Breaking the Barriers to Payments Inclusion

When my friends ask me about my role at the Atlanta Fed, I speak proudly of our work on financial and payments inclusion. Often, they ask, "What is payments inclusion?" So now I've got my elevator speech at the ready: payments inclusion is having equal access to and awareness of efficient, secure, and affordable payments services. Essentially, everyone should have the opportunity to pay for goods and services using their preferred method.

Because of its work in economic mobility and resilience, the Atlanta Fed wanted to better understand factors that can get in the way of payments inclusion. To that end, it brought together people in the payments, fintech, banking, and retail industries as well as regulators and scholars to examine the issue. As you probably would expect, organizations represented on the Special Committee on Payments Inclusion had sometimes different perspectives. With regulators at the table, for example, banks and fintechs openly discussed their compliance or resource constraints. Academics challenged the group on social issues, and merchants described potential effects on their businesses.

Over time, leaders grew to understand each other's challenges. The committee held thoughtful discussions about what might help reduce the barriers that prevent some people from attaining full inclusion in the payments system. The report Promoting Payments Inclusion in a Digital Payments Era, posted this month, documents the committee's work and describes seven of the barriers to financial inclusion.

• Stringent documentation requirements, such as when banks or fintechs accept only specific types of identification
• Lack of access to broadband or smart technology, whether it is an issue of physical access or access to affordable options
• High or unpredictable fees, which can deter consumers from using accounts that enable digital payment options
• Lack of availability of funds or of instant settlement, sometimes making it difficult to manage daily cash flow or respond to an emergency
• Limited acceptance of payment type by businesses, potentially excluding those who rely on other forms of payment
• Security and fraud concerns, which can cause consumers to avoid adopting new digital payment technology
• Limited financial and digital education, possibly hindering some consumers from fully understanding the benefits of being included

The report also discusses steps that public policy makers, regulators, and financial institutions/service providers could consider taking in working to lower these barriers. Not all of these issues are for the Federal Reserve to solve-it will take a broad and innovative approach to make progress on these issues-but raising awareness is a critical first step.

To learn about the linkage of instant payments and inclusion, you can read the white paper "Connecting the Dots: How Adoption of Instant Payments Can Lead to a More Inclusive Economy" published in July 2023.