Emerging Technology in Consumer Finance:

FACIAL RECOGNITION
I. NAME & DESCRIPTION OF THE TECHNOLOGY

BIOMETRICS

is defined as a technological and scientific

method that analyzes physical or behavioral
characteristics of individuals in order to
digitally authenticate their identity.

This technology makes use of attributes that

are unique and specific to each person.
Biometrics is commonly used to grant
individuals access to restricted sites, systems,
devices, and data.

According to research, facial contortions, earlobe geometry, fingerprints, and even

the manner of walking (gait) are considered unique identifiers.

Biometric Identifiers
A.) Physical

Fingerprint Face Voice Signature DNA

B.) Behavioral

Physical Movements Typing Cadence Navigation Patterns Engagement Patterns

When these unique identifiers are used in combination, another layer of security is added
and the accuracy of identification and authentication increases.

In some industries, advanced biometrics are applied to secure highly classified information
which are prone to breach. Below are a few examples of how companies employ the
biometric technology:

Citibank already uses voice recognition to verify customer’s identity.

Halifax, a British bank owned by the Lloyds Banking Group (UK), tested
the use of a customer’s heartbeat to provide access to their online
banking services.

For Halifax, the technology was just on the concept-of-proof stage

when shared to the public. Although there are no further updates on
when it will finally be rolled-out, another agency has come up with a
method that uses heartbeat to ascertain a person’s identity.

The Pentagon now has infrared laser that can extract a person’s
cardiac signature from a distance. This technique aims to be utilized,
along with other biometrics, to verify the identity of a terrorist prior to a
strike.

Ford is also exploring the idea of installing biometric sensors in cars to

further revolutionize self-driving technology. Sensors will be used to
asses a person’s state and send signals to the car if the driver is falling
asleep; the vehicle is thereafter supposed to respond. This security
feature is being eyed in order to lessen vehicle-related accidents.

There are numerous ways on how biometric techniques are implemented. Its applications
are continuously expanding as the human characteristics used are known to be:
For this paper, the specific biometric technology to be used is “Facial Recognition” and its
application to the industry of consumer finance, particularly in the area of consumer
lending.

What is Facial Recognition?

Bernard Marr, a strategic business & technology advisor and a contributing writer
at forbes.com, defined facial recognition as “a biometric technology that uses
distinguishable facial features to identify a person.”

He added that the use of facial

recognition has expanded from simply
unlocking our mobile devices, to passing
through security checks, and even
buying products at stores. Facial
recognition is now the second most
popular kind of biometrics next to
fingerprint.

It was developed by Woodrow W. Bledsoe—an American

computer scientist and one of the founders of Artificial Intelligence.
The US government pioneered the use of this technology by trying
to spot criminals who attempt to cross borders.

Facial recognition grabbed headlines in 2001 when it was used by US law

enforcement at the Super Bowl game to scan for terrorists and felons among the
sea of audience. That was the first time it was used in public and heavily
scrutinized as it raised threats on tampering with individual privacy.

Developments on this technology continued to flourish, with the US government as

its major adopter—using it for surveillance purposes.

Then came the birth of social media. In 2010,

six years after Facebook was created, the
largest social media networking site added
the facial recognition feature in their platform
to help recognize faces in photos and
propose tags for identified users.

The technology likewise spread in the industry of banking & finance, addressing
the growing cases of fraud, identity theft, and robberies. Years later, it was
predicted that the use of facial recognition is bound to expand to retail. And in
2017, Apple made a ground breaking launch of iPhone X, featuring a new system
used to unlock the device: the Face ID.
 In spite of all these developments, facial recognition is still considered an emerging
technology as it continues to increase popularity across the globe and expand its
footprints in various industries.

According to research, the

global facial recognition
market is expected to hit the
$7Bn mark in the next five
years. Growth rate is posed at
16% from 2019-2024, and the
financial services sector is
seen to increase its market size
during the said period.

