Improving Customer Authentication

Improving Customer Authentication

DATE: April 2015

• Retail Payments Risk Forum Working Papers

• Lott, David

ABSTRACT: Authenticating the parties in a payment transaction efficiently and with a high level of confidence is critical to the ongoing safety and soundness of our payment system. As technology has led to new forms of payments and the use of remote payment channels, there has been a growing challenge to modify existing and develop new authentication methods that deliver the necessary levels of efficiency and confidence. This paper examines the evolution of customer authentication methods from the early days of visual identification to the present environment of using physical and behavioral characteristics, known as biometrics. While the authentication of the payment order itself is separate from the authentication of the parties to a payment transaction, the separation of the two can be difficult in various payment instruments. The paper takes a high-level look at the authentication issue from a legal and regulatory viewpoint. Each of the authentication methods are reviewed as to their process, advantages and disadvantages, and applicability to the payments environment. Identification processes have the potential to create conflicts with an individual's privacy rights, and this conflict is examined. Finally, the paper closes by discussing the key learnings obtained from this research effort.

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