Financial inclusion is nothing without security: finding a better balance for prepaid cards
By Vince Graziani, CEO, IDEX Biometrics ASA
The use of prepaid cards is on the rise, and at first glance the trend seems completely understandable. As a way to encourage financial control and enrichment for the unbanked, the underbanked, those with poor or non-existent credit ratings, the elderly, and people in need of care, they are something of a social leveller. But as many of these demographics make their first concerted entry into the modern financial world, there is likely to be one aspect of card usage that they treasure most – the need for security. And in this respect, prepaid cards just don’t offer the level of security users need and desire; they need biometric intervention.
A stored-value card contains money already inputted to the product itself, rather than it being housed and stored in a bank or large financial institution. As such, they are more than just an alternative to traditional payment options. They are an innovative bridge for those demographics to gain simple financial control and conduct transactions in a modern way.
As many as two billion people around the world are currently unable to access modern or digital services because their data and financial histories are held outside of the new digital infrastructure. Introducing an accessible ‘pay-as-you-go’ type model to such a vast population is a great way to make card payments more inclusive than ever before.
Convenience doesn’t equate to security
Inclusivity is the key word here, and it has helped to launch the prepaid market quite dramatically on a global scale. The sector is expected to grow to $4.1 trillion in the next year, and it’s already dominated by some of the most renowned and reliable names in finance, including the likes of Visa and Mastercard. However, this inclusivity can’t come at any cost.
For this rapidly scaling market, customer convenience doesn’t always equate to security. And when the likely demographic of user may just be finding their feet with a card-based solution, this presents an issue.
The insecurity derives from the fact that while debit and credit cards contain theoretical funds, that if stolen or subjected to fraud, the owner is able to cut them off at the source of their bank, or – at worst – ensure that no further funds are allocated to the card. With prepaid cards, their convenience means that the money is already stored on the card, bought and paid for. It creates a hassle-free option for a potential misuser, where their newly ‘acquired’ asset becomes an instant goldmine.
Removing security fears from the equation
And that’s why a more secure form of prepaid card is so necessary, not only to fight back against financial misuse and crime but to instil a sense of confidence and safety among those most likely to benefit from this solution.
Fingerprint biometric prepaid cards are the answer to this challenge. From a purely logistical usage standpoint, they’re already more convenient than traditional cards in that they offset the need for PINS and passwords. They also deliver end-to-end encryption which means that they are not only impervious to fraud, even if stolen, but the owner’s data is also protected without fear of it being found and misused.
Specific to the prepaid card user, when such a large percentage of this demographic are still finding their feet with banking tools, the simplicity of fingerprint authentication also becomes invaluable. To know that the card is only identifiable by a method specific to the owner, removes the security concern from the overall equation.
From that position of safety and comfort, they can continue to enjoy all the benefits of a prepaid solution, without the fear of their already purchased funds falling into the wrong hands.
The first foray into finance
To reaffirm how pivotal this positive tweak on an already good idea could be, there are already so many positive examples of prepaid cards changing people’s lives over the past few years. In the case of solutions such as the Carer Card, the product has been developed so that carers can manage essential activities such as shopping or paying bills, on behalf of the elderly, or those with learning difficulties, for example.
Similarly, they are also a great way for parents and guardians to help children in their early steps towards financial maturity. Using prepaid cards as a positive way to channel pocket money exposes them to adult transactions, but in a controlled, inclusive and manageable way. And with fingerprint biometrics, can also be used in a secure way.
Instilling a sense of confidence and trust among these demographics and the most vulnerable members of our financial ecosystem is imperative. And the onus is now on card issuers and banks to drive this trajectory.
It might be the first foray into payment services for many and they need to feel safe in the knowledge that their finances are secure when embarking on this journey, even if the card should fall into wrong hands. With this final string added to the prepaid bow, these socially levelling cards can continue to thrive as they should, and inclusivity can truly pay off.