How biometric authentication could save the ‘financially excluded’

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Though the majority of the global population possess bank accounts and take financial independence as a given, there are still 1.7 billion adults that remain unbanked today. Those deprived of this financial independence are stripped of opportunities to engage in the economy and wider society consequently. As a result, there are fewer ways for such individuals to pay bills, they have limited financial protection, employment limitations, zero credit record, and much less lending opportunities.

Financial inclusion can be defined as the pursuit of making financial services affordable and accessible to all individuals and businesses.

With UNESCO data from 2017 stating that as many as 750 million adults remain “functionally illiterate” across the globe, illiteracy cannot be overlooked as a major contributor to this issue.

Another significant factor is education and findings from the Global Findex estimate that approximately half of adults in the developing world having a primary education or less, suggesting that unbanked adults are more likely to have lower educational attainment. Faced with limited reading, writing and mathematical skills, these individuals are unable to make  full use of financial services. .

This research also claims that the majority of unbanked adults live in the developing world, with nearly half living in Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. A major inhibitor for financial inclusion within developing economies is the lack of the correct government identification that is initially needed to set up a bank account. In countries such as the UK, formal identity is issued at birth, through the use of birth certificates and thereafter passports. In developing countries however, access to formal identification is scarce, this is due to the costs being far too high and ultimately a lack of daily necessity for formal identification. There are also those who whilst being banked, are struggling to hang on to their financial independence, due to either physical or mental health limitations.

Currently there is an estimated 47 million people in the world living with dementia. Because of this, sufferers often find it difficult to remember PINs or passwords needed to access their bank accounts. Currently signatures are used as a second factor authentication in this situation, but what happens if someone can’t remember or write their signature?

Helping the financially excluded

Whilst the financially excluded might be made up of minorities, when combined, those minorities account for a huge proportion of the population that is currently being underserved. Those who lack access to financial services are missing out on the many benefits financial inclusion has to offer, as they are unable to gain access to credit, overdraft facilities or the welfare needed to improve their financial circumstances.

Governments across the globe have a part to play in improving financial inclusion, but ultimate responsibility must sit with the banks and financial institutions to bridge the gap to the unbanked. The argument for the involvement of banks in this movement is twofold. Not only do banks have the opportunity to benefit from additional revenue by reaching out to these individuals, but they also have the chance to build a relationship with these individuals and improve their quality of life.  Banks must consider how they can make financial services accessible for all in order to help to strengthen and drive growth in emerging economies. 

The role of biometric authentication

Further research by the 2017 Global Findex found recent progress in solving the issue of financial inclusion had been driven by digital payments, government policies, and a new generation of financial services accessed through mobile phones and the internet. With a need for simple, secure and convenient authentication solutions to bridge the gap to financial inclusion, biometrics could be the latest technology to assist with this.

Advances in biometric fingerprint authentication mean that consumers can be linked directly to their card by their fingerprint alone. There is no need for traditional government identification in this case as individuals will be personally linked to their card, thus providing a solution to the 1.1 billion people worldwide without official identification. This method of authentication will mean that financial institutions can be confident that the person they are extending credit to is the person intended, as ultimately nothing is more secure, or personally identifiable, than a fingerprint. 

Fingerprint authentication will also remove the barriers that face those with literacy challenges, or face difficulty with memory, as card payments will no longer be about what you know, or what you can remember, but who you are. Biometric authentication will be a simple, secure and convenient solution eradicating the need for passwords and PINs as a form of authentication.

Latest advancements in remote enrolment of biometric payment cards will also mean that enrolment for biometric payment cards can take place in the comfort of your own home. This prevents individuals from having to leave the house to visit a bank branch, meaning this solution will be accessible for all, including those who might have physical health limitations.

Fingerprint authentication will eradicate a number of obstacles that stand in the way of financial inclusion, as well as enabling individuals to hold on to their financial independence for longer.

How to bridge the gaps between vision and reality

Before this vision can become a reality, it is paramount for this technology to become cost efficient.  Achieving greater inclusion will thereby lie in finding the correct price point, which is likely to be assisted by banks that subsidise the charge for a biometric enabled card.

Amidst this, biometrics companies are currently co-operating with financial institutions and card manufacturers to tackle this issue and rapid advances in technology will mean that biometrics is set to make a real impact on financial inclusion within the next couple of years.

In addition, future developments in biometric enabled payment cards could enable display integration and dynamic CVC, allowing card issuers to provide extra value and layers of security. Though biometric technology clearly provides a solution to the problem of financial inclusion, it is certainly not a quick process, and change will not happen suddenly.

By identifying the power of biometric authentication now and having the patience to ensure that the right frameworks are in place to optimise success, it will be allowed to transform the face of the payment industry entirely.

Stan Swearingen, CEO, IDEX Biometrics
Image Credit: Flickr / AMISOM