PHL banks may face identity verification challenges

THE REQUIREMENT to phase out one-time passwords (OTPs) and replace them with more sophisticated identity verification methods could be a challenge for Philippine banks amid the lack of a central information database, financial technology company Trusting Social Philippines said.

“I guess one challenge is there is no strong central identity database. If the national ID was as easily accessible as in India, then at least identity is less of a problem. But here, identity verification is still a problem and will be for a while until we have a strong national ID,” Trusting Social Philippines Chief Executive officer Juan Miguel Escaler told reporters on Thursday.

The Bangko Sentral ng Pilipinas (BSP) is requiring banks to adopt new fraud management systems and security measures for consumers as alternatives or to supplement OTPs by end-June as part of the implementation of the Anti-Financial Account Scamming Act (AFASA).

Based on the company’s experience in Vietnam, Trusting Social is looking to provide identity solutions to Philippine financial institutions as they adopt facial authentication as an alternative to OTPs.

“The weakness right now is we’re reliant on device authentication. And that’s also fraught with weaknesses. You can do SIM swaps. You can do a hard takeover. Somebody gets your phone and they can pose as you. We’re saying, let’s move away from device authentication and move towards a database that you control as a bank that you can verify against,” Mr. Escaler said.

Banks will have to build their own identity databases as the country’s national ID system remains underdeveloped.

“Ideally, if we can get the whole industry to share an identity system, that’s even better. For example, if our national ID really worked very well and could authenticate every transaction, that would be ideal. But we’re still far from that. So, I think what will happen is that banks will have to build it individually with their own databases,” he said.

“That’s actually a problem for many of the local banks to adopt facial authentication, because they don’t have the digital faces of their clients since they were onboarded a long time ago,” he added. “I would say among the largest banks, the top four or five, 60-70% of their clients probably don’t have a digital identity, as opposed to, let’s say GCash or Maya where everyone is onboarded digitally. They have a more complete facial database, but the local banks don’t. So, that’s the struggle they face.”

The company currently services 52 financial institutions in the Philippines, including six of the 10 top banks, as well as nonbanks and online lending platforms. — A.M.C. Sy