the company culture, and I’m here today.
Great. So, if we come back here to the Central Eastern European market, we can say that the digital maturity of the banks is improving. At end of the last year, 2022, 50% of the banks implemented digital customer onboarding. And I’m mentioning business customers here. And this is for online banking channels. For the mobile banking application, this is the future, I hope the nearest one. And 70% of the banks implemented biometrics as a payment authorization method so customers can choose one of the authorization methods. How do you see the development and the pace of implementation of biometric solutions for business customers in the financial sector?
EM: We see a general trend that a lot of our customers within the financial sector, and business customers are now adopting biometrics. There are a number of reasons why we see that. Generally, I think people now understand the value that biometrics brings, particularly to customers. The whole journey I think is important. I think we’re all used to having quite a draconian way of communicating with our banks and banks approving certain transactions. But now with the adoption of biometrics, that whole user experience is significantly better, and banks are seeing that now. And with the feedback from customers, that transition is slowly being adopted from traditional to more digital, meaning the adoption of biometrics. You mentioned the 70% being in Central Europe, which is extremely high, which is fantastic. Across Europe generally, that number kind of varies but is actually lower in other countries. Just slightly we’ve seen that adoption is increasing, which is great obviously for us. So, the journey is what the second thing is, is also helping customers feel better and secure about using digital services. There are different generations of users. The younger generation obviously is probably used to using digital services. The slightly older generation of which I’m one myself, not too old, I must say. They’re kind of the feeling of do I feel comfortable using digital services is being missed. But what biometrics is doing is helping people transition to digital banking because they can see that it’s much safer, it’s much more secure, and it’s helping people move towards more digital banking. Also, it’s helping banks and business customers make compliance. It is a heavily regulated area. So, meeting certain standards, it’s very difficult. And biometrics and eKYC and AML are certainly one of the areas that are helping our customers, banks, generally, business customers meet and adhere to compliance. So the trend is definitely upward.
From your perspective, what are the main challenges that your customers are facing right now in the financial sector?
EM: There are a number of challenges that we see our customers facing within the financial sector. Something like one in five European banks, unfortunately, has been a victim of financial crime, online fraud, which unfortunately is becoming the norm. So, how you fight that, how you fight against that is really the big challenge. You know, technology is certainly becoming more advanced and that number of one in five is now luckily going the other way. And, you know, one of all challenges and one of our aspirations is, is to become one of the vendors to help our customers fight the, you know, the criminals around that within the sector. Another challenge that we find is that customers are adopting this technology is how that journey from their customers is. There’s a statistic I want to quote here, which is something like 60% of onboarding journeys for customers fail. So from a customer that joins your service from the minute they download an app or you go through the website to actually being identified, 60% of them don’t actually complete or it doesn’t complete or there are errors. Why? There are a number of reasons for that. One is the actual experience as a user myself of this technology, it’s a very frustrating journey. I bank with a big bank I won’t mention who they are. They recently adopted biometrics to verify and authenticate not just myself but also my transactions. And I can’t tell you the amount of time that I go onto the app and the application is asking me to verify myself using face where the system looks at me and says “Blink” and I’m blinking, and it says “Blink” and I blink, and it says “Blink”, and it doesn’t work. It’s such a frustration! It’s difficult to articulate. I put myself in the shoes of many people I know that also experience the same. So back to the question. The challenge for our customers is how do I make my customers’ journey good? If your customers have a bad experience, such is the nature of digital banking, there are so many options and choices out there. If you don’t have that good experience with a bank or with a fintech company offering digital services, I could easily go to someone else because it’s so widely available. So that’s another challenge.
And do you have to blink in the Facephi face recognition?
EM: We don’t. We use what’s called passive liveness. I keep referring to the customer journey, it’s all frictionless, so it’s all point and click correctly to look at the application. I do need to look at the application, but I don’t need to interact with it. I don’t need to blink, wink at that, need to talk, or do anything that I would call unnatural, which makes it difficult to use. One other thing as well, which I think is really important, is that the technology sector has become so advanced, which is fantastic. But the flipside to the technology becoming advanced is the number of choices that customers have and the complexity of all these terminologies makes it very difficult for customers to see the light in all the mist of options. Do I go face? Do I go digital signature? Do I go behavioral? Do I go fingerprint? There are so many conflicting stories and using that how you see through that mist is very, very difficult. And one of the things that Facephi brings to the customers is clarity and choice. Clarity means we explain how this technology works. Choice means we don’t just say or suggest using face or fingerprint. We give you the choice. You pick what’s best for you, and we can advise, and we can suggest which technology best fits and which best used for certain journeys.
