With the UK’s free-to-use ATMs rapidly disappearing and our use of debit cards now outstripping our use of cash, some argue that as a nation we are ready to go cashless. We are not the first nation to reach this point. In Sweden, four out of five purchases are made electronically and the country’s central bank, the Riksbanken, estimates that cash in circulation will decline by 20–50% between 2012 and 2020. So, are we ready to go completely cashless?
The situation is less clear-cut than many think, and authorities in both Sweden and the UK (where the Access to Cash review has recently reported) suggest that the answer to the question is ‘not entirely’. In the UK, debit cards are now the most popular payment method, but in 2017 we still made more than 13 billion cash payments and around 8,000,000 adults (that’s 17% of the population) would struggle in a cashless society.
In a similar way, the Swedish Riksbanken says that certain groups remain dependent on currency. In the UK even people who regularly use debit and credit cards like to carry cash as a back-up, and when asked why they still use cash at all, say they enjoy its convenience and value its trustworthiness — some fear that card payments leave them open to fraud, ID theft or other dangers. They also like being able to select from several payment methods, including cash. So, it seems that we still need a choice over whether to use cash, or not.
That said, such choice is not limited to the continued availability of cash. People reliant on cash tend to be the less prosperous, including many who don’t have a bank account (which is known as being ‘unbanked’). For these groups, the ability to use payment cards (including pre-paid cards) if they choose to, might bring substantial benefits. For example, payment cards allow their users to get better deals online and to build a credit history that, over time, provides access to cheaper credit and more cost-effective financial services.
This is where biometrics, and specifically fingerprint biometrics built into payment or ID cards, can be the solution.
The importance of authentication
There are more than a million unbanked working adults in the UK, of whom only around half actually want a bank account. Even among people who have basic banking facilities, around halfchoose to manage their money in cash. Yet as we have seen, the nature of being unbanked effectively bars such individuals from taking advantage of better deals and therefore cutting costs. Given that many are already not as financially secure, that’s a huge disadvantage, and often continues for years.
At the moment our non-cash payment methods, including cards, rely heavily on PINs, passwords and other established authentication methods. The trouble is that these are (a) too often linked to a plethora of background ID information held by banks and card issuers, thereby excluding the unbanked, and (b) frankly insecure and unreliable.
In India the government has taken on this problem, in order to tackle the twin issues of empowering those at the margins of society (which includes people who are illiterate and/or in poverty, as well as rural and isolated communities) and promoting the cashless agenda. Central to this is Aadhaar, a universally-available digital identity/authentication method that relies on fingerprint biometrics. Aadhaar lets users authenticate receipts and payments, whatever their literacy level, income, ability to speak the local language or access to formal banking. Mastercard also recently announced a new pilot with pre-paid card specialist Edenred and the Mexican state of Sonora to trial the use of cards with embedded fingerprint sensors for benefit program disbursement. This will provide beneficiaries with increased security when receiving their entitled benefit since the card protects their identity and cannot be used by anyone else.
There is an important lesson here for the UK, particularly if the volume of cash in circulation ultimately drops. With fingerprint biometric smart payment cards, a payment recipient is assured of their customer’s identity and the authenticity of the transaction, to a level far above that offered by PINs. Furthermore, the card user can build a financial history and lines of credit — even if they are using a pre-paid card and are currently unbanked — because the authentication of their financial activity is highly reliable and can be linked to an unchanging, universally-recognised element of their identity: their fingerprint.
At the moment, the UK must ensure the continued availability of cash for the millions who are unbanked and the many additional people who prefer to deal in coins and notes. To that end, the government recently announced that, despite the withdrawal of one and two penny coins having been suggested, there will be no changes to UK currency for the foreseeable future.
Nobody knows whether, in time, if the use of cash will drop so far that it becomes irrelevant. But what is already clear is UK consumers’ growing preference for card payments. Ensuring trust in card payments is therefore very important for consumers, banks and merchants alike and it is common sense to make card payments as easy and trusted as possible.
Fingerprint biometric smart payment cards can do this. While signatures can be forged, and PINs forgotten, passwords hacked or guessed and CVVs/CVNs stolen, a fingerprint is virtually impossible to replicate. Cards with built-in fingerprint biometric authentication help consumers to overcome their fears around non-cash payments, and thus also help the financial organisations keen to recruit new customers. Above all, as the UK transitions from being a cash-heavy to a cash-light society, fingerprint biometric smart cards keep people’s precious assets — and those of financial institutions — safer than ever before.