The prepaid card marketer FirstView LLC is planning to use a voice biometric authentication system in its phone and online banking systems to combat a perception that its target market, the unbanked, is especially vulnerable to fraud.
Though the use of biometrics to authenticate consumer payments, particularly for online transactions, is not widespread among mainstream financial institutions, FirstView said the unbanked are a good fit for this technology because many do not trust banks.
"The unbanked and the underbanked are just that for a reason," Zach Todd, the vice president of operations at FirstView, said in an interview last week. "Either they are suspicious already of financial institutions, or they have had a bad experience with a financial institution."
To give its customers more confidence that their funds are safe when loaded onto FirstView cards, the Atlanta company is using biometric technology from VoiceVerified Inc. of New Hope, Pa., that can verify users' identities by comparing their voices with samples provided when they enroll.
Mr. Todd said customers can also use the technology to authorize transactions initiated online by setting the system to call them before approving a funds transfer or other type of payment.
"Our cardholders and our consumers are highly sensitive to the fact that they're easy to take advantage of, and they want to feel more secure in their transactions," he said. "I think they are at a higher risk of fraud just based on where they are in life."
Analysts disagreed that the unbanked are at higher risk but said the fact is less important than the perception: As long as the unbanked believe themselves to be at greater risk, it is an issue.
James Van Dyke, the principal and founder of Javelin Strategy and Research in Pleasanton, Calif., said the idea that the unbanked are targeted more than the banked by fraudsters is "really a perception — fact doesn't support it."
The biggest targets are the ones with more money and who initiate more transactions, he said. Even so, the unbanked are not ignored by scammers, and "when they do become a fraud victim," he said, it can be a bigger hardship. "The extent of each [unbanked] victim's losses are much more significant."
Companies like FirstView, which target the unbanked, still must address their customers' sensitivity to fraud and security concerns, Mr. Van Dyke said, and touting security can be an effective marketing tool even if the technology does not address a real issue.
He compared the voice biometric system to American Express Co.'s introductory campaign for its Blue card, which featured a security chip. "It was all about a security play," he said. "And of course the card went on to be wildly successful, and yet the features behind it didn't really add to anyone's individual security because it was a chip card, certainly back in the time when point-of-sale readers didn't read off the chips."
The success of the Blue card was due more to marketing than to its security technology, he said.
"Through the strength of their marketing muscle, they addressed a perception issue even if it didn't substantially add to it," he said. "They were able to convince the public that the American Express Blue was the card to have if you wanted to become more secure."
FirstView could accomplish the same thing but would have to "spend like crazy" on advertising, he said.
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., also disagreed that the unbanked are frequent fraud targets. "What we've seen in all the data is, the more money you have, the more of a target you are," she said.
However, voice biometric technology can still help FirstView, she said, "because it's a visible sign of additional security, and all our consumer data shows that consumers do want visible security. And you definitely need more security when it comes to prepaid cards."
However, she said, the system will not address one major security problem with prepaid cards: Criminals buy them as a way to "turn stolen credit cards or debit cards into cash," she said, by purchasing prepaid cards with the stolen cards and then selling the prepaid cards. This problem cannot be solved by voice biometrics alone.
"Sometimes, voice is a deterrent to criminals because they don't want their voice recorded, but most of the time it's not a deterrent," she said.
The technology itself is solid, she said, and the only reason large banks have not adopted it widely is that there are concerns about its widespread use.
Within the next two years, she said, she expects a large bank or issuer to adopt voice biometric technology in the call center and "once one does it, then the others will."