How can banks transition from traditional auth to passkeys?

The transition from traditional authentication methods (passwords, SMS OTPs, and hardware tokens) to passkeys is a crucial step for banks looking to enhance security while simplifying the user experience. Passkeys provide a phishing-resistant, PSD2-compliant alternative to passwords and traditional multi-factor authentication (MFA).

Before transitioning, banks should recognize why passkeys are superior:

• Phishing-resistant authentication – Eliminates the risk of credential theft.
• Faster and more seamless UX – No need for passwords or manual OTP entry.
• Meets PSD2 Strong Customer Authentication (SCA) requirements – Passkeys provide both something the user has (device-bound key) and something the user is (biometric authentication).

Banks should strategically plan their transition to passkeys, ensuring a smooth rollout:

• Identify integration points – Where passkeys will replace traditional methods (e.g., login, transaction approvals, account recovery).
• Choose a passkey provider – Implement WebAuthn-based authentication through a passkey service like Corbado.
• Ensure compatibility – Work with existing mobile banking apps, web apps, and infrastructure.
• Pilot with a small user base – Test the implementation with a subset of customers before a full rollout.

Since passkeys introduce a new login paradigm, customer education is essential:

• Explain the benefits of passkeys over passwords (e.g., no need to remember passwords, better security).
• Provide step-by-step guides on registering and using passkeys.
• Ensure seamless fallback options for users who may need traditional MFA methods initially.

Banks must ensure their passkey implementation aligns with PSD2’s Strong Customer Authentication (SCA):

• Use device-bound credentials to meet the “possession” requirement.
• Use biometrics or device PINs to satisfy the “inherence” requirement.
• Ensure passkeys dynamically link authentication to specific transactions for regulatory compliance.

• Track adoption metrics – Measure how many users transition to passkeys.
• Gather user feedback – Identify pain points and improve the onboarding process.
• Enhance fraud detection – Monitor passkey authentication patterns and suspicious activity.

By phasing out passwords and OTPs and transitioning to passkeys, banks can enhance security, streamline authentication, and improve customer experience. A well-planned migration, combined with regulatory compliance and customer education, ensures a successful transition to phishing-resistant authentication.