Let’s talk about ethics in biometrics a bit. I do agree with you that really biometrics gives the best user experience if we talk about digital customer onboarding, it’s smooth and friendly and on the other side, this is a secure solution given that balance between great user experience and security. But on the other hand, we do see a narration on the Internet that some companies can sell biological data, and the data can be harmfully used or misused, let’s say, by private businesses. How do you confront it?
EM: It’s a challenging question. From Facephi perspective, first and foremost, a couple of things. One is that you know, the technology that we provide has to be consented to by the user. Before anybody does anything, they’ve got to say, yes, I’m allowed. No difference to any other vendor. The second thing is that technology from a pure development perspective is developed using the highest level of encryption. It’s meeting and adhering to all the standards around security, ISO. We look at the data side. From a GDPR perspective, we follow all the guidelines to ensure that the data is safe, to ensure that the way we write our data is using the highest level of encryption. Coupled with that we work with customers to ensure that when they store that data or when the application’s running on their infrastructure, we help them and work with them to make sure that they are also using the highest level of security, that they come within their own domain. Because if we don’t control that, that’s down to the individuals. But the reality is, if somebody wanted to gain access to that data, they can. And unfortunately, as I’m sure everybody watching this has seen in the media, there’s been a number of very high-profile cases where data has been stolen, data has been made available or even were still sold to people that you wouldn’t want your data sold to is unfortunately where technology is today. That said, I want to cover one little thing, which is important to understand, particularly the use of face. Facial recognition has a very bad connotation because everybody paints it with the same brush. Actually, that’s not correct. The way that Facephi uses facial recognition and the way that it writes the data makes it very challenging for people to steal information, to do anything with it. What does that mean? When we look at our data without getting too technical, we write it in a way, I’ll give you a practical example. You download a banking app, look at the camera, and take a picture of your face. The source is, yes, a picture. But we translate that into a number, a mathematical vector, which is a 256 string. That doesn’t mean anything to anyone that’s stored in the database. Next time that you access your mobile banking, you look at the camera, it looks at your picture, but we translate that into a number. So, what we’re doing is we’re comparing numbers at the source to numbers with the database. Why am I telling you this? I’m telling you this because if somebody were to get access to the data that we store or they’re going to gain access to these numbers, it is a vector. So, in practice, there’s nothing that you can do with that. It’s very important that you know, the audience understands that because not every vendor is the same. Not every vendor writes their data in the way that we do at Facephi and it’s important to understand that the use of biometrics in this example face has a very large variance of how safe it was stored and at Facephi we use the highest level of encryption, but also the latest technology to ensure that when we capture information, there’s not a lot fraudsters could do with it, and that’s very important. oupled with that, one of the things that we have adopted with our technology is the use of liveness. For those of you in the audience that’s not familiar with liveness. This is the technology that ensures that when somebody is taking a picture of themselves live, in real-time, we can ensure that that person is indeed a real person. What’s very different about the technology of Facephi is that we use what’s called passive liveness, which basically means that I could look at the phone or the webcam and don’t have to interact with the technology so that instantly, as soon as we’ve taken a picture, we can ensure that the person is real, that the person isn’t taking a picture or holding a picture up of the person trying spoof the application. It’s very important to note that is that there are different variants of likeness in the technology sector. And what we have is something called passive liveness. What that means is I don’t have to interact with the application. A number of technologies out there only work if you interact with them, meaning you have to blink or you have to move your head or you’ve got to look left or right, which makes the whole user journey extremely difficult, and extremely cumbersome. And generally, people don’t complete that process because it doesn’t work.
