FIDO authentication

FIDO (Fast Identity Online) is quickly becoming the standard approach to authentication across digital banking and payments. At its core, FIDO replaces passwords and OTPs with secure, device-based credentials, often referred to as passkeys.

Instead of relying on something a customer knows, like a password or one-time passcode, FIDO uses cryptographic keys stored on a trusted device and unlocked with something simple, like a fingerprint, face recognition, or device PIN.

This is built on public-key cryptography, where the private key never leaves the device and authentication is performed through a signed challenge. In advanced implementations, additional cryptographic layers can also be applied to further protect the authentication process and strengthen assurance beyond standard FIDO.

From a customer’s perspective, it feels familiar and effortless. From a security perspective, it’s a meaningful step-change. There are no shared passwords, nothing reusable for attackers to steal, and no credentials that can be phished.

That combination, stronger security with less friction, is what’s driving adoption.

Why FIDO matters now

Authentication today is still a mix of passwords, One-Time Passcodes (OTPs), and step-up challenges. These approaches increase customer friction, are expensive, and are increasingly ineffective against modern fraud trends, particularly phishing and social engineering attacks.

At the same time, the ecosystem has shifted. Passkeys are now natively supported across major platforms, and payment networks are actively introducing passkey-based authentication into the checkout experience. This shift is driving both business and security benefits.

Operational benefits

One of the most immediate operational benefits is cost reduction. Passwords and OTPs carry a significant operational overhead at scale:

• SMS and OTP delivery costs at scale
• Password reset flows and associated support
• Call center volume tied to issues

By moving to passwordless authentication, much of this simply goes away. The result is a cleaner, lower-cost authentication model that scales more efficiently.

Security benefits

FIDO also materially improves security. Traditional authentication methods are highly vulnerable to phishing, social engineering, and credential stuffing. FIDO was designed specifically to remove these attack vectors. Because credentials are bound to the legitimate domain and never leave the user’s device, they cannot be intercepted or reused by attackers.

Customer experience benefits

There’s also a clear upside in customer experience. Authentication becomes faster and more reliable—no waiting for codes, no remembering passwords, fewer lockouts. That translates into higher authentication success rates and less friction in critical moments.

This is particularly relevant in payment and 3DS authentication flows, where step-up challenges introduce both friction and fraud exposure.

Limitations of standard passkey deployment

While FIDO passkeys significantly strengthen authentication, some issues remain for banking-level security requirements.

FIDO verifies that a registered authenticator (device) is being used with user verification; however, there are some limitations to standard passkey deployments due to:

• Shared or compromised devices
• Synced passkeys across ecosystems
• Fraudulent enrolment

FIDO does not assess whether an action itself should be trusted, with no visibility into transaction context or behavioural signals. This distinction is critical in financial services, where fraud can occur even when genuine users are successfully authenticated.

As a result, it cannot detect:

• Social engineering or authorised scams
• Suspicious or anomalous activity

FIDO authentication remains a binary outcome (valid / invalid), with no ability to adapt decisions based on risk. As a result, passkeys should be viewed as a strong authentication method, but not a complete fraud control on their own.

How Outseer extends FIDO

Outseer extends FIDO by introducing a decisioning layer between authentication and fraud. This layer evaluates identity, device, behaviour, and event risk in real time to determine whether and how authentication should occur.

Most organizations treat FIDO as a replacement for passwords or OTPs. Outseer takes a fundamentally different approach, integrating FIDO directly into a broader fraud and risk framework.

The goal is to combine strong authentication with real-time intelligence. This shifts authentication from a static identity check to a real-time trust decision.

In 3DS environments, this represents a key evolution. Rather than using authentication as a fixed control, it can be dynamically applied based on transaction risk and regulatory requirements, with FIDO enabling a stronger, lower-friction authentication method.

Turnkey deployment

Outseer makes FIDO easy to adopt. It provides turnkey enablement across web and mobile channels, without requiring banks to manage the complexity of a FIDO server themselves. That significantly reduces implementation effort and accelerates time-to-value.

Outseer also introduces flexibility in how passkey credentials are managed. Banks can choose between an Outseer-managed keystore or bring their own, depending on internal security and compliance requirements. This supports more advanced use cases, including extending passkey authentication beyond traditional login flows.

Real-time risk decisioning

Outseer embeds risk signals directly into the authentication process. Instead of treating fraud detection as something that happens after authentication, it brings those insights into the moment of authentication itself.

This includes:

• Behavioural and device intelligence
• Real-time risk scoring
• Detection of anomalous or scam-related patterns

Authentication becomes a real-time decision point for risk, not just a checkpoint for identity. High-risk scenarios can be stepped up, challenged, or blocked before any damage is done.

FIDO on its own answers whether credentials are legitimate. It does not determine whether an action should be trusted. This distinction is critical in scenarios such as social engineering, where genuine users can still authorize fraudulent activity.

Business and customer outcomes

By combining FIDO with real-time risk intelligence, organizations can:

• Reduce account takeover (ATO) and authorized push payment (APP) fraud
• Lower SMS OTP and operational authentication costs
• Improve customer experience and authentication success rates
• Support regulatory requirements such as Strong Customer Authentication (SCA)

Strategic impact

Because FIDO is integrated into Outseer’s broader platform, it becomes part of a unified security experience. Fraud, identity, and authentication are no longer separate domains. They work together consistently across channels. That reduces fragmentation and enables a more consistent, scalable approach to managing fraud and authentication.

This shifts FIDO from a standalone authentication method into a broader trust control across digital banking and payment journeys. FIDO becomes a strategic control within the bank’s fraud and risk architecture.