II. HOW DOES IT WORK?

An article at upwork.com explains that Facial Recognition
Technology (FRT) works by measuring and mapping
distinguishable landmarks of facial features from multiple
nodal points, eventually creating a face print. Examples of
these features are:
 Distance between eyes
 Depth of eye sockets
 Shape of cheekbones
 Nose width
 Length of jawline

All these facial features help the system “remember” the attributes of a person’s face. All
measurements and characteristics are collected, stored in a database, and are used for
comparison when the camera detects a face. This technology is becoming the fastest,
most secure, and reliable tool for user authentication.

Facial biometrics functions in two distinct ways: identification and authentication.

According to gemalto.com, during identification stage, a person is recognized as one,
along with a collection of other faces. The information on the person being identified is
compared with the data of other individuals that are stored in the database. The
authentication stage, on the other hand, verifies an individual’s identity by comparing the
information they provide versus the existing / pre-recorded data of the person they
declare to be.
Biometric facial recognition operates on mathematical algorithms through several stages
of image processing:

 Capturing: the system collects physical or behavioral samples and stores it in the
database

 Extraction: unique data are gathered and extracted from the samples to create
templates

 Comparison: collected data are compared with the existing templates

 Matching: the system decides if the features extracted from the new sample
match with the ones from the database. This is also the final stage of
the process.

Facial recognition is indeed a revolutionary technology. However, it also comes with

limitations wherein external factors can affect its precision. For this reason, the idea of
integrating Artificial Intelligence into facial scanning systems is recommended in order to
improve its result, increasing the technology’s accuracy and efficiency.
Merriam-Webster defines Artificial intelligence (AI) as a “branch of computer science that
deals with the simulation of intelligent behavior in computers. It is also the capability of a machine to
imitate intelligent human behavior.”

By incorporating the science of machine learning and neural networks, facial

recognition systems can distinguish images and categorize them according to
the elements that they have.

In a separate article, Bernard Marr said that through neural networks, computers
are taught to function the way human brains do while retaining the advantages
this technology has over humans—speed, accuracy, and the absence of bias.

Another writer and a technology editor, Chua Kong Ho, how facial recognition
and AI are transforming physical security in Asia. He said that “AI is now smart
enough to detect if a person is acting out of the ordinary and flag these ‘exceptions’ to the central
command centre, where human operators can decide on the course of action.”
III. ADVANTAGES & DISADVANTAGES

Advantages

 IMPROVES SECURITY MEASURES

Serves as a more secure tool to protect devices,

confidential files, and other personal data

Makes way for automated identification which can

provide stringent access to business premises and
enhance tracking of human activities

Heightens surveillance in aid of law enforcement

(identify criminals and terrorists) and in monitoring
security in critical and high traffic locations (i.e. airports,
banks, malls, public transport, etc.)

 ALLOWS EASY INTEGRATION

Facial recognition tools that are integrable can work
seamlessly with a security program that is already in
place and can be easily networked with existing
computer systems. With this, companies need not
redevelop or invest on new software that is compatible
for FRT integration.

 PROVIDES CONVENIENCE
Face recognition process only takes a couple of seconds (or even less) since
it requires no physical contact (as compared with finger scanning). It
provides a secure yet fast and seamless verification. This time-saving feature
is beneficial to both the company and its customers alike.
 ENSURES HIGH ACCURACY

Through AI technology, 3D facial

recognition, and infrared cameras, face
tracking has now become more accurate
for identification and verification. Though
glitches may still be possible, the said
improvements have made it more difficult
to trick the system—increasing security to
protect data, facilities, and even prevent
fraud.

Another advantage AI can add to

facial biometrics is the capability to
analyze and calculate the effect of
aging on a human face. This is done
through predictive modeling. These
combined technologies can make
authentication more accurate.

Disadvantages

 REQUIRES AMPLE DATA STORAGE

Facial recognition will be more accurate if the device used can capture
high quality videos and images. However, these high-res files require
significant amount of storage. This requirement may be a problem for small
and medium-sized companies that don’t have enough resources for data
storage.
 EXTERNAL FACTORS CAN CAUSE INACCURACY

They say that the accuracy of facial recognition can’t be put into question.
However, external factors may come into play which can affect its precision—
poor lighting, camera angle, different facial expressions, and even items worn
during image capturing and face detection (eyeglasses, scarves, cap, new
hairstyle that can block the face). That is why integration of artificial intelligence
with facial recognition is highly recommended.

