The Acceleration of Financial Exclusion
Despite the digital advancements in recent years, there remain many millions of people who are excluded from conventional banking systems. These people fall under demographics such as migrants, those with visual or cognitive impairments and the underbanked, a group that itself represents around a third of all adults around the world . As society becomes ever more focused on online transactions, the number of financially excluded people is predicted to grow.
A New Financial Landscape
It is calculated that41% of Americans currently have moved away from carrying out transactions using cash, preferring to use contactless cards or digital wallets. This is a trend that is predicted to grow exponentially over the current decade, meaning that by 2031, only 6% of transactions are likely to involve cash .
This change can, in part, be attributed to the global pandemic, which forced many to adopt a fully digital approach to banking and making transactions. Digital wallets and cards are predicted to be used for almost 85% of all online shopping purchases by next year. And using a contactless payment card has also fuelled consumers’ desires for a quick, convenient payment experience.
However, for those people within the demographics outlined above, the move away from cash represents a serious risk of further financial exclusion. Without a means of safely and confidently being able to access digital payment and banking methods, such groups will be at risk of being unable to access savings accounts, take out loans, build a credit rating, or even open a basic bank account.
Reliance on Memory
For those with cognitive impairments such as dementia or Alzheimer’s, the need to remember a PIN or navigate the multi-factor authentication steps that are becoming the norm, can be an insurmountable barrier to using conventional payment cards. Meanwhile, visually impaired users may fear that others could be able to see their PIN entry, or struggle to manually enter PINs.
Biometric Payment Cards Offer an Answer
By integrating a simple fingerprint sensor into their payment cards, financial institutions can reduce levels of financial exclusion for all of these groups. The robust authentication based on biometric data removes the need to remember a password or PIN.
For displaced migrants or unbanked groups biometric smart cards allow them access to the financial ecosystem, while bypassing complicated registration and documentation processes. This approach has already been adopted in South America, which has given many of its previously unbanked citizens access to bank accounts through biometric smart cards.
In our next blog, we will explore in greater depth how the financially excluded can be supported through biometric payment cards.