The Importance of Prepay and Biometric Authentication for Financial Inclusion
Welcome to the third post in our series on prepaid cards. In this post, Art Stewart, Global Head of Sales & Marketing, IDEX Biometrics, talks about the importance of prepaid cards and biometric authentication for financial inclusion.
The prepaid card market is growing rapidly, and is proving popular with a number of key demographics, such as the younger generation. The global market for prepay was valued at more than $2 trillion in 2019, and is predicted to reach $18.47 trillion by the end of the current decade . Meanwhile, for the billions of people worldwide who are without traditional banking methods, prepaid cards provide an important entry point into modern financial services.
Who Uses Prepaid Cards?
The demographics for the prepaid market indicate that it’s proving attractive to several key groups. Young people constitute a good proportion of users, with the cards providing an ideal first touchpoint for children wanting to handle their pocket money, and students keen to manage their expenditures . In fact, some 43% of prepaid users in the U.S. are part of the Millennial demographic.
Prepay is also an attractive option for people with low credit ratings, the unbanked and underbanked, and the elderly. While the prepaid market is currently largest in the U.S.A. and Canada , Europe is catching up, with the UK and Germany boasting the largest numbers of users. It’s estimated that more than 40 million people in Europe don’t have a bank account, making this section of the market alone ripe with potential . It’s also popular in developing countries. Meanwhile, an American study found that people using prepaid cards like the fact that they prevent overspending, suggesting that prepaid is an ideal option for those on a fixed income.
The Move to Cashless
While it’s been thought for some years that a move to a cashless society was inevitable, the pandemic has undoubtedly accelerated this. The need to promote contact free payments for reasons of hygiene, coupled with the rise of online transactions, means that those who do not have access to a payment card face financial exclusion.
Prepaid provides the solution for those living outside traditional banking methods. The onus is now on financial institutions to engender consumer trust in the service. Prepaid methods must be seen as secure in order to attract vulnerable demographics, and unfortunately it remains the case that a lack of standardization across the market, coupled with weak authentication methods, means many perceive the cards to be a risky proposition.
Biometric Authentication Holds the Key
Overcoming these security concerns can be achieved by incorporating modern security protocols, such as biometric authentication. This technology can be simply added to prepaid cards and provide the certainty consumers need. The fingerprint authentication system is already likely to be familiar to users, as many smart mobile devices already use a similar approach, and this adds further reassurance to card users.
An Opportunity for Financial Institutions
Brands that address the trust issue and incorporate secure biometric authentication are in a great position to help those who might otherwise be excluded from a digital banking world. As well as helping the most vulnerable in society, these institutions can also use prepaid as a trusted first touchpoint in financial services, increasing their customer base in the process.
The previous post in our series on prepaid cards explained why prepaid cards should be protected with biometric sensors.