Biometrics, AI to replace standard OTPs by 2027

THE prevailing one-time passwords (OTPs) used for online financial transactions will be replaced by facial recognition and artificial intelligence authentication by 2027, an official of Singapore-based technology firm ADVANCE.AI said.

“We’re already helping our partners in the Philippines transition to facial recognition and liveness detection for onboarding and transaction authentication,” ADVANCE.AI Country Manager Michelle Anne Chan told The Manila Times. “We expect adoption to accelerate meaningfully over the next 12 to 24 months.”

Chan said the shift away from OTPs was gaining traction as financial institutions responded to rising threats like SIM-swap scams, phishing and deepfake-enabled identity fraud.

The Bangko Sentral ng Pilipinas (BSP) has called on banks to adopt stronger, AI-driven authentication methods amid growing vulnerabilities of OTP-based systems. Fraud-related complaints jumped to 70,000 last year from 43,000 in 2023, the BSP noted.

In 2024 alone, cybercrime losses in the country reached over P198 million, according to the Cybercrime Investigation and Coordinating Center.

Chan called traditional OTP systems “static, single-layer defenses” offering limited information about user behavior or device context. 

Fraudsters are now deploying International Mobile Subscriber Identity (IMSI) catchers, malware (malicious software) and deepfake videos to hijack accounts in real time, often without detection until the damage is done.

“Fraud is evolving faster than regulation, so don’t wait for mandates. [Banks] must invest proactively in robust fraud prevention and identity authentication layers to stay ahead,” Chan said.

In contrast, biometric authentication, particularly facial recognition with liveness detection, offers a more robust layer of security, Chan pointed out, since it verifies a user’s physical identity in real time and is nearly impossible to “spoof.” 

Despite the BSP’s push for more advanced fraud prevention, Chan said biometric adoption in the Philippine banking industry remained patchy. While some top-tier universal and commercial banks are making progress, many rural banks still rely on outdated methods like manual ID checks or SMS OTPs.

“Of the more than 3,000 rural and cooperative banks in the country, only a small fraction have adopted eKYC or biometric tools,” Chan said. “Many still require customers to physically visit branches, particularly in underserved areas.”

Fraud prevention should no longer be the job of just IT or compliance — it should be a leadership priority, she said, noting that with more than 76 million active e-wallet users and 85 million internet users in the Philippines as of 2024, it’s imperative to protect the most vulnerable segments from account takeover fraud.

“Trust drives adoption. If consumers fear identity theft, fraud, or data misuse, they simply won’t use digital banking or payment platforms — especially among low-income and vulnerable segments,” Chan said.

Biometric onboarding, seamless logins through behavioral patterns, real-time fraud detection, and AI-powered credit scoring will make digital finance more “inclusive, secure and user-friendly,” Chan said.