How do you think facial biometrics could be implemented in banking, in digital banking, besides online and mobile banking applications? For example, we heard recently that Japan Railway announced that they will set up facial gates in their two stations in Osaka. Do you think that something like that could be implemented in banking? For example, a customer enters the branch and, you know, using the facial ID, it is scanned, and the relationship manager knows already who enters the branch. It might be connected with CRM. So, you know, the manager knows everything, what the customer has, what they might need, etc. So, then the conversation starts not from a customer authentication, but from the business conversation. Do you think this is possible and makes sense at all?
EM: Biometrics has got a number of different use cases and there are so many values that biometrics can bring to the financial sector. I want to mention a couple. So, when you think about biometrics, a lot of people today think about onboarding. What we’re talking about, capturing your face, taking a picture of an ID, which works very well and obviously has a lot of value there, particularly around insuring the person. We’re now taking that where some of our customers have already taken. It can be adopted and used for general verification. So now, we’ve gone beyond just onboarding, the use of face to access your account or approving a transaction. Because it’s quite widely adopted and because it’s secure, banks could take that and offer it as a service to their customers. And this is novel. Many banks are doing this today where a customer can use their face to transfer money, access their account, to take on a service that the bank office. That said, it’s been taken even further than that, where we have a customer in Spain, which I can mention, which is CaixaBank, which is now adopted face in ATMs. What does that mean? Customers can now withdraw money up to a certain value using face, which is mind-boggling. So, I could go up to an ATM without the use of a card, the camera recognizes who I am, and I get up to a certain value, which allows me to take out money. So, it’s just an example of how widely biometrics is now being adopted within the banking sector, not just within banking services, but also how users interact with the infrastructure of a bank. You mentioned Japan Railways, the banking sector that is more from the traditional banking sector has branches, they have buildings, and could also use biometrics to recognize customers. I could walk into a branch, and be recognized that I’m Enrico, and I could now start to use that to offer different services. I could be a VIP customer. I could be a certain profile to the point such offers that I might have as a bank to me. Not just customers, but employees are accessing a corporate building. Many, many benefits to that. The experience of an employee not having to have a card is much safer and more secure. I said there’re many use cases for the use of biometrics across customer banking services, and how they interact with the infrastructure, also to employees that I could spend another hour talking about it, but now we’re seeing it more and more being widely adopted. I gave you some examples where.
What are your nearest plans? What your customers here in Europe will hear from your nearest year?
EM: Facephi’s goal is to become one of the prominent players to mitigate financial crime through the use of eKYC and AML. The investment that we’ve made is to broaden the scope globally. So, for the last 6-8 months, personally, I’ve been taking the company into Europe, the Middle East, and Africa, and that journey is going to continue. We have invested in this region, Central and Eastern Europe, amongst many other countries across Europe, where we’re putting people on the ground. I’m a big believer in having a local presence, language, and just the confidence that there is someone there on the ground. So, we’re going to continue that. The audience is also going to be seeing a lot more development from a technology perspective for a Facephi. I spoke a little bit about biometrics today and some of the technologies that we have, but we’re growing, we’re adding more to our portfolio, and we’re adding more to the choice. So that customers not only can pick from the best of the breed but also, we’re taking our customers on a journey that can take the customers beyond the onboarding into what that customer does and what is a customer doing once they’re a customer. So, the other biometrics that we are looking at, which the audience will see as part of the Facephi portfolio. One of the things we’re also doing as well, is how we are meeting the eIDAS regulation. It’s a very hot topic, particularly within the European Union. With eIDAS 2.0 coming up at the end of the year a lot of the vendors within this space and now racing to meet the standards that are adhered stated by the eIDAS regulations. So one of the things that we are doing is we are eIDAS compliant and we are monitoring how eIDAS is evolving, particularly eIDAS 2.0. So, you’ll hear a lot more from Facephi on how we’re doing that. And, also, in terms of e-wallets, how we work and how we play in that whole subject. You’ll hear a lot more from Facephi on that. And you know, to summarize, what I’m saying here is that we are pioneers and we will continue to be pioneers. We’re going to see our technology evolving with the demands of our customers. We’re going to spend a lot of time listening to, particularly the financial sector and digital services around the financial sector to ensure that we have our finger on the pulse, ensure that our technology meets and exceeds the demands of our customers and I’m very proud to be part of that.
Good luck with it, Enrico, and thank you very much for this conversation.
EM: Thank you.
Watch the conversation below: