Dive Brief:

• The Atlanta Federal Reserve Bank has concluded a two-year effort to study digital payments inclusion and the reasons that some consumers choose to use cash, publishing a report on the results this month.
• The report pointed to cash-reliant consumers’ lack of credit or debit cards as key to their exclusion from the benefits of digital payments advances. “These innovations offer the possibility of greater convenience, but since a significant number of people can’t access them, they also raise concerns about how they may further exclude a population already marginally attached to the economy,” the December report said.
• The special committee assembled by the Atlanta Fed that provided input for research in the report included not only government officials, but also representatives of payment and fintech companies, including PayPal, Block and Global Payments.

Dive Insight:

Given advances in the digitization in payments and an interest in creating economically resilient individuals, the Atlanta Fed undertook a study over about two years that resulted in the report titled “Promoting Payments Inclusion in a Digital Payments Era: A report of the Special Committee on Payments Inclusion.” The committee and the research focused on why and how some people can’t or won’t tap the benefits of digital payment tools.

In publishing the 40-page report, the Atlanta Fed said it was particularly concerned about low- and moderate-income households or cash-reliant individuals not being able to benefit from the proliferation of digital payment options, which offer more convenience, among other advantages. It noted that an increasing number of businesses prefer cards or digital payments and may make it disadvantageous to pay with cash. 

“The percentage of the US population that lacks credit or debit cards is significant and extends beyond the ‘unbanked’ population,” the report said. “The lack of a payment card or an account at a financial institution can keep this population from accessing innovative digital payment solutions.”

The committee pinpointed seven reasons for some people not being drawn into the digital payments ecosystem. Those barriers included identification or documentation required for digital financial services; lack of access to technology, like broadband internet access; “high and/or unpredictable fees”; unstable or volatile income flows; some businesses not accepting digital options; fraud concerns and limited financial and/or digital education. 

In zeroing in on those seven reasons, the committee was interested in specifying barriers that it thought could be measured. The committee also pinpointed those issues it thought might be impacted by changes that companies, policymakers or regulators could make to promote more inclusion.

Some of those suggested steps included having regulators create a universal account application for use by financial institutions; pushing policymakers to provide more public-use internet and cellular services in certain locations; having financial institutions provide more instant payment services; and offering more financial literacy and education campaigns. 

The Atlanta Fed spearheaded the research on payments inclusion partly because its district has a concentration of payments and fintech companies and acts as a hub for the industry, the report said. In a disclaimer, the Atlanta Fed said that the opinions in the report aren’t necessarily representative of its views, or any of the individuals on the committee, or the companies for which they work.