 POSES PRIVACY RISKS

While facial recognition can help track down law offenders, it can also be used
to keep an eye on anyone. People’s activities may no longer be kept private
and this is considered as breach of privacy rights. More so, given that it is starting
to gain traction, if users of this technology are not responsible enough to beef up
on data security, information may be collected, stored, and used by ill-
motivated and unscrupulous individuals for illegal activities.
IV. APPLICATION TO CHOSEN SECTOR: FACIAL RECOGNITION IN CONSUMER FINANCE

Aviram Eisenberg, founder and CEO of the software company Ignite Ltd., explained
how suited biometrics technology is to the financial industry: “it satisfies institutions’ ever-
increasing need to protect their customers’ information, and it makes conducting transactions more
convenient.”

There are vast opportunities that can be unlocked in the financial market through this
technology, and the possibilities are also limitless.

1. Verifying Customer Identity for Loan Application

Financial companies may implement the use facial recognition to

identify customers applying for a loan. The goal is to fast- track
the application and identification process, and eliminate the
need for in-person appointments. This can be done in few easy
steps:

 Customers to fill-out application

form online (website or app)

 Using a facial recognition

technology installed in the
company’s digital platform,
customers shall take a picture of
their face and upload it in the
system

 Let machine learning technology verify all data uploaded in the

system

This approach can help institutions reach out to customers who

rely purely on cash transactions due to limited access to
mainstream financial services.

Having an efficient customer identification system can also protect

both the company and its customers from fraud.
2. Determine Creditworthiness for Loan Approval

The chance of getting approved for a loan, as well as the value of

money a person or business can borrow, rely heavily on their
likeliness to pay back. Determining an individual’s capability to do
so is highly important in the industry of lending.

Financial institutions should look past the usual credit score and
income as basis for credit worthiness. In this age where people are
offered with numerous options on where and how to utilize their
finances, companies should see beyond the traditional way of
assessing customers especially those who have no traditional
credit history.

By incorporating facial recognition technology with machine

learning, companies can detect a person’s reliability in repaying
loans by looking at the applicants’ digital footprint. Techterms.com
defines digital footprint as “the trail of data a person creates while using the
Internet including websites visited, emails sent, or any information submitted
to online services.” It can also be data posted by others that is related
to or identifies a person.

A business intelligence article at emerj.com shared how a tech

start-up is using advanced machine learning to “comb through vast
sources of alternative data to predict an individual’s creditworthiness.” It is called
Lenddo—a software company based in Singapore that spawned
the concept of using non-traditional data to measure people’s
financial stability. Their goal is mainly to improve the lives of the
rising middle class in emerging countries by “providing micro loans for
specific purposes.”

Ping An Puhui, a micro lending unit of one of the largest life insurers
in China, also developed a digitalized loan process where they
“analyze facial expressions of applicants to determine their willingness to repay the
loans.”

The company has seen 100% growth in customer base in 2017 and
its loan default rate has dropped without having to increase in
staffing.
V. ETHICAL ISSUES IN THE INDUSTRY CHOSEN

Privacy of Client Data

Biometric technology can indeed revolutionize the consumer lending process. A quick
and uncomplicated loan process may be ideal for customers but lack of proper
information may lead them into a debt trap. More so, given the advanced method of
customer assessment, security and privacy can be placed at a greater risk.

Since digital footprint analysis will be tied to facial recognition

in measuring loan eligibility, extensive customer information
will be collected—even non-financial related data. Lending
institutions can have access to clients’ social media
information, online activities, emails, contacts, purchase
history, even geo-tracking of their locations. This could result in
unprecedented volumes of data collected, with the chance
of these highly sensitive information being exposed.

