Face It — Biometrics to be Big in Cybersecurity
Weak, reused and often forgotten passwords. These are the root cause of expensive data breaches, soaring cybersecurity bills and lost opportunity. The good news? A solution is coming.
Alphabet (GOOGL) announced Monday that logging into websites and applications is about to become as easy as tapping the fingerprint sensor on a late-model Android phone. Eventually passwords — and bad actors hacking them — will go away.
It seems big data breaches have become part of our modern connected culture. About 80% of the time, the weak link is the silly passwords we use to secure our online identities. This is according to data from the Fast Identity Online alliance, an open industry association to promote authentication standards.
The group, founded in 2013 by PayPal (PYPL), Lenovo and Nok Nok Labs, is targeting passwords because too many people use them incorrectly. These are generally weak, rarely changed and often forgotten. The alliance found that 1-in-3 ecommerce transactions are abandoned because users can’t log in.
By 2016, the group was 260 members strong, including Amazon.com (AMZN), Alibaba (BABA), Mastercard (MA), Visa (V), Samsung, Bank of America and Aetna, among others.
The goal is to use the sophisticated sensors inside smartphones to do away with passwords once and for all. Facial recognition, fingerprint scans, voice prints and even physical security keys can do the job faster and better.
The engineers at Google are bringing second generation FIDO protocols to every Android smartphone running software version 7.0 or above. The software will begin rolling out to devices over the next few days in an over-the-air update.
The attraction is users will simply register their login credentials with websites and applications once, then the biometric information will supersede usernames and passwords.
Fingerprint information is never stored on Google servers. It is maintained cryptographically on the device.
This is a big deal. There are 2.8 billion Android users worldwide. Forbes calculates that 1.7 billion users will get the FIDO2 update. And FIDO2 is already supported across all of the leading internet browsers, including Google Chrome, Microsoft Edge, Firefox and Apple Safari.
This follows a decision by Microsoft (MSFT) in 2018 to bring the same capability to 800 million Windows users through its Hello login.
Faster, more secure logins make life easier for users. However, the real benefit accrues to enterprises, financial institutions, telecoms, insurance and the government. Better authentication speeds ecommerce and banking transactions. It protects networks from malicious hackers and reduces the likelihood of fraud.
It’s no wonder momentum has been so strong.
Investors should prepare for a wave of new products.
Diebold Nixdorf (DBD) may not be top of mind when investors think about cutting edge authentication devices. Today, the 160-year-old company is best known for its 35% global market share of automated teller machines.
|Diebold is a former dividend aristocrat, offering annual dividend increases for 60 years in a row until 2014. The stock has struggled since then, but with the company’s big bet on biometrics, the stock could easily do an about-face.|
Machines that spit out cash may seem passé in a world of cryptocurrencies, Apple pay and facial recognition. However, 85% of all global transactions are still conducted using cash. And 75 million people interact with systems from the Canton, Ohio, company every day, thanks to its partnerships with 90 of the top 100 global financial institutions.
More importantly, Diebold is leveraging those networks, along with progress being made by smartphone makers, to take innovative biometric authentication mainstream.
The company showed off in 2017, an ATM using FIDO standards developed with Samsung. The prototype device was intended for use in self-service convenience stores.
And as the retail sector moves aggressively toward self-checkout, Diebold is ready. New machines with touchscreens accept and dispense cash. They allow payments for coffee, soda and other snacks sold in convenience stores and fast food restuarants.
All this verification is biometric.
Diebold managers make the argument that they are filling in the dots between the physical and digital worlds. That’s a good way to look at it.
The company has 1,900 software engineers and 3,000 patents. It’s also ramping up research and development spending. Diebold spent $154 million in 2018 making better software and pushing ahead with connected commerce, a system that allows bankers and retailers to glean insights about customer behavior from Diebold devices in the field.
The initiatives are working. Gerard Schmid, chief executive officer, said July 25 that second-quarter sales shot up 4% to $1.2 billion.
Diebold shares trade at 14.9x forward earnings and 0.24x sales. They have been a big winner, rising 450% in 2019.
Given that the business is entering a new product cycle, these metrics are cheap. Growth investors should consider buying the first meaningful pullback.
Jon D. Markman