Why should banks start collecting passkeys early?

As financial institutions move away from outdated authentication methods like passwords and SMS OTPs, passkeys are emerging as the future-proof solution for secure and seamless banking authentication. Banks that start collecting passkeys early will gain a strategic advantage by improving security, reducing costs, and ensuring regulatory compliance.

1. Future-Proof Authentication & Regulatory Readiness

• Governments and financial regulators worldwide are tightening security requirements (e.g., PSD2, SCA, MAS guidelines).
• Passkeys meet phishing-resistant authentication standards, ensuring banks stay ahead of compliance mandates.

2. Enhanced Security & Fraud Prevention

• Passkeys eliminate phishing attacks by ensuring authentication only occurs on legitimate banking platforms.
• They remove reliance on SMS OTPs, which are vulnerable to SIM-swapping, interception, and social engineering attacks.
• Public-private key cryptography ensures only trusted devices can authenticate user sessions.

3. Cost Savings & Reduced Support Overhead

• Eliminates SMS OTP costs, which can save banks millions annually.
• Reduces customer support workload by minimizing password resets and OTP delivery issues.
• Streamlines onboarding, improving conversion rates and reducing drop-offs.

4. Competitive Advantage & Customer Experience

• Faster, frictionless logins enhance customer satisfaction and reduce login friction.
• Biometric authentication improves user trust and convenience, leading to higher adoption and retention rates.
• Banks that implement passkeys early will be seen as innovation leaders in secure digital banking.

5. Seamless Transition to Passwordless Authentication

• By starting early, banks can gradually transition users from passwords to passkeys, minimizing disruption.
• Hybrid authentication models (e.g., passkeys alongside existing methods) ensure smooth adoption.
• Early passkey collection helps prepare customers and internal systems for a complete passwordless future.

Singapore’s Monetary Authority of Singapore (MAS) has already mandated the phase-out of SMS OTPs due to security vulnerabilities. Passkeys are the next logical step, providing the highest level of security, cost efficiency, and user convenience.

Banks that start collecting passkeys today will be in the best position to seamlessly transition to passwordless authentication while improving security, compliance, and user trust.