Also, customers may not be fully aware of the extent of data that will be obtained
from them and how their information will be handled (collection, usage, storage,
sharing). Companies must first address the following concerns:

 What type of data will be acquired?

 Who will collect it and who else will have access to it?
 For what purpose/s will the data be used?
 How will the companies protect customer data
 How long will their information be stored in the database?
 What rights and options do customers have if their data are
compromised?

Applying and getting approval for a loan is one thing, but the
entire process also includes payment and collections. Concerns
on data privacy can be problematic in the event that
companies would use customer data in forcing them to pay their
debts. Misuse of borrower’s information including disclosing their
unpaid balances to their contacts constitutes harassment as it
causes reputational harm to the individual. It is also considered
as abuse of the borrower’s privacy rights. Financial institutions
must provide customers with an adequate exposure about data
collection as well as its use in credit applications so that they can
come up with an informed decision before applying for a loan.
VI. CONTRIBUTION TO SUSTAINABLE DEVELOPMENT

Digital technology can truly transform the finance

industry at a global scale. By digitizing the loan process,
companies can reach out to the underserved who have
limited or no access to financial services. This scheme
would contribute to the principle of financial inclusion.

World Bank defines financial inclusion as “access of individuals and businesses to useful and
affordable financial products and services that meet their needs – transactions, payments, savings,
credit, and insurance.” The goal is to eliminate hindrances that exclude people from
having rights to financial products and services that can improve their lives.

The United Nations Capital Development Fund (UNCDF) sees

financial inclusion as a prominent enabler and a target of
several goals in the 2030 Sustainable Development Goals (SGD)
such as: diminishing poverty (SDG1), putting an end to hunger
(SDG2), ensuring good health and well-being (SDG3), promoting
economic growth and decent employment (SDG8), building
industries through innovation and infrastructure (SDG), and
reducing inequality (SDG10).

A recent report of McKinsey Global Institute says that digital identification is “key to
inclusive growth” and widespread adoption of digital finance will empower the
economy of emerging countries. UNCDF also supports business models that will
extend the reach of financial markets and provide suitable products to the
underbanked at “a reasonable cost and on a sustainable basis.”

By putting people at the center of emerging technologies (like digitized loan systems)
we can greatly rely on the advancements in Fintech in helping achieve financial
inclusion and contribute to the realization of UN’s Sustainable Development Goals.
We have reached the point where speed has become a fundamental requirement for
anything, be it in transportation, transaction, user experience, and customer service. That
is why businesses are quickly shifting their resources to technology in order to speed up
processes and improve customer experience. This gave way to the rise of innovative
advancements, including AI and chatbots, to name a few.

V. Ethical Issues in Implementation

Chatbot technology offers many ways to provide customer delight. Some examples
include automation of basic communications and customer service. However, every
time advanced technologies take the spotlight, there are always concerns if it should
totally be considered as a good thing or not.

Who will greatly benefit from it?

Home Credit’s implementation of chatbots in handling basic, non-transactional
inquiries can help speed up the way they respond to customers. But the company
must first identify and decide on whose needs will primarily be served by the
technology—the business or the customer?
An article at IBM.com said that,
whether the bot will interact with
customers or not, the organization
should prioritize the needs of the
customers before the needs of the
business. This means providing a
product that best suits the customers’
needs, rather than opting for a system
because it can be easily implemented
or mainly for profit reasons. “Ethics form
the foundation of how a bot is built,
and more importantly, they dictate
how a bot interacts with users.”
Determining the main purpose as well as the business value of the chatbot is essential,
and upholding customer interest should be a primary consideration.

Data Privacy Concern

The use of chatbot for customer inquiries and credit collection brings forth some
concerns on data privacy. Heavy reliance on bots raises a possibility for data to be
compromised, especially details obtained from chatbot queries. These may include
confidential data such as customer information, bank details, etc.

Privacy and protection of lender’s data should be given

a great amount of attention as most of the time,
customers are not fully aware of the extent of data
obtained from them and how their information are
handled (collection, usage, storage, sharing).

