Study promotes inclusive faster payment strategies

A white paper titled Faster Payments and Financial Inclusion, published July 29, 2022, by the U.S. Faster Payments Council, urges payments industry stakeholders to tailor faster payment schemes to the needs of marginalized communities.

Citing eight distinct pain points as barriers to adoption, researchers noted underserved communities have neither financial resources nor access to traditional financial services. The report emphasized the need to make faster payments available to all families and business owners, including growing numbers of citizens and enterprises impacted by inflation, labor shortages and supply chain issues.

Gail Hillebrand of the National Consumers League and FPC Financial Inclusion work group chair stated millions of families in the United States are living paycheck to paycheck and cannot afford to lose funds to fraud or mistake. “Faster payments providers can reach and serve underserved people by designing products and services that work for the realities of their financial lives and protect them from losing their hard-earned money,” she said.

Hillebrand noted that the five-part report is organized as follows:

• Part I describes the underserved as people who are unbanked, people who are living paycheck to paycheck, and small businesses.

• Part II identifies eight clusters of pain points or barriers for the underserved in using faster payments.

• Part III describes steps that can be taken by private sector entities throughout the faster payments chain to increase financial inclusion by mitigating the pain points.

• Part IV describes use cases for the underserved that could provide benefits from faster payments and associated services.

• Part V identifies issues that would not be fully resolved by the recommendations in the report.

Understanding needs

Adam Rust, senior policy advisor at the National Community Reinvestment Coalition and vice chair at the Financial Inclusion Work Group, pointed out that the FPC white paper takes a different spin on marginalized communities than numerous other studies.

"It explains how slower payments can create challenges for cash-strapped consumers and shows how faster payments could make for a more inclusive banking system,” he said. “It also issues a clarion call to financial institutions, emphasizing that banks and other payment providers must consider the needs of low-wealth households when they design new services, and making clear that fraud protections are a precondition of reaching widescale adoption."

FPC researchers assessed the unique needs and pain points of marginalized communities from a variety of perspectives, beginning with the fact that service providers have not tailored their products and services to the specific needs of underserved sectors, according to the report, which cited the following pain points:

1. Design: Product design is not currently targeted to needs of the financial lives of the underserved.

2. Liquidity constraints: Tight budgets mean that a delay, interruption or loss of funds can lead to a cascade of adverse financial consequences.

3. Cash in/cash out: People without bank or credit union accounts face costs to get cash into and out of faster payments.

4. Trust: Trust in financial services providers may be low. It may be undermined in the absence of strong customer service and language access, and by apprehension about fees.

5. Mistake prevention: The ability of a customer to absorb the loss of funds due to a mistake is limited.

6. Fraud prevention and remedy: The customer has limited ability to absorb the loss of funds from fraud.

7. Security:Concerns remain about the security of funds and the impact of security procedures on inclusion.

8. Interoperability for ease of use: Concerns remain about how to use faster payments efficiently when payees and payors may use different payment methods that do not connect.

Purposeful design

With these pain point clusters in mind, FPC researchers recommended designing more inclusive processes that address each of these issues while fostering trust.

“Trust is built or lost through the interactions with each part of the faster payments product; the overall experience with the product; the fee structure; and the type and quality of customer service,” FPC researchers wrote. “Trust is undermined by any interruption in access to funds, and further weakened if there is no way to get prompt help during that time.”

Researchers further noted that maintaining trust requires strong security, reliable account access, and steps to prevent and remediate for mistake and fraud.

A copy of the report is available at fasterpaymentscouncil.org/userfiles/2080/files/Financial%20Inclusion%20White%20Paper_7-29-2022_Final.pdf .

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