The federal government wants to financially mainstream more unbanked and underbanked Americans. Both the Federal Deposit Insurance Corp. and the U.S. Department of the Treasury have new plans to encourage these individuals (collectively known as the financially underserved) to embrace mobile banking and payments.
In April 2016, the Treasury Department's Bureau of the Fiscal Service unveiled a mobile app for Direct Express, which employs debit cards funded with distributions of benefits and other federal payments to an estimated 5.5 million recipients who cannot or will not use direct deposit. The new app mirrors many already in the market by enabling cardholders to use mobile devices to check balances and transactions, find ATMs and even sweepstakes-based rewards.
"Fifty-three percent of our cardholders had a smartphone in 2015, up from 32 percent in 2013," said Walt Henderson, Director of the EFT Strategy Division at the Bureau of the Fiscal Service, which handles bill-paying for federal civilian government agencies. "And about 78 percent of Direct Express cardholders with a smartphone use it to access the Internet or use a mobile application."
Henderson noted that the Treasury Department began piloting the Direct Express mobile app in August 2015, and as of late April, more than 100,000 Direct Express cardholders were using the app. "The app offers cardholders with smartphones an opportunity to better understand and manage their Direct Express accounts," he wrote in a recent blog post.
"Given the high smartphone adoption rate, this mobile app provides an empowering tool to those who need it most."
In addition, it will benefit the government. Today, the Direct Express call center fields about 20 million calls a month; most are from cardholders checking transactions, balances and deposits. With the new mobile app, those cardholders may never need to speak with customer service reps again, Henderson stated.
Separately, the FDIC wants public guidance on how mobile financial services could help lead the financially underserved into the banking mainstream. The bank regulatory agency recently conducted qualitative research to help understand the financially underserved's perceptions of mobile financial services.
Among other things, the research revealed that underserved consumers like prepaid debit cards because they "maximize" feelings of control over their money. Better control is also what they are seeking from mobile apps generally, a report on the research suggested.
The downside: security and privacy. Concerns about losing account numbers and passwords, identity theft, and unwanted forms of communications (for example, sales pitches) are significant among the financially underserved, the FDIC reported. And while they have advantages, mobile financial services, alone, are not sufficient to engage underserved consumers with mainstream banking, the agency concluded.
The FDIC said it has identified benefits and areas of concern banks can address to draw in the underserved using new or existing mobile products: increased consumer control; faster access to money; affordability; security shortfalls, both real and perceived; increased awareness of mobile tools; and better information in support of personal financial management.
The FDIC seeks input for demonstration projects and has set a deadline of June 15. Additional information is posted at Ahttp://firstname.lastname@example.org.
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