Transparency is one of the ideal routes to address this concern. In answering customer
inquiries, Home Credit should find a way to let their customers know that they are
interacting with a machine and not a human being. Users should also be assured that
the information they provide and the communication trail they have with the chatbots
are private and secure. Same goes for credit collections; customer data generated
and linked to the bots that will conduct payment follow ups must be secured and
protected from system errors to avoid possible leaks of private information.
In some organizations, bot developers create an unspoken “user-bot confidentiality
agreement” which guarantees customers that their chat history with the bots are
deleted once the interaction has been completed.
 Chatbot is considered as a big thing in many industries as it is expected to take over
basic and even complex tasks. Its adaptability and accuracy can change the playing
field and define the future of customer service.

VI. Contribution to Nation Building and Sustainable Development

Chatbot is just one of the many forms of AI that are utilized by businesses in order to
improve the way they service their customers. In the area of consumer finance,
chatbot technology has been seen as a game changer in redefining customer
service as it reduce resolution times for inquiries while boosting cost savings for
companies.

For Home Credit, allowing chatbots to address

basic inquiries will enable customer service
representatives to focus on complex cases that
need immediate attention. It will also allow
customers to better manage their accounts and
seek help whenever needed. Aside from potentially
increasing the engagement of customers, such
improvements can also result in increased revenue
and open doors to new customer segments.

Implementing the chatbot technology will provide

a better kind of alternative financing to consumers,
and can contribute to Home Credit’s efforts to
harness the power of digitization in driving financial
inclusion.

World Bank defines financial inclusion as “access of individuals and businesses to

useful and affordable financial products and services that meet their needs –
transactions, payments, savings, credit, and insurance.” The goal is to eliminate
hindrances that exclude people from having rights to financial products and services
that can improve their lives.

The United Nations Capital Development Fund (UNCDF)

sees financial inclusion as a prominent enabler and a
target of several goals in the 2030 Sustainable
Development Goals (SGD) such as: diminishing poverty
(SDG1), putting an end to hunger (SDG2), ensuring
good health and well-being (SDG3), promoting
economic growth and decent employment (SDG8),
building industries through innovation and infrastructure
(SDG9), and reducing inequality (SDG10).

By putting people at the center of emerging technologies (like digitized loan systems)
we can greatly rely on the advancements in Fintech in helping achieve financial
inclusion and contribute to the realization of UN’s Sustainable Development Goals.
VII. REFERENCES

Biometrics: authentication & identification (2019).

Retrieved from: https://www.gemalto.com/govt/inspired/biometrics

Charter Pacific. (2019, August 6). Biometrics: authentication and identification. Retrieved
from: https://www.charpac.com.au/biometrics-authentication-and-identification/

What are Biometrics? (n.d.). Retrieved from: https://www.kaspersky.com/resource-

center/definitions/biometrics

Korolov, M. (2019, February 12). What is biometrics? 10 physical and behavioral identifiers
that can be used for authentication.
Retrieved from: https://www.csoonline.com/article/3339565/what-is-biometrics-and-why-
collecting-biometric-data-is-risky.html

Citibank. (2017, March 20). Citi Tops 1 Million Mark for Voice Biometrics Authentication for
Asia Pacific Consumer Banking Clients.
Retrieved from: https://www.citigroup.com/citi/news/2017/170321b.htm

Chester, T. (2015, March 14). UK's Halifax bank tests heartbeat sensor to unlock online
banking services. Retrieved from: https://mashable.com/2015/03/13/halifax-bank-
heartbeat-sensor-online-banking/

Hambling, D. (2019, June 27). The Pentagon has a laser that can identify people from a
distance—by their heartbeat.
Retrieved from: https://www.technologyreview.com/s/613891/the-pentagon-has-a-laser-
that-can-identify-people-from-a-distanceby-their-heartbeat/

Cheromka, K. (2017, May 5). Ford Wants to Add Biometric Sensors to Its Cars. Retrieved
from: https://www.thedrive.com/tech/9973/ford-wants-to-add-biometric-sensors-to-its-cars

Kanchwala, H. (2019, January). How Does Facial Recognition Work?

