Biometric authentication: bridging the gap for financial inclusion
By Stan Swearingen, CEO of IDEX Biometrics
Financial inclusion is the pursuit of making financial services accessible at affordable costs to all individuals and minorities. Whilst many of us take our bank accounts for granted, without one, the ability to engage in the economy and wider society is virtually non-existent. There are limited ways to pay bills, a lack of consumer protection, limitations on employment, zero credit record, and very few lending opportunities. Universal Credit, which will be distributed through bank accounts, could also prove problematic for those currently without them.
Despite this, globally, about 1.7 billion adults remain unbanked today, that’s more than a third of the world’s adult population who are making little or no use of formal financial services . Why? There are many reasons, from language barriers to a distrust of the financial system. Undoubtedly, illiteracy is also a huge factor. UNESCO data from 2017 states that as many as 750 million adults remain “functionally illiterate” across the globe. Further research from the Global Findex suggests that unbanked adults are more likely to have low educational attainment with approximately half of adults in the developing world having a primary education or less. A lack of skills in reading and writing, as well as confusion in understanding numbers are all factors discouraging these individuals from making full use of financial systems.
This research by the Global Findex also claims that the majority of unbanked adults live in the developing world, with nearly half living in just seven developing economies including Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan. A major inhibitor for financial inclusion within these countries is the lack of the correct government identification that is initially needed to set up a bank account. In countries such as the U.S. and UK, formal identity is issued at birth through the use of birth certificates and thereafter passports, and additional forms of identification are relatively easy and inexpensive to obtain. 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. For example, often there is no need for a driving license and no need to verify age in supermarkets due to a difference in law across developing countries.
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 currently living with dementia, as a result 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 their signature?
The financially excluded: an underserved population
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.
Could biometrics be the solution?
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.
Bridging the gap
Implementing biometric authentication technologies as a solution to this problem is all well and good, but driving cost efficiency of this as a product is essential. Whilst many banks may subsidise the charge for a biometric enabled card, the price point must be one that means financial inclusion is available for all.
Biometrics companies are already working alongside card manufacturers and financial institutions in order to combat this issue and rapid advances in technology means that biometrics is set to make a real impact on financial inclusion over the next couple of years. 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. Solving the issues around financial inclusion isn’t going to happen quickly, but these advancements in biometric technologies will go a long way towards bridging the gap for financial inclusion.