Biometrics for the Unbanked

10. December 2017.

The number of mobile phone users in the world is likely to surpass 5 billion within the next year. As this number grows, it’s no wonder why most banks have their own mobile app or at least a way for their customers to access finances on-the-go. Yet 3.5 billion people worldwide are excluded from the financial system.

Surely there is a way for these enterprises to grant financial opportunity to those who don’t have immediate access or are without smartphones entirely. Here’s where the “Banking the Unbanked” movement comes into play. Also known as microfinancing or financial inclusion, this movement caters to developing areas of the world, such as sub-Saharan Africa, Indonesia, and elsewhere, with the goal of providing their populations with affordable, quality banking and fostering economic development.

What’s the Issue?

Populations in these areas are naturally migrating from more remote living spaces into urban environments, where the way of life has modern and foreign necessities. People who never required access to financial services suddenly need to be able to pay for water bills, loans, and online services. There are certain modern commodities that are not so foreign to these populations – mobile phones were introduced to developing nations over a decade ago, with the Internet coming along with them. That’s where the opportunity to achieve global financial enrollment lies: using mobile phone technology to enroll the unbanked.

There are a number of roadblocks, however – namely illiteracy and a lack of ID documents. Though these are not an excuse for all of the estimated 2 billion adults lacking access to formal financial services across the globe, they do pose a challenge for many. Luckily, with advanced modern technology and a genuine desire from banks and startups around the world to aid these populations, there are ways to overcome these roadblocks. As the saying goes, where there is a will, there is a way.

There is a Will

Banks and startups across the globe are attempting to combat this issue. Barclays’ has launched a Cellphone Banking service in Africa which, by way of an app, allows users to open accounts. Sampath Bank in Sri Lanka, launched Sampath MY wherein customers could visit a merchant equipped with a POS terminal, as opposed to a bank, to enroll for an account. India is in the midst of a massive undertaking through their Pradhan Mantri Jan Dhan Yojana (PMJDY) bank accounts and they have seen over 306 million JDY accounts opened since it launched in 2014. In the U.S., TFC Bank has created a “ZEO” program, which allows for the creation of a savings account with no minimum balance or monthly fees, and Western Union customers can pick up transferred funds for free.

On top of all these efforts, there are countless Fintech start-ups attempting to aid in the effort through technologies like bitcoin and blockchain.

But This is the Way

The disconnect between mobile technology and accessible banking stems from the actual access to a bank account. This is perhaps why we’ve relied on banks to provide the solution — but that approach isn’t working. And start-ups are making ripples, but not the wave this issue requires. In these solutions, illiteracy and particularly missing ID documents still propose a challenge.

As a way to solve identity verification disparity in developing countries, biometrics is emerging as a convenient, accessible and secure technology. Biometrics encompasses anything that uses a person’s physical characteristics to prove their identity (e.g. facial recognition, iris scanning, fingerprint). As opposed to relying on ID cards, passwords, and paperwork (which can be a problem where illiteracy is concerned), biometrics simply uses an individual’s fingerprint or face to prove who they are. Biometrics are now being integrated into government processes, hospitals, and even airports as an expedited and secure means of identifying individuals.

Pakistan is an optimal example of the fluidity and ease of biometric authentication, especially in a crisis situation. In 2010, they had catastrophic flooding and, since the government had previously implemented a biometric citizen registry system, they were able to confirm and distribute donations to over two million families.

India, too, has launched into digital identity programs and is driving the use of financial services back to that single source of truth. In a country with over 1.5 billion people, they will work to remove cash from the ecosystem over the next five years and digitalize payments and currency. Their first building block to a transparent money system is enrolling, matching and managing inhabitant’s biometrics.

Biometrics, of course, is not without its drawbacks. Often biometric technological solutions involve the distribution of hardware fingerprint readers or face scanners. When evaluating a widespread — national even — deployment, it can be a less efficient and particularly less cost-effective solution. Additionally, what happens if someone has worn-down, weathered hands? This is why smartphones play a critical role in the biometric banking solution.

Most smartphones already contain the sensors required to capture biometric data: cameras, face scanners, fingerprint readers, these are all integrated pieces of modern smartphones. And these phones are becoming rapidly adopted in the developing world. In Kenya, for example, over 37 million people have a phone that is SMS-capable. For those who may have trouble using fingerprint technology, contactless biometrics are a developing option. The latest iPhone was released with face scanning technology, which could easily be integrated into a mobile banking app. In fact, Malaysia’s largest bank, Maybank, unveiled a Face ID and voice recognition solution for its customers using their Maybank2u app. iPhone owners in the TSB or Tesco banks in the UK and communities are now able to use Apple’s Face ID to access the mobile app and make payments. Of course, there is still progress to be made. iPhones are expensive and are not exactly an affordable solution – but uploading a selfie is simple, and even flip-phones come with cameras.

Using current mobile technology and integrating its functionalities with apps or browsers presents an ideal solution to banking enrollment and authentication in the developing world. It could make enrollment essentially paperless and combat some of the key roadblocks in developing countries (such as literacy). Additionally, by allowing users to utilize on-the-go technology, the process becomes widely accessible and exceptionally fast.

At Veridium, we know the potential biometrics has in advancing financial access in the developing world. With support from the Bill and Melinda Gates Foundation, we were recently awarded a grant from the Digital Financial Services Innovation Lab, to develop biometric authentication technology on Android phones. The goal, of course, is to improve the opportunities in financial and governmental enrollment for those in developing countries. Imagine the number of people that could be helped with such an attainable technology.

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