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Friday, September 24, 2021

ETA event highlights financial inclusion

The Electronic Transactions Association hosted its fifth annual Fintech Policy Forum on Sept. 23, 2021. Designed to highlight legislative and regulatory issues impacting payments industry stakeholders, this year's virtual event brought together policymakers and payment leaders, stated Jodie Kelley, chief executive officer at the ETA.

In opening remarks, Kelley thanked sponsors Discover Global Network, Arnall Golden Gregory LLP, FIS and Venable LLP, along with the ETA's government relations leadership team, for their support, planning and contributions. The day's program would address trending topics in crypto, open banking, helping the underserved, small business lending, and international payments, she stated.

"We'll discuss how these developments help increase financial inclusion, and we'll hear from policymakers and industry and SEC executives," Kelley said of the comprehensive agenda, which began with a presentation by Guy Harris, head of merchant services at Bank of America.

Financial inclusion

Throughout the day, government and industry leaders discussed ways to help underserved consumers and small business owners survive pandemic-related economic challenges while improving access to financial products and services.

In March 2021, the ETA published a whitepaper, How FinTech is Addressing the Financial Needs of the Underserved, which expanded on the association's previous research and highlighted efforts by ETA members to use technology in service of unbanked and underbanked sectors.

"ETA members are constantly developing and deploying new products and services, bringing together traditional players and new participants," ETA researchers wrote. "The innovation in this space delivers new products and services quickly and less expensively, while supporting an inclusive financial system that provides high-quality, responsible, secure, and affordable financial services for the broadest possible set of consumers."

Topics discussed in the report include the following:

  • Pandemic economic relief: providing safe commerce options and lending assistance throughout the business shutdown.

  • Prepaid products: providing cost-effective, convenient, and innovative payment options for consumers who may not have access to traditional financial accounts.

  • Nontraditional payments: providing financial literacy and readiness education to help consumers take control of their finances.

  • Mobile banking, ADA compliance: providing financial independence and security for those demographic groups that lack easy access to physical financial institutions, such as consumers in rural areas, the elderly, or persons with disabilities.

  • Mobile payments: providing alternative payment methods to enable consumers to pay for goods and services in an efficient, cost-effective, and secure manner.

  • Peer-2-Peer (P2P) payments: providing P2P schemes that facilitate money transfer via mobile applications. 

  • Expanded internet access: providing affordable internet access in underserved communities domestically and abroad by improving infrastructure and reducing costs.

  • Online small business lending: providing small and midsize businesses (SMBs) with access to credit and capital to help them grow their businesses.

  • Interactive ATMs: providing ATMs to help underserved communities.

  • Diversity, equity and inclusion: creating a payments industry environment where every colleague can be themselves and truly feel included.

A copy of the full report is available at www.electran.org/public-policy/how-fintech-is-addressing-the-financial-needs-of-the-underserved/ .

Meeting consumer needs

A panel discussion on financial inclusion by fintechs, moderated by Ed Marshall, partner at Arnall Golden Gregory LLP, featured panelists Kim Ford, senior vice president, government relations at Fiserv and Harris Qureshi, director, public policy & regulatory affairs in NA for Afterpay. They further explored how fintechs are improving access to financial services.

Qureshi described the overarching goal of financial inclusion as meeting consumers where they are. "It's about bringing access to more people to give them the access they need," he said. "How we serve a market that continues to evolve based on changing consumer needs and behavior to give consumers ways to use their own money and make equity possible."

Ford cited a 2019 FDIC study that found numerous consumers unable to meet minimum deposit requirements at traditional financial institutions. Fiserv started the Bank On initiative to make it easier for customers to open accounts while eliminating overdraft fees and problematic features to enable everyone to get these accounts, she stated, adding that once they are in these accounts, users can add other services.

"Another effort is alternative data sources to assess people without credit scores," Ford said. "My stepdaughter is 20 but has no credit history. How can we supplement traditional data sources with other things that are rich and tell a story such as a Netflix subscription or rent and bill pay?"

Global perspectives

Additional discussions among government and industry leaders relating to cross-border payments, open banking, cryptocurrency and central bank digital currency reflected the ETA's increasingly global perspective.

Commenting on topics addressed during the annual Fintech Policy Forum, Kamran Hedjri, founder and group CEO at PXP Financial, a global fintech firm, noted that fintech innovations are helping to close the digital gap between developed economies and underserved communities.

"Finding solutions, like the use of QR codes to access accounts and pay for goods and services is the way this has been achieved in China with the massive growth of AliPay," Hedjri said. "Creating a lowest common denominator solution like QR codes on laminated card could go far in creating solutions, but we, as an industry, need to continue to innovate."

Regulators could do more to educate consumers and simplify KYC, Hedjri pointed out. Simple onboarding processes would facilitate secure authentication among underserved individuals while eliminating traditional barriers to entry, he stated.  

"The key areas that we can promote financial inclusion is through education," Hedjri said, citing a recent review by UK Finance on the future of payments and financial inclusion as a positive step forward. "At the moment, even in very developed countries like the UK, there are still many people without access to the internet [or technology] and this means their costs and access to goods and services are higher yet their earnings are much lower."

Reflecting on similarities and differences between U.S. and European regulatory environments, Hedjri remarked that the United States has state-by-state laws and regulations as well as federal laws, which occasionally can be in conflict. "We need the U.S. to create a simpler solution like the EU, which means all states accept a common set of laws and regulations in payments to enable far simpler adoption of new financial services propositions," he said. end of article

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