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Enabling the large-scale deployment of Facial Recognition in banking security

Periodic Reporting for period 1 - FACCESS (Enabling the large-scale deployment of Facial Recognition in banking security)

Reporting period: 2015-09-01 to 2016-01-31

WHO WE ARE? FacePhi is a company founded in 2006 specialized in the development and commercialization of advanced Face Recognition Software solutions. FacePhi´s headquarters are based in Alicante (Spain), while the company operates internationally through branch offices in Europe, Latin America and the US. Currently the company has a team of 16 highly skilled professionals, with a balance between engineers, software developers and business managers. Thanks to our multidisciplinary team, we have been able to increase our international presence in the young but rapidly growing market of face recognition (facial biometrics). The key of our success is the uniqueness of our 100% proprietary technology for facial recognition, based on our own-developed algorithms (technology registered and protected by industrial secret, with no possibility for reverse engineering).

THE FACCESS PROJECT: In the FACCESS project we aim at performing a pilot study for the large-scale implementation of our face recognition technology in banking security. There is a strong demand in the banking industry for secure biometric applications. In fact, in May 2014 the European Central Bank (ECB) published a list of recommendations for increased bank transaction security and for the first time, biometrics was included as one of the most valid and most secure authentication parameters. Security has always been a major concern of the banking industry, fundamentally because banks are attractive to criminals as a direct access to currency, bank notes, and user‘s personal information which can be used for identity theft (phishing and card skimming). The concerns about bank security have always been there, but it has been after the breakthrough of online and mobile banking when bank fraud has become major issue to address with urgency. Currently, whether it’s online, on a smartphone, on an ATM or on a POS (point-of-sale), the great majority of banking transactions are done by using a 4-6 digits PIN code as the way for authentication. This form of authentication is of an extremely low security level in all cases, but especially more in online banking where cybercriminals and hackers can easily obtain this PIN code in a matter of seconds. As a result, the total value of fraudulent transactions is rapidly increasing year by year, being now estimated at €1.44 billion solely in Europe. In this scenario, biometrics holds great promise to become the gold standard authentication method for bank transactions in the near future. Instead of a PIN code, which is something you should remember and that can be easily obtained by criminals, biometric authentication is based on those distinctive and measurable characteristics that can be used to unequivocally authenticate a person (facial features, iris pattern, fingerprint, voice…); thus making the identity fraud impossible. However, despite the clear opportunity there are still some barriers preventing the banking biometrics breakthrough, at least on a large scale. Our Facial recognition technology gathers the ideal features to overcome these barriers, so thus representing a great opportunity to bring definitively biometric authentication to banking security.

FACCESS: Objectives of the action

The ultimate objective we sought for the FACCESS project during Phase 1 was to minimize any potential risk that could endanger the success of our business innovation project from all perspectives: technical, commercial and financial perspectives. With this ultimate objective in mind, the Phase 1 was designed as a feasibility study aimed at determining those key aspects for the successful implementation of our facial recognition technology in banking security on a large scale. Therefore, the phase 1 objectives were set up upon a thorough analysis of the potential risks we might encounter and as a way to mitigate them since the very beginning. Considering this, the specific objectives for the action were as follows:
To collect information on the current state of biometric deployment in banking security.
To analyse the major European players and stakeholders in the biometric field.
To identify the major challenges for banking biometric deployment in Europe: user experience is a major issue we should address by engaging the final users in the project since the beginning and by testing the end-user experience.
To engage a large European bank institution (testing with >500.000 users) for the large-scale pilot study.
To define the roadmap for achieving the FIDO certification (current international standard that defines the highest security level for user identification).
To design the pilot study according to the strictest technical and security standards defined by ISO standards in biometrics and FIDO certification.
To thoroughly calculate the total investment requirements and the future investment needs to complete our FACCESS business plan.
To update our financial projections for a 3 years business plan.
To elaborate an updated business plan with the updated financial data.
During Phase 1, we have performed an in-depth assessment of the feasibility of the FACCESS project. The work performed and main achievements are as follows:

COMMERCIAL FEASIBILITY ASSESSMENT: The Commercial feasibility study was planned for this Phase 1 project as a way to understand better the market we aim to enter, so to help us in the definition of the most optimal strategy for commercialization. The work performed during the action has been the following:
 Analysis of the current situation of bank fraud in Europe, as a way to validate our market hypothesis and value proposition.
 In-depth market research study including the global market of biometrics and the market of facial biometrics. The market study has enabled us a better understanding of the key market features, the drivers and restrains, the geographic segmentation, the value chain analysis and the competitive landscape.
 Analysis of the current stage of banking biometrics deployment and the challenges preventing a wider implementation nowadays. This has enabled us to gain a deeper understanding of the aspects of our technology we should optimize to achieve our business goals in the market.
TECHNCIAL FEASIBILITY ASSESSMENT: The technical feasibility performed during phase 1 has been majorly based on the outcome of the commercial feasibility assessment, as it has been based on it how we have carefully analyzed and planned the next technical activities we should perform to ensure a wide acceptance of our technology by the banking sector. The work performed during the action has been the following:
 In collaboration with different international banking institutions, we have analysed the mayor issues for a wide client/end user acceptance.
 We have determined the technical activities we should perform to achieve the highest client (banks) and end user acceptance.
 We have enlarged our client network with different international banking institutions and under conversations with them we have validated our market hypothesis and determined they key aspects of our technology we should further optimize to warranty the market success of our product.
 We have defined the technical roadmap for the next 2 years (FACCES Work Plan) including a risk assessment.

FINANCIAL FEASIBILITY ASSESSMENT: The financial feasibility study was planned for this Phase 1 as a way to carefully analyse the funding requirements for the FACCESS project and to determine the project profitability (Return of Investment, R.O.I.). The work performed during the action has been the following:
 Calculation of the total financing needs for the FACCESS project to reach the go to market stage.
 Update of our financial and cash flow projections for the following 3 years of FACCESS commercialization.
The FACCESS project is aimed at overcoming those barriers in the large scale deployment of banking biometrics, so it will have a great impact in banking security in Europe and Worldwide. Thanks to this Phase 1 project we have been able to validate our value proposition and to define a clear roadmap for the next two years to achieve this ultimate goal and in turn to make our business innovation project profitable.
The expected impact of the FACCESS project will be derived by a significant reduction of online and mobile bank fraud, a major priority in banking security after the emergence of these new banking modalities. Security has always been a major concern for bank institutions and the most common type of bank security violation is done by fraudulent user authentication in bank transactions. Traditionally, these fraudulent authentications were made at ATMs and POS terminals. However, the irruption of online and mobile banking and the fact that these ways for accessing banking information are becoming the preferred options by the bank´s customers, are now opening a new security breach in banking. In this new banking scenario, the need for new user authentication methods different from PIN codes or passwords that can be easily intercepted by cybercriminal and hackers, is becoming an urgent issue to address. Proof of this statement is the 8% increase of bank fraud since 2012 up to €1.44 billion in 20, which can be explained by the increase of the card-non-present (CNP) payments done mostly through the Internet and/or smartphone apps (66% of the total bank fraud in Europe). Biometric authentication emerges as a definitive solution for authentication in banking security, as recommended recently by the European Central Bank (ECB). However, there are still some barriers preventing the large scale implementation of banking biometrics. Our technology gathers the ideal features to overcome these barriers, so it has the potential to become the referent method in banking authentication in the upcoming years. Furthermore, as part of this Phase 1 project we have determined those key aspects to be further optimized in our technology to ensure the highest clients (banks) and end users acceptance. Therefore, we can conclude that the major result of this Phase 1 project is that it has enabled a better understanding of the critical barriers for the commercial success of the FACCESS project and based on it a rationale planning of the future activities to be done towards the market success our technology.