Biometric technology has the potential to radically transform the banking industry by securing identities while improving user-friendliness. And, says Nick Perkins, divisional director at Bytes Systems Integration’s Identity Management division, biometrics also holds the potential to widen access to financial services by equipping banks with a low-cost, easy-to-use method of user authentication.
“While effective to a point, the measures banks put in place for identity protection can be restrictive to customers as remembering passwords, using codes, identity documents and plastic cards can be a hassle. Forget a card, forget a password or lose an ID document, and you are effectively locked out,” Perkins observes.
That’s not all – despite the security these traditional verification methods add, they are also prone to interception.
By contrast, biometric information (such as a fingerprint, iris or facial scan) is more secure. These credentials cannot be forgotten or misplaced, which means users always have the means to access their accounts. “Biometric data can be used to design simple, user-friendly ways to identify clients and give them access to the services they require,” Perkins confirms.
It’s a tantalising prospect that some banks are already exploring. By deploying biometric ATMs, customers use something that they are (instead of something they have or something they know) to verify their identity.
More than delivering improved convenience, Perkins says perhaps the biggest unrecognised potential for biometrics could be its use to take financial services to the unbanked. In one estimate, 67% of South Africa’s adults are
unbanked, with just over one-third (37%) of them living in rural areas.
“Financial inclusion is a priority for the government and it’s not hard to see why – it’s an essential step to becoming integrated into the mainstream economy, and to improving one’s financial position and prospects,” Perkins explains.
However, conventional banking’s requirement for cards, PIN numbers and ID documents can be intimidating for some customers, while extending the necessary infrastructure to rural areas can be costly.
Instead, technology with which most people are already familiar can be leveraged – mobile phones and biometric identity verification.
Many are already using biometrics to access social grants, while the success of M-Pesa in Kenya and elsewhere, and the growth of micro-insurance bought via mobile devices, has shown that the right mobile financial solutions find a ready market at the so-called “base of the economic pyramid”.
While individuals in this market are seen as poor, in aggregate, they constitute a substantial prize. One estimate is that these consumers in Nigeria, Kenya and South Africa have an income of R1 682 billion per year.
As micro-insurers are finding, the right solutions offered via mobile devices are proving very popular: global micro-insurance premiums are already worth somewhere between R137 billion and R166 billion worldwide – and are set to grow at 6.2% annually until 2017.
It’s a market that Perkins believes is ripe for the advantages that formal financial services providers deliver to market.
“Biometrics delivers secure identification which can enable a range of services, from physical or virtual access control, to authentication for the purposes of transacting. It has multiple uses in the financial services sector, but perhaps none is as exciting for our society’s long-term health as its potential for promoting inclusion, with all the associated benefits,” he concludes.