Retrieved from: https://www.scienceabc.com/innovation/facial-recognition-works.html

Wess, J.D. (2017, August 1). A Brief History of Facial Recognition. Retrieved from:
https://www.facefirst.com/blog/brief-history-of-face-recognition-software/
Marr, B. (2019, August 19). Facial Recognition Technology: Here Are The Important Pros And
Cons. Retrieved from: https://www.forbes.com/sites/bernardmarr/2019/08/19/facial-
recognition-technology-here-are-the-important-pros-and-cons/#5853994414d1\

Marr, B. (2016, December 6). What Is The Difference Between Artificial Intelligence And
Machine Learning?
Retrieved from: https://www.forbes.com/sites/bernardmarr/2016/12/06/what-is-the-
difference-between-artificial-intelligence-and-machine-learning/#111c0cad2742

Ho, C.K. (2019, March 20). How AI, facial recognition technologies are revolutionising
physical security in Asia.
Retrieved from: https://www.scmp.com/tech/innovation/article/3002383/how-ai-facial-
recognition-technologies-are-revolutionising-physical

Pros and Cons of Facial Recognition Technology For Your Business. (n.d.). Retrieved from:
https://www.upwork.com/hiring/for-clients/pros-cons-facial-recognition-technology-
business/

Eisenberg, A. ((2018, November 29). How to Apply Biometrics in Banking Sector. Retrieved
from: https://igniteoutsourcing.com/fintech/how-to-apply-biometric-technology-for-your-
fintech-startup/

Walker, J. (2019, May 19). Artificial Intelligence Applications for Lending and Loan
Management. Retrieved from: https://emerj.com/ai-sector-overviews/artificial-
intelligence-applications-lending-loan-management/

Market Research Future. (2017, April 19). Facial Recognition Market is Expected to Reach
USD 8.93 Billion by 2022.
Retrieved from: https://www.openpr.com/news/507008/facial-recognition-market-is-
expected-to-reach-usd-8-93-billion-by-2022.html

Traynor, P. (2018). Digital Finance and Data Security: How Private and Secure Is Data Used
in Digital Finance?
Retrieved from: https://content.centerforfinancialinclusion.org/wp-
content/uploads/sites/2/2018/09/CFI43-CFI_Online_Security-Final-2018.09.12.pdf
How Private and Secure Is Data Used in Digital Finance?
Owens, J. (2018). Responsible Digital Credit: What does responsible digital credit look like?
Retrieved from: https://content.centerforfinancialinclusion.org/wp-
content/uploads/sites/2/1970/01/Responsible_Digital_Credit_FINAL_2018.07.18.pdf

The World Bank. (2018, Oct 2). Financial Inclusion: A key enabler to reducing poverty and
boosting prosperity
Retrieved from: https://www.worldbank.org/en/topic/financialinclusion/overview

Zibell, L.S. (n.d.). How Digital Finance Can Help Achieve Global Sustainability Goals.
Retrieved from: https://development.asia/explainer/how-digital-finance-can-help-
achieve-global-sustainability-goals

United Nations Capital Development Fund . Financial Inclusion and the SDGs. (n.d.)
Retrieved from: https://www.uncdf.org/financial-inclusion-and-the-sdgs

White, O., Madgaykar, A., Manyika, J., Mahajan, D., Bughin, J., McCarthy, M., Sperling, O.
(2019, April). Digital Identification: A Key to Inclusive growth. Retrieved from:
https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital
/Our%20Insights/Digital%20identification%20A%20key%20to%20inclusive%20growth/MGI-
Digital-identification-Executive-summary.ashx
A key to inclusive growth
Manyika, J. Lund, S. Singer, M. White, O., Berry, C. (2016, September). How digital finance
could boost growth in emerging economies.
Retrieved from: https://www.mckinsey.com/featured-insights/employment-and-
growth/how-digital-finance-could-boost-growth-in-emerging-economies