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Creating a financially inclusive future with biometric smart cards

Creating a financially inclusive future with biometric smart cards

By Catharina Eklof, CCO of IDEX Biometrics

There is still a wide financial divide across many demographics in society. People who are visually impaired, displaced migrants, unbanked, and those suffering from dementia are the demographics that might benefit from a more smooth, secure, and inclusive method of making payments and verifying their identity.

Nearly one-third of adults worldwide are still without a bank account, according to research by the World Bank Group. This translates to almost 1.7 billion people, with 40 percent of them being from the world’s poorest regions. Exclusion denotes a lack of access to standard financial services such as bank and savings accounts, loans, or even a credit rating. The modern financial infrastructure also leaves behind groups, such as migrants, who are waiting for permission to enter a nation’s financial ecosystem.

Given the increasing dependence on digital and contactless transactions, access to finances through the existing financial infrastructures is only expected to worsen for these groups of people. The percentage of Americans who no longer use cash for payments has risen by double figures, reaching 41 percent. While it is expected that by 2031, cash payments are expected to make up only 6 percent of all transactions.

Those in migrant populations and those with visual or cognitive disabilities can benefit from the accessibility to biometric smart cards, and feel secure, included, and independent.

Moving away from passwords and PINs

COVID accelerated the transition from cash to contactless payments and the use of digital wallets, creating a challenge for many. By 2024, it is expected that digital wallets and cards will account for 84.5 percent of all e-commerce spend.

Digital transactions traditionally rely on the use of PINs that can easily be forgotten, as studies have found that we manage 100 passwords on average across various sites and services. In the U.S. alone, consumers report relationships with more than three financial institutions and have more than four accounts per household. The challenge of password recollection is only growing. To counter rising cybersecurity threats, several countries now mandate two-factor authentication for retailers and service providers, creating further complexity.

However, organizations are responding to financial exclusion. Card provider Mastercard introduced its contactless PayPass offering, as well its Touch Card developed alongside Amjan Bank which enables the visually impaired to distinguish between their cards. Both look to provide a better customer experience for people struggling with the digital changeover. For those living with dementia, Mastercard has also partnered with Sibstar and the Alzheimer’s Society to create a specific card where limits, transactions, top-ups and notifications can be viewed and managed via a complementing app. Likewise, Turkish neo bank Papara introduced a Bluetooth debit card that provides visually impaired users with audio prompts when making payments.

Raising awareness of financial security

There are at least 2.2 billion visually impaired people globally. In 2019, it was found that 89 percent of visually impaired have been victims of fraud or have made errors when paying for goods and services. This figure comes prior to the pandemic, and the proliferation of digital transactions, suggesting an even bigger concern today.

PINs present an obvious security issue for this demographic, with others able to oversee their inputs and then manipulate them. Contactless payments go some way to solving that problem but pose the risk of fraud as there is no PIN verification below the increasing threshold amount, now at £100 (approximately US$122) in the UK, where the average annual wage is £27,756 ($33,890). In India, where the average annual wage is 945,489 rupees ($11,372), contactless limits are set to 5,000 rupees ($60). Many accounts also require visual-based inputs to prove identity, such as CAPTCHA, proving as a barrier for the visually impaired.

Enhancing awareness on a regulatory level is key for driving change and reassuring vulnerable groups. The EU Accessibility Act is an example of how payment service providers are obliged to comply with accessibility standards. This includes making interfaces perceivable, operable, understandable, and robust, to ensure that individuals with disabilities can effectively navigate payment interfaces.

Advancements in biometrics

Including braille on cards for easy identification is a crucial step for the visually impaired. This is also used on biometrics smart cards, with sensor textures to confirm the user has selected the correct method of transacting. These cards provide convenience, inclusivity, and security by linking a person’s identity to their fingerprints, encrypted within the card itself, reducing data breach concerns.

Fingerprint biometric smart cards function by linking a person’s identity to their card. A card may only be used for transactions using the fingerprints of the card’s exclusive owner. The data is encrypted and saved on the card itself, eliminating any further concern about data loss due to a centralized breach or large-scale attack.

Biometrics goes beyond traditional demographics to help the unbanked and individuals who are not recognized in national infrastructures. Pension payment fraud in India has decreased by 47 percent as a result of the elimination of the requirement for prior credit ratings or qualifications. South America was one of the first regions to embrace biometrics as a solution to the issue of obtaining confirmation of identification, when setting up traditional bank accounts.

Biometric liveness detection is critical for financial aid worldwide that helps underprivileged communities. Securing remittances with biometric verification promotes transparency and improved fund control. Transferring payments to cold wallets or biometrically validated cards improves program efficiency while protecting the interests of people and communities.

Overall, the biometrics market is estimated to reach $87.4 billion by 2028, at a CAGR of 17 percent. Its overall worth as a simple and secure alternative to routine transactions is increasing year after year. However, you can’t put a figure on the impact that biometrics will have on individuals who have so far slipped through the cracks of finance’s digital transformation.

About the author

Catharina Eklof has served as IDEX Biometrics Chief Commercial Officer (CCO) since June 2021. Prior to joining IDEX, she was the CCO at Defentry, a cyber safety solutions provider, and established Mastercard’s global strategic merchant programme. With over 20 years of experience in leading business transformation across financial services, retail, travel, and information security, Eklof serves on the board of directors of Avanza Bank Holding AB.

DISCLAIMER: Biometric Update’s Industry Insights are submitted content. The views expressed in this post are that of the author, and don’t necessarily reflect the views of Biometric Update.

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