Passwordless Authentication: A Thorough Analysis
In recent years, digital transformations have swept the world of commerce and banking. More specifically, these changes entailed the adoption of passwordless and multifactor authentication technologies by online retailers and digital banking institutions.
The key components of such authentication technologies, along with their efficacy and cost-effectiveness, are outlined in a white paper released by the World Economic Forum, titled “Passwordless Authentication: The next breakthrough in secure digital transformation”.
This paper was released in collaboration with the Fast IDentity Online Alliance (FIDO), a universally recognized association of companies that establish standards for passwordless and multi-factor authentication services.
In this article, we will be examining the main takeaways of this paper to highlight the significance and functionality of passwordless and multi-factor authentication methods.
Authentication Framework: What is Necessary?
The World Economic Forum’s 2021 Global Risks Report defined cybersecurity as one of the Top 10 global risks in the world.
Indeed, in our current digital age, cybersecurity attacks can compromise national security and have drastic consequences on all aspects of society.
Common targets for hackers include digital bank and online shopping servers as they often store user password information. Users may also recycle passwords across multiple accounts so with a single data breach, millions of dollars can be lost in the blink of an eye.
Hence, financial institutions and organizations involving online payment have sought to upgrade their existing authentication methods. How can we evaluate the effectiveness of an authentication service or product?
The World Economic Forum’s paper offers a few key criteria for evaluation:
If all aforementioned criteria are optimized, customers will be ensured a frictionless and secure authentication experience and banks need not worry about additional authentication management costs.
Why Passwordless Authentication?
The paper also underscored numerous benefits of passwordless authentication which are summarized as follows:
Though cybersecurity protections and implementing passwordless authentication solutions may seem to require a huge budget, in reality, it drastically reduces the overall cost required to implement and manage the authentication solution. With the traditional username and password format, companies must spend large amounts on password management and mitigating the risks of data breaches.
The World Economic Forum reported that employees may spend up to 11 hours a year entering and resetting passwords, leading to a direct productivity loss of 5.3 million USD. Moreover, in 2019, the average cost of a data breach was around 3.92 million USD. Clearly, subtracting these costs would be hugely advantageous to all platforms requiring authentication.
Improved User Experience
Not only are passwordless solutions much more cost effective for the service provider, they are also significantly easier for users to navigate. Research has shown that almost 9 in 10 customers would be willing to pay for premium plans that guarantee a more user-friendly and customizable authentication experience.
Additionally, security does not have to come at the expense of user-friendliness. As the paper points out, users are not as likely to “circumvent security measures”, such as recycling passwords or using overly simple and common passwords. By moving past knowledge-based authentication, customers do not have to solely rely on their memory for authentication and can engage in alternatives such as presenting a biometric ID.
FIDO2 certified solutions all use public key cryptography, which uses a combination of a public key that can be accessed by all sources and a private key which is secured on the authenticator device (a mobile phone or security key).
Authentication can only be complete if the public and private key matches; this technology protects against hacking attacks as no confidential information is stored on the server and the private key can only be accessed by the customer. Biometric information cannot be stolen from servers like passwords are as the information is solely located on the device of authentication.
Needless to say, passwordless authentication offers a variety of benefits to financial institutions. By implementing Toppan iDGate solution, your organization will be a step closer to achieving the optimal user experience in digital banking.
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