I'll admit it, financial inclusion and access to financial services is a topic about which I care deeply. I'll also admit that I'm enthusiastic about the white paper recently released by the US Faster Payments Council's Financial Inclusion Work Group, Faster Payments and Financial Inclusion – which is why I'm excited to share it with you.
The Faster Payments and Financial Inclusion Report asks, "How can we get more financial inclusion in faster payments? How can people who have to manage their money closely benefit from the features of faster payments to move money quickly to family members, to pay a bill very close in time to the due date, and to meet other needs? Faster payments usage grew throughout the Covid-19 pandemic, but adoption is still low and unequal across income levels. What might be deterring or slowing adoption of faster payments for those who are not at the top of the income scale, and what can private sector entities in the payments space do about it? These are the questions this report seeks to answer."
The Financial Inclusion Work Group included those without a bank or credit union account (the unbanked), those living paycheck to paycheck (the resource-constrained), and small businesses in their definition of underserved; and addresses the following:
- Who are the underserved?
- What are the pain points for the underserved that may limit the use of faster payments?
- Actions to address the pain points and expand financial inclusion in faster payments
- Liquidity constraints
- Cash in / Cash out
- Mistake prevention
- Fraud prevention and remedy
- Enhancing solutions and services for the underserved
- Remaining considerations
A Potential Case Study for Real-Time Payments and Financial Inclusion
Back in March, I had the opportunity to attend the US Faster Payments Council's Spring Member Meeting in New Orleans, LA. One of the panel discussions moderated by Reed Luhtanen, the Executive Director of the FPC, was entitled Doing Well by Doing Good: Achieving Inclusive Economic Growth in New Orleans. The panel consisted of Joshua Cox, from the office of New Orleans' Mayor LaToya Contrell; Steve Tae, from MasterCard; and Wole Coaxum, Founder & CEO of Mobility Capital Finance (MoCaFi). The panel focused on MasterCard and MoCaFi's work with the city of New Orleans; but the challenges are pervasive, and the same issues faced by the underserved population in New Orleans are explored in the Financial Inclusion White Paper.
A substantial portion of New Orleans residents are unbanked or underbanked. This is a sort of tax on the poor, as check cashing services and predatory lending are expensive. Take check cashing for example: an unbanked resident brings his paycheck to a check casher to negotiate and is charged at least 10% for the service. New Orleans is working with Mobility Capital Finance (MoCaFi) to develop the Crescent Card. The end goal is to develop a financial infrastructure around these underserved groups. One of the challenges is the digitization of payments to underserved populations – those most in need cannot receive their money timely, and sometimes not all. Imagine a situation where an individual has no electronic means of receiving a disaster relief payment, and mail cannot be delivered to their vicinity. An electronic payment accessible by card would be immediately available to the recipient; but without the infrastructure to receive that payment, they are reliant upon receipt of a paper check and even then, must still find somewhere (and pay at least 10%) to cash that check and finally access their funds. For New Orleans, the Crescent Card might be the answer.
If the issue of financial inclusion is of interest to you, I encourage you to read the report; and to tune into the August 11th episode of the Off the Rails podcast episode, in which Reed Luhtanen, the Executive Director of the USFPC discusses financial inclusion with Gail Hillebrand of the NCL (National Consumers League) and Chair of FPC's Financial Inclusion workgroup, and Adam Rust of the NCRC (National Community Reinvestment Coalition) and Vice-Chair of the Financial Inclusion Workgroup. Note: To listen to the podcast, you'll have to click the link for the 11 August 2022 episode.
Don't forget that the US Faster Payments Council website (of which NEACH is a founding member) contains a wealth of faster payments resources for you!
From the Faster Payments Council:
At the Faster Payments Council (FPC), they have not let the "dog days of summer" deter them. In fact, over the past few months, they have sharpened their focus and ramped up the level of activity, largely due to the efforts of their Work Groups. Their labors have resulted in the release of two new white papers: QR Codes for Faster Payments and Faster Payments and Financial Inclusion. While neither QR Codes nor financial inclusion are new topics, they are subject areas that warrant further examination and action as they pertain to faster payments. FPC Work Groups responded to that call with these latest resources that explore QR Codes and financial inclusion in detail and offer recommendations and actions to address the challenges that hinder faster payments progress in these areas. Learn more about these industry resources by reading their latest blog post: No "Dog Days of Summer" for the FPC.
AUTHOR: Mary Mumper-Morrison, AAP, APRP, CAMS