Last updated on October 26, 2025
No. European fintechs are not allowed to use biometric data for credit scoring without regulatory approval. Biometric data is classified as “special category” under the General Data Protection Regulation (GDPR), and its use—especially in high-risk AI systems like credit scoring—requires strict compliance with both GDPR and the EU AI Act.
Welcome to the Regulatory Jungle
Imagine a fintech startup in Berlin, fresh off a funding round, eager to revolutionize lending with cutting-edge AI. Their secret weapon? Biometric data—facial scans, voice patterns, even typing rhythms—to predict creditworthiness. Sounds futuristic, right? But before they can unleash their algorithmic marvel, they hit a wall. A big, bureaucratic, EU-shaped wall.
In Europe, using biometric data isn’t just a tech decision—it’s a legal minefield. The General Data Protection Regulation (GDPR), in force since 2018, treats biometric data as “special category” personal data. That means it’s subject to the strictest rules in the data protection playbook. And when fintechs use it for credit scoring, they’re not just processing sensitive data—they’re entering the realm of automated decision-making, which triggers even more scrutiny.
GDPR: The Gatekeeper of Biometric Data
Under GDPR, biometric data used to uniquely identify a person—say, matching a face to a name—is generally prohibited unless one of the exceptions in Article 9(2) applies. The most common legal basis? Explicit consent. But here’s the catch: consent must be freely given, specific, informed, and unambiguous. That’s a tall order when the data is being fed into opaque AI models that even developers struggle to explain.
And it gets trickier. In December 2023, the European Court of Justice issued a landmark ruling in the SCHUFA case. It found that automated credit scoring based on personal data, when used decisively in lending decisions, constitutes automated decision-making under Article 22 of GDPR. Unless the process meets strict exceptions—like being necessary for a contract or authorized by law—it’s not allowed. That ruling sent shockwaves through the fintech world, forcing many to rethink their data strategies.
The AI Act: Europe’s New Sheriff
If GDPR is the gatekeeper, the EU AI Act is the new sheriff in town. Effective from August 2024, the AI Act classifies AI systems used for credit scoring as “high-risk.” That includes systems using biometric data to assess creditworthiness. High-risk systems must undergo rigorous compliance checks: risk assessments, human oversight, transparency disclosures, and conformity assessments before deployment.
Fintechs must register these systems in an EU database, obtain CE marking, and ensure their models are resilient, accurate, and free from bias. Failure to comply can result in fines of up to €35 million or 7% of global turnover. That’s not just a slap on the wrist—it’s a financial knockout.
So, What’s a Fintech to Do?
To legally use biometric data for credit scoring, fintechs must:
- Obtain explicit, informed consent from users
- Ensure the system meets GDPR’s automated decision-making rules
- Comply with the AI Act’s high-risk system obligations
- Possibly seek sector-specific regulatory approval, depending on the Member State
In short, it’s not impossible—but it’s far from easy. The regulatory maze is dense, and the stakes are high. For fintechs, the message is clear: innovate responsibly, or risk regulatory wrath.
See more on EUROPEAN UNION
Sources
Unfit for purpose? The legal maze of credit scoring under EU law
https://www.ecri.eu/sites/default/files/unfitforpurposeecriindepthanalysis.pdf
December 2023
Biometrics in the EU: Navigating the GDPR, AI Act
https://iapp.org/news/a/biometrics-in-the-eu-navigating-the-gdpr-ai-act
April 2025