In today’s digitally connected economy, security and user experience are becoming increasingly intertwined and interdependent.
Against that backdrop, the transformative potential of passwordless authentication represents a crucial step toward a more secure and efficient digital future.
“A password is nothing but a shared secret, and a shared secret is just a disaster waiting to happen,” Adam Lowe, chief product and innovation officer at CompoSecure, told PYMNTS.
As shared secrets, passwords are vulnerable to various forms of attacks, including phishing, social engineering, man-in-the-middle attacks and more. In contrast, passwordless systems leverage cryptographic keys, providing a more secure and user-friendly experience.
That’s why, as Lowe explained, the future of authentication lies in moving away from traditional passwords to more secure and seamless methods.
“The first thing that companies need to do is a fundamental mind shift … instead of something that is knowledge-based, like a password, move to a key-based system,” he said, highlighting the capabilities of key-based systems, specifically those adhering to the FIDO standard.
FIDO (Fast Identity Online) standards are designed to enhance security through a combination of biometrics, PINs and cryptographic keys. This approach ensures that each transaction or login attempt is securely verified, mitigating risks associated with traditional passwords.
“We’re moving toward a future where digital identity and commerce merge seamlessly,” Lowe said. “Cryptographic signatures will underpin this future, ensuring security and efficiency.”
Passwordless authentication offers multiple layers of security and privacy enhancements. For one, it reduces friction for users, eliminating the need to remember complex passwords or rely on potentially insecure password managers. Instead, users can authenticate using a secure physical device, such as a payment card, combined with biometric verification.
“The key is securely stored on your payment card. When you tap it to your phone, it verifies your identity with minimal friction,” Lowe said. “It’s a deterministic model — if you have the key, you’re in.”
This multi-factor authentication model, encompassing something you have (the card), something you know (a PIN), and something you are (biometric data), aligns with high-security standards used by governmental and defense organizations.
CompoSecure’s own digital security platform, Arculus, “transforms the traditional payment card into a multi-functional cryptographic engine,” Lowe said. “This evolution extends beyond payments to secure digital identities and digital assets, providing a comprehensive security solution.”
“The chip in our payment cards is similar to those used in U.S. passports,” Lowe added. “It generates a private key on the card, with a corresponding public key stored on a server. This setup ensures that every transaction is securely authenticated.”
These secure elements generate, store, and manage cryptographic keys, ensuring the integrity and security of each transaction, and the technology is particularly beneficial for card-not-present transactions, such as online shopping, where verifying the authenticity of the user is crucial.
For consumers, the shift to passwordless authentication offers significant benefits, including reduced false declines and improved efficiency in customer service interactions. False declines, where legitimate transactions are mistakenly blocked, are a common frustration for users and a revenue loss for banks.
“A simple tap of the card can verify your identity, reducing the chances of a false decline,” Lowe said. “This also enhances experiences in call centers, where users can authenticate themselves before even speaking to an agent.”
Additionally, passwordless authentication supports secure, high-value transactions, such as moving retirement accounts, with less friction and higher security.
That’s why, for banks and other corporations, adopting passwordless authentication is both a technological necessity and a business imperative. As major tech companies like Google and Apple embrace these standards and the future of authentication sees further convergence between digital identities and digital transactions, financial institutions must follow suit to stay competitive and secure.
“Passwords are dying, and banks need to upgrade their infrastructure,” Lowe said. “Passwordless systems offer a win-win: improved user experiences and reduced fraud.”
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